Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil, up
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Yesterday, I was expecting some kind of up wave at the open, and then further down waves. That is precisely what happened, and the size of the waves seems to be what matters.
With reference to the chart below, this morning's up wave labeled c of B exceeded the size of the wave labeled a of B. And, the down wave to b exceeded 161.8% the length of a. Yet, the c wave up, as expected, did not exceed the high of a. Therefore, this middle wave meets all the criteria for a true "running flat" wave, and has, with the waves following it, been designated an overall B wave in an A-B-C, lower. So far.
|S&P 500 Cash : 5-Minute Chart - Since the March High|
IF the up wave designated as c were to be designated as ii of 1-2-i-ii, then this would be a degree violation, and that is one way that the concept of wave degrees in Elliott Wave is helpful. In a true 1-2-i-ii, then wave ii can not be larger than wave 2, or it violates the very meaning of the term degree.
Next you'll note the whole down wave is in a rather specific declining channel. This is one hallmark of a corrective wave.
Third, again because of the size of the wave marked (iv), and the fact that it overlaps the wave marked (i), it appears the overall C wave will be an Expanding Ending Diagonal. Right now we have (iii) longer than (i), (iv) longer than (ii), (iv) overlaps (i) without traveling beyond the end of wave (ii), and all of the sequences thus far can be counted as zigzags. Now, more than likely, wave (v) down should also become longer than wave (iii). Already, there is a lower low than (iii) so the fifth wave has not failed, but the question is will (v) become longer than (iii), as it should. A case can be made that we have made the a wave down of (v), with possibly a b up, and c down to go tomorrow.
Overall, if we do make an A-B-C down, then, again, depending on length, we can still be in a triangle or a diagonal.
On the day declines exceeded advances by 1,247 : 1,703. This is nowhere near as severe as those truly impulsive days that are from 1 : 4 to 1 : 9, and so that may still provide a clue regarding correction versus impulse.
As I noted last night in the comments, it was possible with the overlap in the Dow futures to see a potential triangle - completed or in progress. Below is the daily chart of DJIA - Cash Index. Yes, regardless of whether I preferred to see a triangle or not, one can argue that the exact shape painted out below is that of a triangular shape - right up until today.
|DJIA Daily Cash - Triangular Shape In the Dow|
The shape is fairly symmetrical, although not perfect. And as I alluded to in last night's comments, it all depends on whether the (a) and (c) waves are five-wave sequences or three-wave sequences. A triangle like this could become more symmetrical - and take more time - if the current down wave travels to below the current (c) wave location, around the 78.6% Fibonacci retracement level, and then there is a larger (d) wave up. It is, however, currently possible for prices to 'pop' and make the thrust out of the reasonably well-formed triangle from here.
Do I know for sure? Not on your life. This is The Fourth Wave Conundrum, and so I remain flexible, calm and patient. And I will not pretend to know something that I don't, and I will not purport to sell you a service that claims to know, when it doesn't know either - like some of those other web-sites. I am however, just gratified to see the triangle shape on the chart, with each significant wave on the opposite side of the daily EMA-34. It does bring a smile to my face, and I hope it does to yours too.
Remember, the alternate for a triangle is almost always that (a) = 1, and (b) = 2, and (c) = i, and (d) = ii. In this latter case, then since (d) or ii, is smaller than (b) or 2, then, finally there would be no degree violation.
Have a very good start to your evening. I truly hope this helps.