Friday, June 21, 2019

Dow and S&P Overlapped

In yesterday's post, we cited how if a contracting diagonal was being formed, then overlap was required. It didn't occur until the last moments of the trading session, and then it occurred with a minor vengeance. The Dow's cash chart - as an example - is shown below with the potential diagonal.

DJIA Cash Index - 15 Minutes - Downward Overlap

The first thing that occurred this morning was the higher high. That was completely expected from the counts that were posted throughout the prior post. Then, in a wave which is slightly longer in time than wave (ii), a potential fourth wave did form a clear zigzag downward. We showed the divergence on the Elliott Wave Oscillator, and there now appears to be a fourth-wave signature, with the EWO slightly below the zero line. The overlap, too, was expected.

Now, it is critical that in both cash and futures, for a potential contracting diagonal to play out, the length of (iv) in points, must not exceed the length of (ii) in terms of points. Unfortunately, this is going to require monitoring of the overnight futures on Friday/Sunday/Monday

IF a contracting diagonal forms properly in one or both indexes, then it could terminate the minute ((c)) wave, up, shown in yesterday's post. But, in order to make that claim, then it must fully retrace the diagonal in less time than the diagonal took too form. These are the 'rules'. It is not a matter of being unsure. It is a matter of being uncertain - that is uncertain in the probability sense.

With that in mind, one time only I will provide these exact levels where a contracting diagonal would invalidate. In the September ES Sep futures, it is 2,940.25 (we are about 10 points from there). In the Dow futures in  the after hours Friday, the potential contracting diagonal has already invalidated, and a potential expanding diagonal or triangle might be looked for. This might explain the fourth wave that is longer in time than the second wave.

P.S. Because of the after-hours invalidation of the Dow's contracting diagonal, I have shown below what a legal Expanding Ending Diagonal count for the Dow would look like in the chart below.

DJIA Cash Index - 15 Minutes - Potential Ending Expanding Diagonal

Unfortunately, since they are all three-wave sequences, if this expanding diagonal plays out, this must be an ending or "terminal" wave sequence. Wave iv in cash must become longer than wave ii in points. As we said above, it is already longer in time. And the fifth wave can make a new high or fail. And, if this potential diagonal does not form properly, it would be best to look for a larger fourth wave triangle.

Have a good start to your evening.


  1. If you are leaving a comment, please be sure to see the updated P.S. and chart, first. Thanks!


  2. thats pretty good bewn watching it in ndx as well

    1. but didnt get the right look in the ewo oacillator...

  3. Did anyone mention this on Friday? Works on both spx and nya cash index?

    1. Yes, I noticed it works in the DOW, too - but just barely. I was honestly waiting to see if absolutely anybody would recognize the obvious degree violation in the second chart - subwave ii greater than larger degree wave (ii). But absolutely nobody gets it. The charting software allows it. No one pays attention. What am I to do?

  4. A new post has been started for the next day.