Wednesday, December 28, 2016

Complex 4th Wave

If you have never seriously studied Elliott Wave, here is a very good example of a complex fourth wave for you. Since December 14th, we have shown the minor 4th wave within Intermediate Wave (3). That's just about two weeks ago now. On December 15th, it was stated that the minor 4th wave could form as either a 'complex correction' or a triangle, as we were waiting for the EMA-34 on the two-hourly chart to be crossed lower, and the complex correction is what we've got.

Here is an update of the two hour chart as shown in the live chat room today. If you are interested in Elliott Wave, then I urge you to study this chart.

SP500 - 2hr Chart - Complex Wave 4

Notice that price has now crossed the EMA-34 for good form and balance in an impulse wave. Also, the wave 0 - 2 trend line has been broken, indicating the losing of momentum as volume shrinks over the holidays.

This chart would indicate that wave 4 would be expected to wrap up soon, so as to avoid an overlap with wave Minor 1. Then, there should be a fifth wave up, to Minor 5 - which should be shorter than Wave 3, because wave 3 is shorter than wave 1.

You will notice we are using The Eight Fold Path method (in the Featured Post) to count this impulse. It was started by selecting the time frame that provides the needed 120 - 160 candles on the chart. That time frame is the two-hourly chart in this case. This is a step most people don't perform, and many do not understand why they even need to perform it. We have been using that time frame since the charts first posted on December 14th.

The Elliott Wave Oscillator has re-crossed below the zero line, but it is not greater than -40% of the peak value in wave 3. The chart does not imply that the minute z wave of minor 4 can't go lower. In fact, it can.

But what the chart does tell us, in a simple and straight-forward manner, is that minor wave 1 should not be overlapped, downward before there is a new high in the market, or we likely did not make an impulse wave up. If a new high should complete as Minor 5, then we did, indeed, have a successful impulse.

And, if you think this chart is interesting, you should see the NQ futures chart. Hint: likely also in Intermediate wave (3) at this time, by my count... But, we'll save that one for later.

Take care as we are in the last few trading days of 2016.

26 comments:

  1. Joe, love your education. In a 4th wave contracting triangle in a bull market, can the E wave go lower than the C wave? Thanks and Happy and healthy New Year. Sam

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    1. Hi Sam. Thanks. The only way to make a lower E wave in a triangle is to have an expanding triangle. But, an expanding triangle requires higher highs than the start (which works in the Dow, but not the S&P). In a contracting triangle the wave E 'must' be shorter than wave C -- or it's simply not a triangle. In fact, in the ES e-mini futures, the FED low was taken out. Not so in cash, yet.

      Bottom line; it's not a triangle.

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  2. Thanks again Joe,
    As you described, minor 4 has been very complex, and in charting today's impulsive looking z wave down I encountered two points that I'd appreciate your clarification on.

    1. As one of the possibilities was a triangle 4th, today at the point where if we were counting a triangle the proposed wave 5 exceeded the length of wave 3 I was asking myself if when the 5th wave was a throw over, is it allowed to be longer than 3 or is it black and white that the triangle invalidated?

    2. In looking at just the z impulse down it appears that there is a 3rd wave extension. In that case does the EWO still peak at 3 of 3 or can it peak at 5of 5 or 7 of 3?

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    1. 1. Triangle invalidated in the futures. No question about that.
      2. Don't know if 'z' is done but have three waves, 2269-2260, 2260-2267, 2267-2243; all in the futures.

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  3. Thanks again Joe!

    Love how price action back tested that broken 0-2 trendline and reversed. Being patient

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  4. Joe, Thank you for your generosity in sharing your talents & teachings.

    Happy & Healthy New Year!

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  5. Joe-given the peak of ewo is at third of 1 instead of third of 3...any significance of that. thanks

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    1. The peak of the EWO being in 1 is likely just another indicator that the first wave is the extended wave.

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  6. Replies
    1. Yes, or dxy has not invalidated a triangle yet, either.

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  7. Re your Crude post, from December 13, thank you so much. I have a technical question--- you are seeming to refer to only the CL Jan 2017 contract, but the wave count only works when you make it always the Front Month contract. The count does not work if you consider CL Jan 2017 all the way back in 2015 etc. I presume that you are using front months only but the post does not make that clear. Using front months, the waves are Wave 1 Feb 11 2016 to June 8 same year is 25.57; Wave 2 Aug 3 to Oct 19 is 13.03; Wave 5 Nov 14 to Dec 12 2016 is 12.31. If this is correct, then the invalidation point is 55.23 for the front month. Just checking that this is the right approach.

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    1. Star - the daily nearest has over five times the volume of the lone contract (2 MM vs 400k) at the point in question, so I believe the correct procedure is to use the chart where the volume is shown. And that would thus be the Daily Nearest, absent a cash chart. Elliott wave theory is a theory of mass psychology, so we should see what the masses are doing. At least, that is my understanding.

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  8. Joe - a question on ED. .does the first wave of ED has to terminate above the previous 3rd wave or can it terminate below the previous 3rd wave. thanks

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    1. It is more usual for the first wave of an ED to terminate above the previous third. This is how Prechter diagrammed it, and he wrote, "each of the waves of an E-D crests higher to show their motive character". But, that said, one can not find a 'rule' to that effect in the list. But you might check to see you have an extended third wave (of the impulse you ending) because one wave guideline says, "in an impulse, unless wave three is extended, wave five is not likely to form a diagonal"). That is, without the extended wave three, it's hard to see how the wave would have traveled "too far, too fast". Hope this helps some.

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  9. What a load of untradable nonsense.

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    1. Wow! Why so harsh? If it's not your cup of tea ok, but no need to use a baseball bat. Personally, this site has brought a lot of things that were heretofore fuzzy into focus by using actual Elliott rules and measuring techniques which are proving to have exceptional accuracy. I would suggest you read "The Eightfold Path" at the top right of the page and I guarantee that a lightbulb will go on.

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  10. Not untradable. Not nonsense.
    The suggestion of the analysis is that S&P may decline to a point above 2214 and then rally toward 2300. That's helpful.
    This site has a very high degree of reasoned, thoughtful analysis. It also that helps those who follow OEW and other sites in trying to consider best possibilities.

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  11. Joe, would you rate the odds as low for a primary diagonal 5th since Feb's 1,810 S&P low, i.e. 1810/2193/2083/2277 and now in 4th to overlap 2193 before final 5th wave up?

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  12. So when wave 4 gets invalidated which we all know it well. Does everything get relabelled?

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    1. Your attitude here is not helpful to anyone. On the OEW site, you posted that the easiest trade of the year was to be long during the low volume days from Xmas to the end of the year. How did that work out for you? Now you're saying that 2214 will definitely be taken out before 2277 is taken out. None of your comments are ever supported by anything other than your right to make unsupported comments. This site stands out from all of the others because Joe presents his analysis in a very disciplined manner. His analysis is always based on EW rules and guidelines. He presents what he considers to be the highest probability counts, while always acknowledging that the market can always take an alternate path. When that happens, he adjusts to the alternate count. That's just how it works. If you don't like it, then go somewhere else.

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    2. I asked him a simple question about the EWO but wrote OEW by mistake. Because of that typo he threatened to ban me. I apoligised for the typo yet got ignored. All I ask for is polite courtesy.

      As for my 'easy trade'. I got stopped out for a small loss.

      Happy New Year Joe and everybody else. All the best for 2017.

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  13. Joe, I vote for you to block trolls like this jerk.

    Great post mblcta, lmao over that one! Happy New Year!

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  14. HI TJ happy new year
    the EW video tutorials on u tube are not any more available
    so they tell
    do you know some other good free link?
    Thx

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