Monday, January 9, 2017

Intermediate (3) May Now Be Done

As I alluded to in the comments section of the prior post (see January 8, 2017 at 4:29 AM), a new set of measurements had been done in the off hours that allowed the up wave to be considered complete with Minor 5 as a completed Ending Diagonal. Here is what the overall count would look like, using the The Eight Fold Path Methodology and 120 - 160 candles on the chart. This chart would end at 166 candles in the two-hour time-frame: well within the parameters of the method.

SP500 2 hr Chart : Minor waves 1 - 5 of Intermediate (3) can be considered complete

In the very last five minutes of the day today, a lower low was established, allowing a small degree "five" count on the downward wave. This wave - and it's associated gap - also broke the rising lower trend line yet again. Therefore, it is 'possible' to conclude that the Minor 5th wave of Intermediate (3) has ended, and we are now, very possibly, in Intermediate (4). If so, it would end on a divergence with the peak of wave 3 on the Elliott Wave Oscillator, after a dip below the zero line but not by more than +10% to -40% of the peak value.

Although I will not do this often, in the chart below I will show you the exact measurements of the diagonal so you will see that there are no hi-jinks being played. This will be on the SP500 30-min chart below. This chart is the one I referred to in my weekend comments and during live chat today.

 
SP500 - 30 Minutes - Measurements of Diagonal


Here you can see for yourself that wave minute v (circle v) is shorter than minute iii, that minute iii is shorter than minute i, than minute iv is shorter than minute ii, and that minute iv overlaps minute i. In  this chart I have included the most extreme ends of the waves - without the truncations - and the measurements all work. But, beyond that I have tested that it works with the truncation, as well. That's why the first wave shows a second measurement. That is the length of the wave if the truncation is subtracted from wave i, to be sure wave minute iii is still shorter than minute i - which it is.

And, I also tested it using each of the potential bottoms in minute ii, and the result is still the same. Minute iii is always shorter than minute i, and minute v is always shorter than minute iii. The only qualm I had was how well the downward legs formed zigzags. But, they do "look" sharp and steep in the chart, so that will be acceptable.

With the diagonal trend line broken, the market is again losing more momentum, not gaining it. Since, there is likely a five-wave down sequence, one should expect at least one more such downward sequence (maybe more, depending on whether a larger impulse forms or not). As such, it is worth noting that today's advance-decline line was 1,082 to 1,942; making harder yet for the Dow to hit that 20k level right away.

Keep in mind the overall Intermediate (3) count would be that in which Minor 1 is the extended wave in the sequence. Minor 2 is a small retrace, that tends to indicate that the first wave is the extended one. But it is the first wave that breaks the EMA-34, lower. Minor 3 is then shorter than Minor 1, and ends very, very close to the predicted 0.618 extension on Minor 1. And none of Minor 3 breaks below the EMA-34. Minor 4, as we know, was a compound flat on the very light holiday volume, as was only a bit deeper than typical. But it did weave around the EMA-34, as a fourth wave should, breaking it lower, twice. Then, Minor 5 would be the diagonal that just eeks out the new high, but not before breaking the EMA-34 to the upside.

Well, I may have missed the wave-counting top by 12 points as regards the blog (...maybe not depending on what you think of the weekend comment). But, I did say the count was proceeding in a wedge. And, the 30-minute chart shows that is true. Any downward overlap of 2263 will solidify that the upward count is likely over - at least for a while. 

With five waves down, there is now higher confidence that the diagonal formed. The only way for the bulls to rescue the situation is if the diagonal is somehow 'leading', but that would be a true rarity at the all-time high in the market and seems unrealistic at this point. In fact, the invalidation point for a contracting ending diagonal Minor 5th wave, now moves up to the all-time high, at 2282.10, or it is more likely that Intermediate (4) has now begun.

Since Intermediate (2) was a flat wave, Intermediate (4) may be a sharp (zigzag or double zz) or a triangle. Let's take it step-by-step.

Cheers and enjoy the charts!
Trader Joe

17 comments:

  1. The next objective ?
    Weekly we are?

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  2. I have a hard time seeing where we are

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    1. I posted the longer term chart in the video.

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  4. Joe, Thank you very much for your generous teachings. There is much to learn. Question, is your post below from your Christmas Card still your current view? Thanks again.

    "Elliott_TraderDecember 26, 2016 at 6:34 AM

    ...the Dec 22 post to see we likely are in Minor 4, of Intermediate (3) of Primary V. The post above - if you will enlarge the Christmas Card, shows a tool called the Fibonacci Frame, which divides the Golden Section into Fibonacci ratios. It therefore shows Primary IV at the 38.2% level (the three-wise men candles), and now in Primary V. It also shows the upper border of the frame at the 21,000 level - which is approximately 1,010 points from the Dow's high. That is about eight 150 pt days on the Dow. I'm not saying they will happen that way - but it is not 'far' by any means. In terms of the timing, likely after the first of the year. And that is unless wave V extends, which is 'possible', but we're not there yet."

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  5. When wave 5 is an ending diagonal then minor i of the wave 5 ED should be higher than the wave 3 to establish the motive character of the wave 5. But in this case wave i of wave 5 is lower than wave 3. This means it is a leading diagonal.

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    1. It would be minute i (circle i) that 'should' be higher than 3. But, yes, that is the dilemma. So, I remain flexible, open and patient, as before. There is no 'rule' that states that this 'must' be the case.

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    2. So, if it is, a diagonal, it could be only the 'a' wave of minute i, upward. That might makes some sense given where it is. But there is no evidence for that yet, and it is speculation at this point.

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  6. Great stuff, Joe!
    Thanks a lot.
    Is there a possibility we've just seen wave 3 top out instead of 5 with 1 being at 2182 instead of 2214?

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    1. Not likely according to The Eight Fold Path methodology. The EWO should have made a higher high for a new 3. That's precisely what the methodology is good for --helping eliminating all the guessing.

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  8. I take it another new high would mean Int 3 is not yet complete?

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    1. I just realised you answered this in the post. Ignore.

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