Market Indexes: Major Equity Indexes eeked out gains, except transports and utilities
Today's Candle: Higher Low, Higher High, Higher Close
I am pretty much going to let this chart speak for itself. Because, in the Dow Jones Industrial Average cash chart, a wave (v) is now longer than a wave (iii), and wave (iv) is longer than wave (ii), and wave (iii) is longer than wave (i), with wave (iv) overlapping wave (i), but not traveling beyond the low of wave (ii), with all three-wave sequences, then the pattern of an expanding diagonal - or megaphone - may be seen.
This one even has trend lines that look the part! In other words, the wave pattern almost has exactly the right look. If wave (iv) took a little longer in time than wave (ii), it would be perfect.
|DJIA Cash - Hourly - Triple Zigzag or Expanding Diagonal (Megaphone)|
There is no doubt that the above structure - as shown in black - is a triple zigzag. The issue is this: usually - most often - ending expanding diagonals usually occur 'over' their wave ((iii)). This one occurs inside it's wave ((iii)). So, there are three possibilities now. First, triple zigzag B wave. Second, ending diagonal. Third, leading diagonal. And, usually, the fifth wave (v) of an ending diagonal almost always occurs over it's wave ((iii)).
The pattern is there. The question is what to do with it. We'll leave that up to you. We will note that the ES futures are right up against their upper daily Bollinger Band, but the slow stochastics are now embedded for the third day.
The pattern of the EWO is quite amazing; the peak of wave z, is taller than the peak of wave y, which is taller than the peak of wave w. And the trough of wave (iv) is lower than the trough of wave (ii). This is the usual and customary pattern of an expanding diagonal on any time scale.
The only thing we can say is that if wave (v) were to conclude above the high of wave ((iii)), and there is a quick retrace, then the ending diagonal pattern gains considerable credibility. For this to happen, the downward wave must travel below the start of the diagonal at ((iv)). If this does not occur, then the pattern is either the B wave or a leading diagonal.
Even as I write that last sentence, having a leading diagonal at an all time high in the market makes me gulp, gasp, and shake my head, tsk, tsk. But, I've been fooled before. Let's see how it goes.
Have a good evening.