And, as Donald Trump outlined his choice to head the EPA, Crude Oil fell, the Transports rose to a new all time high, the $NYAD broke it's local divergence, and the S&P500 rose higher. I was still expecting higher prices. They got 'much' higher - and more quickly than I thought.
Now to show why nothing is really wrong, first of all, below is the updated two-weekly chart of the S&P 500 Index.
|SP500 Two-Weekly Chart|
As regular viewers of my video channel and readers of this blog know from the posted Eight Fold Path methodology, I am one of the biggest proponents of a preliminary target of 5 = 1 for the fifth wave in an Elliott Wave sequence. That level is at 2,363. As you can see from the above chart, today's price action only gets us to within 78.6% of that level. But, it does indicate that level is possible.
Will the S&P actually "throw-over" it's two-weekly channel as a last hurrah? I have no way of knowing. It is speculation at this point in time, but that, too is possible. And, beyond that, it is even possible for a fifth wave to extend to 0.618 x net (1-through-3). But, we're not there yet.
I have repeatedly said and written since the end of the Primary 4th wave that I have 'no preference' as to whether this up wave completes as an impulse or a diagonal. It started out looking like a diagonal, and it may still be. Below is the diagonal possibility.
|SP500 Two-Daily Diagonal Possibility|
At the moment, there is nothing wrong with this count. Wave (3) is still shorter than Wave (1). Yes, we have 'blasted-off' for the moment - and somewhere within a "C" wave it 'should' feel like that. But, unlike other professional Elliott Analyst's who were screaming "top tick" I did nothing of the kind. I did not suggest we were at the ultimate top. And I even clearly suggested we were in an Intermediate (3). Today just helps prove that we are. Will Intermediate (3) turn out to be a 'raging impulse'? That is possible.
Do, I personally like the market here? No, I have said too many times, the risk of a wrong count is going up - specifically because it takes many more points now to validate a count. And I clearly indicated another 3 - 5% up in this wave is possible. I will be more friendly to the market if there is an Intermediate (4) pull-back. But, my question is "did you go short, based on Monday's post?" If so, remember, I do not offer trading or investment advice. All I will do is re-iterate the information in my paraphrase of Ira Epstein's Trading Guidelines: he does not recommend shorting a market above the 18-day SMA : the line in the sand. Clearly, prices are still above that level. This is why he makes that recommendation.
So, for now, the reality is "we are in a wave (3), and whether it's an impulse or a diagonal we must recognize it as a wave (3)."
I have revised the hourly DOW Jones count to look like this, for the moment.
|Hourly DJIA - Three Wave Count|
Let me say quite clearly. I do not know that wave iii of C is over. There could be much more buying from overseas markets tonight, and even more yet on any ECB announcement tomorrow and FED announcement next week.
But from the vantage point of the Elliott Wave Oscillator, this is a particularly odd wave, as the middle section of the wave - which should have the most momentum - has the least. Further, there do appear to be two non-limiting triangles in the wave (where price goes right to the apex) which causes price to travel beyond the usual triangle target (see Neely, Mastering Elliott Wave if you have questions on this). And, it was the second triangle that was the fooler. It was a triangle, not part of a diagonal.
These things happen when you count Elliott waves and try to follow the rules. It's nothing wrong with wave theory. It's an error of pattern recognition - technically - and how a person handles it is up to them. I know how I do. I cut back and try to adjust as quickly as possible to the new paradigm. In reviewing my blog performance, however, I said the one thing I would try to concentrate on was always to provide a clear and unequivocal invalidation point based on the pattern. And, I did not do that in Monday's post, so I first apologize, and I will endeavor to do that from now on. I certainly did do that in live chat, saying that the pattern must prove itself that wave (v) remain shorter than wave (iii). When it didn't: that was that - pure and simple!
Once again, the invalidation point of Intermediate (3) of a diagonal wave is that it may not become longer than wave Intermediate (1), but I would greatly start to question this one if goes beyond 50% times wave (1) because then I would have to do some measurements to see if wave (4) could again overlap wave (1), and still remain shorter than wave (2). More on that in a future post.
Thanks for reading, and have a good evening!