|SP500 5-Minute Chart : Wave Follows The Eight Fold Path|
So with 175 candles on the chart (versus the recommended 120 - 160), wave ((iii)) of 3 is on the peak of the Elliott Wave Oscillator, and wave 3 is on a divergence, as it should be. A smaller time frame would result in too many candles, a larger time frame would result in too few candles.
Today's down wave at the start of the session did not break the ((a)) wave low, and yesterday, we had called a ((b)) wave high. Today continued the sideways action breaking the various trend channel possibilities several times. This is what "attacking the lower channel boundary is all about".
Given the very slow nature of the trading day, pre-holiday, and all, and the very light volume, it looks like the overall structure for the waves since the wave 3 high is that of a "running triangle". At the end of the session, we watched as the wave ((e)) low was respected, and the ((d)) wave was broken slightly higher. It could be a set-up for a gap-up Tuesday.
This is both good an bad news. When one looks at how far price has pushed into the apex of the triangle, then the triangle can be described as a non-limiting one. This means that, presuming price breaks the ((b)) wave high properly, price can sometimes run beyond the typical triangle targets before turning lower. This triangle currently projects 8 - 10 points (roughly the width of the triangle), so if you start to see more than that, it is due to the extreme price compression into the apex. That's the good news.
The bad news is that triangles usually precede the last wave in the sequence. So, we may be looking at "the last wave up, dead ahead". The market ending the pre-holiday week on a triangle is fitting. Triangles don't have to complete properly. If they do, great. If not, then they can point to a 1-2 in the opposite direction (which would be lower in this case). If all goes well over the weekend, the triangle should likely break to the upside, as expected. If something untoward or unexpected should happen, then the triangle pattern still allows the market the flexibility to allow that to be expressed, as well.
There are a couple of things not to like about the triangle pattern, the lower triangle trend line is at a rather shallow angle. But, heck, I didn't draw it; the market did. And, the ((c)) wave of the triangle is quite steep - but it did not break to a new low. Still, the Elliott Wave Oscillator is well within it's parameters for a fourth wave, staying between +10% to -40% of the peak in wave 3. So, we should expect to see a fifth wave higher!
Have a good start to the long weekend.