Thursday, December 8, 2016

Set Aside

Well, because of the lengths of various price movements, we can now officially set aside the diagonal count in the Dow. The clear rationale is below in chart form.

DJIA - Daily - Contracting Diagonal Can Not Be Completed

I alluded to this yesterday in the blog post. This morning made it unequivocal. If the November low was seen as Intermediate (2) in a diagonal count, then the upward price movement has now proceeded to the point where the same price movement downward (shown by the upper blue box) will no longer overlap Intermediate Wave (1). That means a contracting diagonal is ruled out quickly and completely.

So, in terms of impulse counts, as stated yesterday - we are definitely in Intermediate Wave (3). But there are two styles of impulses to consider: one in a channel, and one still in a wedge. Both charts consider than Intermediate Wave (2) is at the low of the Elliott Wave Oscillator. That is an objective observation, and so it is critical. (See the circled trough on the the EWOsc).

This first chart is a channel impulse, and considers that perhaps the S&P500 can get past 2343 where wave Primary V = Primary I.

SP500 2-Day Channel Impulse

This count uses the exact wave formations we used in the corrections lower. And, it uses exactly the same upward count as we did in Intermediate (1). Nothing changed there. But, it considers the upward wave in July and August to be a three-wave X wave as it is not in a channel. You might not like that count, because you might see that X wave as a "five". It is possible to do that. I certainly saw it as a five-wave C wave of the now defunct diagonal.

If, instead, it is actually still "five", then the best impulse count I see is the one below : in a wedge.

SP500 - 2-Day Wedge Impulse

In this case, Intermediate Wave (1) topped in August of this year. And the correction was a shallow 23.6%. This is the usual Elliott Wave formula for an "Extended First Wave". When the first wave is the extended wave in the sequence, then the second wave usually is a shallow retrace between 23.6 and 38.2%. And, in that case, Wave Intermediate (3) would be likely only 61.8% times the length of Intermediate Wave (1). When the first wave is the extended wave, that obviously means the third wave can not be longer than it.

This is now the preferred count. And one of the reasons it is the preferred count is that within wave Intermediate (1), wave minor 5 would be 0.618 times the net distance traveled by waves minor 1 through minor 3 : the second of  the two Elliott Waves that help predict the length of a fifth wave. You remember how I pointed out in the defunct diagonal count that the wave shown as 5, above, was originally C of (1), and it was 0.618 x A of (1), where A was formerly the wave at the April high?

Another reason it is my preferred count is that the construction can be seen as limiting Primary V to around that 2343 level, where Primary V = Primary I. (It doesn't have to be exact to the point). And, a third reason that I prefer the count is the wedge reflects the situation of the poor momentum which should accompany a Primary Vth wave.

Let's take it step by step and see how it goes. We are in Intermediate Wave (3) until further notice. We have quickly and concretely answered the question of whether we are in a contracting diagonal wave or not, and shown you how to do it.

By way of invalidation, wave Intermediate (3) should not now overlap the 2182.30 level until five waves up are complete. We'll try to advise when we do have five waves up.

Cheers and enjoy the evening!


    It becomes more and more clear thanks to you
    But it will be hard to find the high point of PRIMARY V
      And the beginning of the bear market

    1. You're welcome. But the job right now is not to find the high of Primary V yet. Try to stay in the present.

  2. call tops based on Elliot waves seem to be the bane of analysts. Credit for changing it so quickly.