Friday, January 20, 2017

What Now, Dow ?

Let's address the very short term first. In the Dow and S&P, all the charts currently have from the all-time-high is a series of lower highs! While that may indeed indicate a down trend is coming, the lower lows to confirm that are still needed, and they are not in evidence, yet. That 'might' happen early next week, and in live chat, we have published a currently very tenable wave count lower. We'll see.

Today, all we had was a situation where the bulls couldn't make a new all-time-high (ATH), and the bears couldn't fill the opening gap. With the S&P and NQ so close to the all time highs, we must allow that until new lower low candles are printed on the daily chart, we must respect the trend and allow that new higher highs are possible. (The Dow, as you know, is now not as close to it's all time high as the S&P.)

But what I wanted to address today is in reference to the the longer term count : that of the S&P500's potential diagonal that we showed you yesterday versus the Dow Jones Industrial Average. As you may recall from my previous post entitled Elephant Head, I have a long memory, and two things have been bothering me. First is the fact that the Dow and the S&P did not bottom on the same day in Primary IV (in February, 2016), and the second was - ignoring that - the DOW would have it's Intermediate Wave (1) at a different location than the S&P500 in an impulse count. This was potentially causing me to count the DOW with an 'X' wave where I said it was a five-wave sequence in the S&P500 - which just - I'm sorry - seemed too odd.

So, I went to work last night to try to answer that riddle, and here is the Dow count that would agree with the placement of the Intermediate Waves in the S&P500 Index.

DJIA Now In-Synch with S&P500 Index

You should take some time to compare this to the potential count of the S&P500 Diagonal shown yesterday to now see that, a) all of the five-wave sequences are now in the same place, b) that all of the corrective sequences are now in the same place, and c) that Intermediate (1) and Intermediate (3) now synch-up on the same waves on both charts!

And the answer lie in putting that orphan wave in the Dow to good use! Problem solved!

So, the Dow may still finish as an impulse - while the S&P finishes as a diagonal - because, in the Dow, Intermediate (3) is still too long to allow Intermediate (4) to overlap Intermediate (1) with a wave that is shorter than Intermediate (2), as is required in an ending contracting diagonal for the Dow. But, perhaps it just means that Intermediate (4) in the S&P will overlap, and Intermediate (4) in the Dow will not overlap!

That would really confuse the daylights out of most wave counters - but, hey - that's what the market is here for!

Cheers!
TraderJoe

11 comments:

  1. Maybe it is (1)-(2)-1)-2), not (1)-(2)-(3)-(4)

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    1. See The Eight Fold Path Method which is the featured post, in the upper right. With 120 - 160 candles on the chart, the higher high for the EWO is the middle of a third wave, and the divergence with the higher high the end of the third wave. With the EWO solidly red, it tells us to expect a fourth wave where the EWO will come back to +10% to -40% of the zero line.

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  2. Thanks Joe. Quick question. Why is minor 4 of intermediate 1 consist of minute W, X and Y rather than minute A,B and C?

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    1. It isn't either. See the Dec 28th post where it is counted out in detail. It is counted as w-x-y-x-z because the middle wave 'y' is a clearly a "three" and simply can not be counted as a five, and all other aspects of the count worked out in the smallest detail - including a three-wave 'z' wave.

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  3. Joe a quick question in Dow where you have labelled 1 of intermediate 3 (starting post election day) - you have labelled A and then 1 of C in SP for similar move. I would think post election day- Dow and SP would have behaved similarly in terms of up moves so can you shed some light how are you dividing the waves differently. thanks

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    1. One 'would think' and yet if you plot the Dow against the S&P for that period you will see markedly different behavior. The Dow doesn't retrace as deeply as the S&P does, for example. Always remember, the Dow is only 30 stocks. The S&P on the other hand includes 500 names and is more 'tech influenced' than the Dow is. And the tech stocks didn't join the trump rally until later in the cycle (because they were afraid Trump would force them to repatriate their profits) if you recall.

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  4. TJ, what do you think of nates count from 2234 only? I think it fits nicely and explains LD (a) wave.
    https://2.bp.blogspot.com/-AU4gca8Ki2g/WIOZIMLovDI/AAAAAAAAMY8/Wunr6GKf7c8fIXqO6yTY_aFHEwopI9IcwCLcB/s1600/20170120b.png

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    1. Same as mine my alternate (up from 2234); certainly can't count it that way in the Dow - which is why it became my alternate.

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  5. I was referring to this possibe ED. It is between trendlines.

    http://i.imgur.com/EVbl2Qe.png

    If it forms and is valid then it can cause a rapid reversal to overlap wave 1.

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    1. A third wave can never be an E-D in it's entirety. Either it is an impulse, or it is an A-B-C as part of a larger diagonal. For the C wave portion in your drawing, there would have to be higher highs, yet, and they are not in evidence yet. If there are higher highs then there would be several ways to count. I have said many times on this blog and in live chat that the ending diagonal I sketched out on the half-hour chart shown a few days ago, "could end the move, or it could just be the 'a' wave within a diagonal."

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