Saturday, May 13, 2017

Update on Potential Triangle

Here is an update on the potential triangle in the ES E-Mini S&P500 4-HR chart. If this triangle completes properly, it may allow for a new high. And if a new high occurs in the S&P500 Index, then it might similarly allow for a new higher local high in the Dow Jones Industrial Average.

ES E-Mini S&P500 Futures Potential Triangle

Essentially, all of the requirements of a triangle in this index have been fulfilled. All of the waves internally overlap and wave ((E)) overlaps wave iii, downward, demonstrating that the potential triangle is corrective to it.

Wave iv would now be much, much longer in time than wave ii, and the triangle may represent the wave before the last wave up in both indexes. If the indexes do struggle to a new high, it would be one of the longest and most protracted upward  minute ((b)) waves on record.

The immediate implication of a vth wave up (especially if it results from v = i), would be that a minute ((c)) wave down should occur as a five-wave sequence to end Minor 4.

Still, however, this triangle is only a potential triangle. To be a proper triangle, it must demonstrate that price can exceed the high of iii before traveling below wave ((C)), downward, the invalidation point.

Potential triangles, being what they are can sometimes expand once. This means that, in the process of traveling sideways and taking up time, it is possible for the ((D)) wave to pop once higher, and to get an ((E)) wave a little further along to the right-hand-side. This would / will be OK if the ((E)) wave comes back down to overlap wave iii, again. If prices travel north without the return overlap for the ((E)) wave, then one simply assumes the triangle is over as of today. Usually triangles like this can be more symmetric, however, which is why we must allow for a higher ((D)) wave - since the bottom of the potential triangle is relatively flat.

The Dow Jones, on the other hand, can be seen to be in a regular FLAT for it's wave iv, with a clear lower low that the ES futures so far have just refused to make (twice!). A chart of the Dow as of the close on Friday is below.

DJIA - 2 HR - Wave iv is a FLAT

It is interesting, that within wave iv, but not overall, the ((B)) has made the 90% level of the ((A)) wave. We also counted the five-wave down expanding diagonal in the live in the chat room.

The reason for showing this chart is that it is possible that the DOW and the ES will synch up while the ES is in the triangle process. That is certainly a possibility providing that the triangle completes in proper order.

In case you are one of the individuals that is skeptical of wave counting, and / or Elliott wave work, here is a chart of the Russell 2000 ($IUX, on my quote service). Look at the beautiful, ending contracting diagonal that was formed for a C wave, upward, just before the Russell spilled to a fresh lower low.

Ending Contracting Diagonal C wave in the 5-Minute Russell 2000

In this clear example, wave v is shorter than wave iii, wave iii is shorter than wave i, wave iv is shorter than wave ii, wave iv overlaps wave i, but does not travel lower than the end of wave ii, and each wave sequence within the diagonal is a clear three-wave zigzag. Perhaps more importantly, wave i has it's crest clearly above the former high, signalling it's true motive character. This is way most contracting ending diagonals form. This is the pattern that should be looked for above all else before considering a true contracting ending diagonal.

It is clear from the above chart that price then rapidly and quickly retraced the entire diagonal (beyond the point marked as 0), in less time than it took to build the diagonal. This is a critical measurement and this diagonal passes that test, and how!

I hope you will keep this example in mind, because you will see beginning Elliott analysts that haven't quite grasped the concept yet, trying to call all sorts of waves that don't have their start over the prior high as contracting diagonals (when often they are just "b" waves of one degree or another).

That said, it is not at all clear that this observation applies to expanding ending diagonals. Just look at the DOW chart, above, and the expanding ending diagonal ((C)) wave of iv. It seems to me that because of the very compressed nature of the expanding diagonal, it almost assures that while wave (i) in an expanding diagonal will be recognizable for one of several reasons - such as traveling outside of a parallel channel, or making a larger recent retrace than previous ones. But, whether it exceeds all of the prior lows (in this case) of the prior wave certainly seems nearly impossible. Yet, wave (v) in this sequence has, and now price is currently above a declining diagonal trend line.

It is good to have the Google Blogger editor and upload service back on line - at least temporarily. Let's see if it stays that way, and have a great weekend.

Thanks for your support through the technical glitches.

P.S. In order to see if file space limitations were involved in the technical problems, a number of blog posts with interim status were removed (and unfortunately can't come back). When deleting a lot of old posts and files did not resolve the issue, it told me almost completely that the issue was with the host. I tried not to delete the most important posts - such as The Eight Fold Path, and the Paraphrase of Ira Epstein's Guidelines for Trading.


  1. Nice glad you got your blog-spot back up, I dealt with them for about three years but problems kept coming up, the good thing, with a little googling you could normally find a fix in the coding. I was really happy when I finally left blog-spot, at first we did have a few problems for a year or so but now the site is running really good and I am happy. I would suggest to start getting your other site ready to transfer over, in the end it is a lot less work.

  2. Thanks for the update, Joe. Here's a question: Both SPX and DOW moved essentially in unison, tick for tick, down from the SPX 2404 high, in a mirror image of each other. However, you have labeled that wave as a zig-zag in SPX, while calling it an expanding triangle in the DOW. Personally, I don't see how it can be counted as a zig-zag in SPX because I don't see a 5:3:5 subdivision, but nevertheless, why are you labeling the exact same wave structure differently in the 2 indexes? Thanks.

    1. Correction: Rather than labeling it a zig-zag in SPX, it looks like you're calling it a wxy. My question remains the same, though. Thanks.

    2. Both are labeled as three-wave A waves: one in the first wave of a triangle for ES; one as the first wave in a flat. Regardless, it should now be clear they are not moving tick-for-tick now as the ES has so far refused to make new lows to this point. The S&P500 has made a new all-time high. The DOW has not. Indexes will trade differently​ at different times.

    3. Joe, I was referring to the circle C wave, not the circle A wave. Seems to me that both SPX and DOW did a flat from the 4/26 high to the 5/11 low. I have them in the same count.

    4. Nope. Then you have to invoke truncations which you do not have to do with a triangle. See tomorrow's update. Triangle already validated.

    5. SPX was stronger than the DOW for the duration of the flat. The slight truncation in SPX makes perfect sense because its B wave made a higher high. In my count, the DOW and SPX began and completed the flat together, and also began the current rally together. They remain in sync.

    6. No it doesn't. Now you are dealing with a 'triple' truncation in the S&P versus the Dow. Your analysis is faulty ... justify it any way you want.