Tuesday, June 20, 2017

Downward Wave Began - And More

Per the S&P500 Cash Chart below, and yesterday's blog post, we were expecting a fourth wave down ((iv)) today. We got that, and a tad more. Here is the S&P500 Index 2-Hr cash chart with the triangle count. The same one we showed yesterday.

SP500 2-Hr Chart : Triangle Count

By a hair's whisker wave ((iv)) down today did not overlap wave ((i)) down in the cash market within this C wave upward. So, this count is still valid, and with some heavy lifting tomorrow, it is possible to complete a wave ((v)), upward either as a higher high, or as a truncated top.

But, the same is not true in the ES E-Mini S&P futures. Today, a wave ((iv)) did overlap a wave ((i)) up. So, whether we want to or not, that forces us to ask what might be going on. You'll notice that all along, we've been showing in bold brown letters Triangle / Diagonal Invalidation on the chart.

So, given that the futures have downward overlap in the last wave, already, while the cash does not, and given that we have two marginal higher highs, we must also consider our diagonal variety count of a top. It would look like this.

SP500 Cash 2-Hr Chart : Diagonal Alternate

Such a diagonal would really put a lid on things, and is a completely acceptable way to the end the (b) wave up. And we want to indicate, there was enough damage done to the market internals today that wave ((v)) in such a diagonal could easily truncate. But, as usual it does not have to.

This is once again a time for patience and flexibility, not ego or emotion. Let's let the market suggest what it is doing in the short term here. It seems to us that either way, the pattern is about to become very clear.

By, the way, within the triangle count, there is no way that a ((v)) = ((i)) wave will now get prices over the top. It would take a ((v)) = 0.618 x net of [((i)) through ((iii))].

In any event, we can see two sides to this same coin. Again, we are not bullish here - just neutral and counting waves until the situation clears.

I hope you have a good start to your evening.


  1. Joe, a few general EW questions.
    When there is a 3rd wave extension:

    1. Does that cause the EWO to peak at one of the later waves?
    2. Does the 3rd wave extension make a 5th wave truncation more likely?

    1. 1. See The Eight Fold Path Method post.
      2. More so after 2.618, 4.236 +

  2. Thanks Joe. I've got 3 different ways of grouping the waves from the May 18th low, but they all end up as a-b-c-x-a-b-c-x-a-b-c, and they all finished at yesterday's high. While it's always possible for the market to continue to subdivide, I'll be very surprised to see yesterday's high exceeded. I think the next destination for SPX is 2200.

  3. Thanks ET, good analysis as usual.

  4. If ED is in play, I think wave 4 will not complete until tomorrow near 2430ish. Still need a clear b of 4 within ED IMO. a of 4 should be complete at 2433