Wednesday, March 8, 2017

Mind The Gap

In the S&P500 2-Hour chart, the gap that was created from the combination of the first of the month money from pension funds, 401k's, dividend reinvestment plans, and company bonus contributions on March 1st was filled today. Some people wrongly attribute this gap to hot air from Washington. Not so.

SP500 2-Hour Chart : Gap Filled

As we said yesterday, further downward movement was possible, and was possible we were getting an ending diagonal c wave, lower. Not only was the gap filled, not only was the lower trend channel line attacked more vigorously, but, at the end of the day, it did look like an ending diagonal c wave did indeed form. At least as of the end of the cash close. And, so too, the Elliott Wave Oscillator remained in the acceptable range - staying within -12 currently.

In sort of a rare treat, I'm going to provide this SP500 15-minute chart from the live chat room so you can see how this potential ending diagonal c wave formed in near real time.

SP500 15-Minute Chart - Potential Ending Diagonal

As we stated before, we can not count the downward wave currently using The Eight Fold Path Methodology. Therefore, it seems best to call this wave corrective in nature, and not an impulse. We counted the five waves down to the a wave - live and in real time. And then things started getting whippy, murky, and compressed which is what made me think of a diagonal. We also had a clear triangle yesterday which I called in real time and which broke to the down side, and that was likely the (B) wave of wave ((3)) of the diagonal. Please remember, a double set of parentheses means the same as 'circle'.

So, at this point, here you have it: Wave ((5)) is less than ((3)), Wave ((3)) is less than ((1)), Wave ((4)) is less than ((2)), and Wave ((4)) overlaps wave ((1)) and each wave is a zigzag, currently fitting the definition of an ending contracting diagonal.

During live chat, I stated the limit of wave ((5)) as 2359.80, and that level held into the close with the day's low at 2361.01; and in looking this wave over after the heat of battle, I realize it is possible but not necessary at this point to move wave ((4)) to where (B) of ((5)) is. In other words, it is possible the (C) wave of ((4)) truncated slightly. That would allow the invalidation to be moved down about a point to 2358.50, but that's it.

Still, diagonals are waves that must prove themselves, and regardless of what happens in the futures overnight, it is this cash count that must hold. The Dow Jones Industrial Average also made lower lows today, so it seems, for now, these two markets are in gear. Let's see what tomorrow does to the structure.

Currently, with three-waves down, at least three waves more up could be expected, if downward movement ends in this area and the upper diagonal trend line is broken to the up side.

Until then, have a great evening.
TraderJoe



11 comments:

  1. Quick question. It seems on today's chart that the Channel Lines have shifted downward. Is that because you're assuming today was the bottom of 4 and are now connecting 2 & 4 with a parallel off of 1 instead of connecting 1 & 3 with a parallel off of 2?

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  2. On your 15 minute chart c=1.618*a as well.

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  3. hmm... looks like full moon is able to predict this bottom as well. The next full moon is on Sunday.

    Not that I would rely on this but it's always funny coincidence :)

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  4. TJ, could that Trump speech induced sharp rise be a B wave of a triangle. Will be an ugly triangle (currently C wave forming, e.g.). If yes, then unlikely going much below 2350. Should be consistent with many metrics that are showing oversold conditions developing?

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    Replies
    1. Possible, but not needed. Impulse counted as "five up", and a triangle preceded it.

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  5. TJ, you going to count this ED as an LD now as part of WXY (DZZ)?

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    1. Yes, or a very important alternate that I will discuss in the next update.

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  6. Joe, ED could have extended a little if triangle for b of iii is counted a little differently.

    https://www.tradingview.com/x/ZSHFBf6G/

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    1. Nope. Sorry. In your proposed "running triangle" for little b, the interior (c) wave of that triangle 'must' contract. It does not, and is therefore not a valid triangle. See tomorrow's update, please.

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    2. Ok, I look forward to your update to understand as it seems to contract to me, (a)>(c)>(e). 1 minute chart in link for reference.

      https://www.tradingview.com/x/ukrxsRD4/

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