Wednesday, May 24, 2017


As if yesterday's wedge wasn't bad enough, today's overlapping waves made an even more severe compression on exceptionally light volume. Stocks dropped on the FED's FOMC meeting minutes, then they rose, then they dropped back again, over-lapping over themselves in near psychotic manner.

And while it is possible to count a top today - in diagonal fashion - there is no incontrovertible sign of one yet. Price has not yet retraced below the 2390 level in futures to signify the start of a downward move. The ES futures are ticks from a new all time high, as is cash S&P500. Only the Dow lags. The dilemma of the count can be illustrated most clearly from the Dow daily chart, below.

Daily DJIA Cash

At the point labeled (0), the Dow had not quite made the 90% mark for the minute ((b)) wave of a flat that it should make. Yet, the way down from there measures properly for, and can be considered, an expanding leading diagonal five-wave sequence, either as an "A" wave or a "1" wave. This is shown as the sequence (i) through (v).

But, since the all diagonals consist of three zigzags, then the way down can also be considered just a triple zigzag corrective wave, or "X" wave, instead of "A" or "1". This is shown as the sequence (in circles) w-x-y-x-z.

If the Dow exceeds the (0) mark, it must then be the "X" wave. And, this may allow the Dow to make the 90% mark which it should have for the minute ((b)) wave of a larger flat. This would simply result in a more complex ((b)) wave.

The NQ has exceeded the high today. If the other markets do tomorrow, then it will likely solidify the larger ((b)) wave. And, the upward count may form like a flat-x-zigzag, upward, in the Dow. In such a case, even the prior high in the Dow could be exceeded before starting on the C wave lower.

The only thing we can say is you can see how the volume, while up volume, or green, is falling off badly in the Dow, and this is especially true of the ES futures, too. While that can go on for quite a while, it is not an especially good sign.

Patience and flexibility remain needed to count this market.

Have a great night!


  1. Thanks Joe. FWIW, I'm counting it as wave A ending on 3/27; 'a' of B ending on 4/26; 'b' of B ending on 5/18; and now in 'c' of B. This count is the same in all the large cap indexes.

    1. Your suggestion is not correct in the DOW. The Dow just hit the required 90% up wave this morning again proving the rule that a three wave "A" wave must be followed by a 90% "B" wave. Your count would ignores that rule because your 'b' of B ending on 5/18 did not retrace 90%. The correct up count for minute ((b)) is w-x-y as a flat-x-zigzag structure, indicated in yesterday's blog that will be in the 5/26 posting.

    2. I admit to not really worrying about the difference between a 3:3:5 (a-b-c) versus a 3:3:3 (w-x-y) because the end result is the same. I realize that there is a technical difference, but, imo, there is no trading difference. You are correct, though. The 6 day rally is a double zig-zag, so far.