Tuesday, January 3, 2017

Wiley Flats

No, it's not a new Country Banjo picker. It's a follow up to our December 22 post on the US Dollar Index. If you have not seen that post, I encourage you to review it now, and then refer to the chart below.

Proven Flat-X-Zigzag in the US Dollar Index

So, we had showed you this chart back when we had labeled the c:5 wave, and called it a Flat wave, ruling out a triangle, and said that it is more typical for the c:5 wave in a Flat to break the a:3 wave. But that did not happen, with a fifth-wave-up still expected soon.

Well, because of the light volume across the holiday, the wave formed another three waves up to (x), and then another three waves down to (y) to deepen the correction. So, that pesky a:3 wave, was, in fact, exceeded lower.

Such a wave structure is known as a Flat-X-Zigzag, or a Double Flat since the (x) wave upward did make another 90% retracement of the of the (w) wave.

I wanted to show you this example when the 5th wave, upward, was confirmed today to show what some fourth waves can look like. First, notice that wave 4 did not overlap wave 1. That is critical! Second, notice how much time the fourth wave took versus the second wave. The fourth wave not only attacked the lower trend channel boundary, it took over a lot of enemy territory, too! In practice, we would again lower the parallel channel to try to help find the end of wave 5, but I didn't want to confuse things for this example. But wave 5 is clearly shown to have made a new high, and formed a valid impulse upward under The Eight Fold Path methodology.

Third, I printed out the values of the Elliott Wave Oscillator for this example. Notice the peak of Wave 3 was 1.61, and the new trough of wave 4 is -0.69; so doing the math, that means that EWO was -42% on the other side of zero line compared to a guideline of +10% to -40%. How's that for the accuracy of a guideline?!

Fourth, notice that little ending diagonal to end the c wave of  wave (y)? Perfect in every detail. Wave (v) is shorter than wave (iii), wave (iii) shorter than wave (i), wave (iv) shorter than wave (ii), wave (iv) overlapping wave (i), and all three-wave zigzag sequences. We pointed out that little guy in the live chat room on Friday.

And Fibonacci fifth, I think it is important to note that to do this work, with you must be comfortable with some sloppiness. Not a lot, but some. This is particularly true in fourth waves. It is, in fact, why I have titled this phenomenon of uncertainty in fourth waves, The Fourth Wave Conundrum.

Anybody who can tell you if you will get a regular flat, versus a triangle, versus a double flat, versus a flat-x-zigzag, versus an expanded flat, versus a running triangle, versus a triple-flat, versus a barrier triangle, versus a truncated flat, versus an expanding triangle .. either has much better tools than I can find, or, they quite simply don't know the nature of this task. (But, if you know what to expect, at least, it can help you dial up your patience for the wave.)

This issue of fourth waves is what causes a lot of novices to give up on Elliott Wave, or to go short when the wave is just about to go long causing them big losses. Is that going to be you? Are you going to give up on Elliott Wave? Or are you going to understand it's true nature and see how it can help you?

Oh, and how about that S&P, today?!

Trader Joe


  1. Another great lesson that needs repeating. Thanks Joe!

  2. Joe, You are so fluent in EW you don't even realize how it sounds to others to hear you speak it as if your just reciting the alphabet...it's like listening to Mozart! Truly amazing.

    1. Rich, so that neither of our heads explode, please look at wave 1 in the Dollar Index. And, if you like, please describe the structure of that wave for people who view this blog. The chart above is a 120 minute chart, but, for clarity, you might like to go down to the 15 minute or 30 minute level. Free charts of the Dollar Index (intraday) can be obtained from Barchart.com (DXH17) or from Tradingview.com. Tell us what is unique and particular about that wave 1. Practice makes perfect.

    2. Joe, Thank you for the vote of confidence. Sadly I don't have the answer as to what was "unique and particular" about wave 1. To date I have not been able to find any free charting service to be able to load 120-160 candles or load the 30 or 15 minute chart to look at wave 1. In addition, I have not been able to mimic an EWO with the MACD 5,35,5, which is all I have available on my Scottrade account. It just looks nothing like your charts. A problem I need to solve. I was not able to solve that same problem using either Tradingview.com nor Barchart.com today.

    3. Hmm .. a very disappointing answer. I was able to go to Investing.com (TradingView's partner) for free, bring up the US Dollar Index, scroll to Dec 8th, add the Awesome Oscillator (same as EWO) and an EMA-34, and answer the question.

    4. Wow, okay, so I will try Investing.com. I spent several hours trying on Barchart.com without success.

      Thank you for telling me this, really appreciate it.

  3. 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?

    1. Wow. Fabio. You are correct & thanks for telling me! The user apparently closed that account which makes the videos no longer available. It's a shame because I don't immediately know of another competently done video series. If I find one, I'll let you know.

  4. Is it increasingly probable that Wave 4 was even more complex as widening triangle in DXY?

    1. No. Because yesterday it overlapped with Wave 1 of the sequence.