Thursday, May 25, 2017

DJIA makes 90%

Let's hear a minor hooray! The DJIA finally made that 90% level and avoided breaking an Elliott Wave rule (not a guideline) for the minute ((b)) wave of a flat. The upward wave was a total mess, but we recognized that the lower low in the Dow that was not made in the S&P500 meant we did have another flat construction - which must have also followed the rules for a 90% retrace in the downward direction after the three-wave "a" sequence below from Mar27th to April 5th. It did! It even made a lower low - the very signature of another flat.

DJIA Daily finally makes the 90% Level to Validate a Possible ((b)) Wave of a FLAT

So, the overall upward sequence from March 27th counts as the flat-x-zigzag that we mentioned in prior posts, where a,b,c to (w) is the flat, w-x-y-x-z is the (x), and now we are working on a three wave zigzag upward for the (y) wave. So, while this has been a real terror of a wave to count, we are most satisfied that no Elliott Wave rules are broken.

It is likely that the market knows what you and I suspect - that a strong and steady minute ((c)) wave down is expected for Minor 4, and there had to be a lot of bronco-bucking to make sure no one is on board for it.

The upward movement is probably not over yet, but volume continues to fall off. It will be very interesting to see if the upward-sloping channel drawn in contains the corrective price movement. With today's locally higher high, all of the gaps are now to the down side, and we can envision a scenario where the trading algorithms go "on the hunt" for those gaps at some point in the near term.

You might ask, "how do you know the upward wave is a zigzag"? Earlier today in live chat, I published this 15-minute chart of the S&P500 Index.

SP500 15-Minute Chart

Today's re-acceleration upward was likely the third wave of a (c) wave higher. Why? First, because of insidious price overlaps it is almost impossible to count the waves up until May 23 as anything other than one wave, in itself. Then, yesterday's FED meeting wave was so shallow and overlapping that, on reflection, we can only call it a (b) wave. Price has not really attacked the channel lower, although it did glance off it, and the Elliott Wave Oscillator (EWO) has remained above the zero line almost the entire time.  For these reasons, it does not seem to me that this wave follows The Eight Fold Path Methodology.  There are too many anomalies, and that tells me the upward wave is corrective.

Here is a similar upward wave in 2-Hr Crude Oil futures, and look what's happened to it today!

WTI Crude Oil Futures - 2 Hr Chart - Corrective Wave Upward

Clobbered! ...and now overlapping the minute ((a)) wave up. This is a likely an excellent example of a zigzag wave where ((c)) = 0.618 x ((a)) when added to ((b)) as the green Fibonacci ruler shows. I'm not sure how many of those you get to see in your lifetime, so I wanted to point this one out.

By-the-way, MotiveWave counted the minute ((c)) wave upward as a contracting ending diagonal in beautiful form. I didn't even have to tell it to! If it is truly an ending contracting diagonal, then price should fully retrace below the low of the minute ((b)) wave in less time than it took to build the diagonal. Looks like the chart has a very good start on that objective.

And I hope you have a very good start on your afternoon and evening, too. Cheers!
TraderJoe

4 comments:

  1. Replies
    1. Welcome, Mark. Hope you are doing well.

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  2. Joe, your counting skills are really an eye opener.

    By the way, could you please recap on the rules and guidelines of "x" wave? Thank you.

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  3. What is the rule how high this "b" wave can go? There is a lot of strength in too many sectors for this rally to falter very far.

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