Thursday, February 23, 2017

Best Hourly Count

So, even though the potential wave three of a diagonal shown on Tuesday's post did, in fact, remain less than the 2368.50 needed to be shorter than potential first wave of such a diagonal, the wave traveled far enough (as per the comments section yesterday) that a fourth wave could not downwardly overlap and remain shorter than the second wave, as required in a contracting diagonal. And even though I suggested one more higher high could be made, "rules are rules" and they will be followed.

None-the-less, the potential wave count did serve as an excellent "tell" precisely because we can now know for sure that we are not in a diagonal. (See post William Tell).

That being said, there are about 115 candles on this chart of the hourly S&P500 Index, and so that tends to indicate with today's sharp downward movement and lack of a new all-time-high in the afternoon, that a triangle might be in progress instead of a diagonal.

The rationale is below the chart.

SP500 Index Hourly - Potential Running Triangle

Examing the chart, we see that wave (iii) of ((iii)) is on the maximum of the Elliott Wave Oscillator, at a 2.618 Fibonacci extension, and wave (v) of ((iii)) is on the first divergence. If we look at the lengths of the corrections - just in terms of time, not price - we see that no correction, so far, has been remotely long enough to correct the strong minute ((iii)) wave in terms of the time taken by the advance.

And, if we look solely at alternation, we see that wave (iv) alternates with wave (ii) since wave (iv) is a short sharp, and wave (ii) is a long flat. But, then we see that wave (a) down of the potential triangle would not alternate well with minute wave ((ii)) lower at the bottom of the chart. In fact, they are the same shape! So, this suggests that we need a wave that is long enough in time to provide a decent length of a correction for minute wave ((iii)), and one that will alternate with minute wave ((ii)). A decent triangle would do that at this point in time. I have sketched in the potential triangle.

Tonight and tomorrow, I would watch to see if 2359.50 is exceeded lower in the futures, as that is the low of the B wave that was counted in this afternoon's upward waves. If that is exceeded lower, then most likely, a downward wave is in progress. Of course, a low below 2353.00 futures would solidify the correction in progress, and the invalidation point is the high of today's cash C wave upward at 2366.40 (cash), as a running triangle like this one must contract.

And, there is a reason I have not suggested a flat wave for the type of correction, even though a flat might provide the needed alternation. The (b) wave of this triangle is just inside a 2.618 extension on the (a) wave. That most likely means a "running correction" is in progress, and, again, a "running" triangle would fit that bill.

Such a correction might get us to the end of the month until the new month begins with the possibility of inflows from pension funds, bonuses, 401k's, etc.

This weekend I will address the "most likely" alternates as price moves forward - even though we have been correct, so far, that price is finding some resistance at the channels shown yesterday on the linear and log charts. Is it perfect? It seldom is.

A word for those following Gold. It can now be counted that Gold can have "five waves up" in the form of a contracting diagonal, with today's higher highs. Nothing rules out a B wave as a triple zigzag - since every contracting diagonal must be comprised of three zigzags. But, I wanted to at least confirm that "five waves up" can be counted (although there may be one or two more slight new highs to go.) The chart is below.

GOLD Futures - 4 Hours - Five Waves Up Can Now Be Counted

One point being, in order to even make this count, one needs to learn how to be able to count diagonals (leading and ending, expanding and contracting), and triangles, because they are all legitimately there, and shown in near real-time.

In the overall count, at the present time, wave 5 is shorter than wave 3, wave 3 is shorter than wave 1. Wave 4 is shorter than wave 2, wave 4 overlaps wave 1, and they are all zigzag sequences. So, a contracting diagonal is currently valid, provided that wave 5 remains shorter than wave 3. Wave 3 was 0.618 the length of wave 1, so there may be a similar relationship between wave 5 and wave 3. Then, if it really is a contracting diagonal, the low of 0 must hold. If the whole structure is a triple zigzag B wave, the low of 0 might break.

Truth be told, I do not like diagonals and triangles very much: they are murder on the nerves. But, it is not possible to follow the rules of Elliott Waves unless one learns to manage them. That's some food for thought.

Cheers! And have a good night!


  1. Kindly please let us know your rationale behind changing the (1) from Feb 7th high to Feb 3rd high.

    1. Explained on Thursday Feb 16th post : so no part of either wave three in an impulse breaks a trend line extended from a zero point through a second wave along all of a wave three. I will cover this again on the weekend.

  2. TJ, P3 continues to gain traction and the counts Continue to change daily. This why EW is very difficult and should only be used a risk/reward tool

    1. Nothing has changed. We are still in Minor 3 of Intermediate (3). May try to get a video out this weekend.

    2. I understand you, Steve. It's very difficult to rely on EW in most cases. I follow TJ because he explains his expectations in detail and follows his rules with integrity and a passion for the system.
      I am not onboard with EW yet, but I am hoping to understand how it could help me support a trading decision someday.
      What I do know is institutions and big money are not afraid to put money in this market at this time, which tells me we are likely going a lot higher for a lot longer.
      If we close strong for February, I can count on the market rising for several more months this year. This is based on a simple monthly bollinger band squeeze to the upside, which I have found far more effective than most trading systems. I continue to look into TJ's system and others because my system has failed me badly.

    3. TJ, are you sure nothing has changed? It wasn't more than 1-2 weeks ago the market was in minor 5 of int 3 and about 3 weeks ago int 4.

    4. Still in Intermediate (3). I will try to address some of the frustrations in an upcoming video.

  3. TJ,

    If u indeed make the video, I will really appreciate your rationale to have intermediate 2 as a double zigzag instead of an extended intermediate 3rd. I am sure you may have explained this before when those waves were formed. But I can't find it in archives. Thanks again.

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  5. If Gold has completed (or nearly completed) a contracting leading diagonal, how does it fit into the larger picture?