Rationale for 'Daily' Count

Below is a two-day chart of the ES E-Mini S&P futures. Why would anyone say that they are providing rationale for the 'daily' chart and yet show a two-day time-frame? If you have not read the featured post in this blog (entitled, "The Eight Fold Path Method for Counting an Impulse" at this LINK), then you should do so now. The first step in that method is to "Chose the time frame that allows 120 - 160 bars on the chart.") You select the number of candles first; the time-frame is what results. That is done below. Using a one-day chart would provide 244 candles, and that is way too many.

 

ES Futures - 2 Day - Intermediate (W), (X)

I have used MotiveWave for this count to verify the accuracy of the placement of the wave labels and lengths of the waves, and to provide the accurate degree symbols. Other programs make this very difficult. This provides additional confidence in its correctness. Now for the rationale, recognizing that last weekend I provided rationale for the larger Primary ((B)) wave, upwards.

1. With between 120 - 160 candles on the chart, the Elliott Wave Oscillator is plotted next. What can be seen is that there is no higher high third-wave peak on the EWO. This likely means that the up wave - to this point in time, and on this time-scale - is not impulsing.
2. Next, when the daily chart is considered, the minute ((iii)) waves (or circle-iii waves) are in the only locations where a 0 - ((ii)) trend line does not cut off a portion of a third wave. If you are unsure of this count, are a new reader, or just have Elliott Wave qualms, in general, you really should take a daily chart, and try drawing what you see are 0 - ((ii)) trend lines, and see whether they cut off any portion of what you think are your third waves. This is the only way I can find to do it.
   
3. The highest wave on a divergence is the Minor C wave of Intermediate (W). Assume for a moment that Intermediate (W) is "all one wave". As such, it has not yet been retraced 50 - 62% for what would otherwise be a normal second wave retracement. So, we think one will happen, but the FED's early recognition of the need for lower rates, and stimulus efforts from Congress have stalled that decline.
4. Next we placed a Fibonacci ruler at the only location we can find for the current up wave. It is exactly a 1.618 external retrace on the Minor A wave down into the end of October, 2020. The market does seem to be reacting here.
5. Finally, we have degrees to consider. And at this location - as an 'up' wave - minor B is shorter in price and time than it's larger degree up wave, Intermediate (W). Yet, it is "on the order" of the Minor A wave up of (W), and the Minor C wave up of (W), likely confirming that the degrees are similar.

So, that is the major rationale for this count. As a next exercise, we draw a tentative up trend line (dotted blue) through the extremes of the chart. First, we see it is very nearly at a 45 degree angle, and next we see it has really only two touch-points at this location. This trend line becomes important. Initially, price may come down to touch it, and then bounce off of it. However, if price goes down through it, and then back-tests and fails, then it would suggest the expanded flat for wave (X) is underway. That would be accompanied by a significant break of the round-number 3,600.

In last weekend's post (LINK here), in addition to providing the rationale for the Primary ((B)) count, and the daily count, I highlighted that I don't think this Intermediate (X) wave would likely be a triangle because the middle wave of the Intermediate (B) wave of the Primary ((A)) wave down was a triangle, and this would seem like bad alternation. Again, I could be wrong, but this is what alternation suggests.

In Elliott Wave work, a good analysis also indicates where a wave count is incorrect. In this case it is relatively simple. Any higher high above Minor B would likely suggest this scenario doesn't work. Why? Because 1.618 is about the maximum measurement allowed for the "B" wave of any expanded flat. Beyond that, and the wave is likely to fail. This is one of the key benefits of Elliott Wave work. Knowing where one is not correct helps one to be flexible, patient, and calm.

 

Notice I said in Item 1, above, that The Eight Fold Path Method is also indicating where this wave is NOT impulsing - at least at the moment.  That is also one of the benefits of the method, and it's why I rely on it for counting waves.

 

In terms of alternates, the best suggestion would be to replace the Minor A wave at the end if October with the Intermediate (X) wave. The problem with that count is that at this point in time there is no good Fibonacci relationship with this new (Y) wave and the (W) wave. I've tried. I've looked for numerous other counts. This is the simplest I can find. 

If you think you have another count, great! Then show it in the comments via a link and show how you have counted those third waves as not breaking any part of a line through wave 0 - ((ii)). This is the second post this weekend, and if you have not read the first one, you may wish to view it now.

Otherwise and else-wise, have an excellent rest of the weekend.

TraderJoe