An Experiment

I was looking for a way to mimic the Neely data preparation steps without actually having to manipulate the data off-line (subject to error, and time consuming). What I don't especially like in the Neely technique is problem due to "sampling error". Suppose you pick a 4-Hr time period and pick the high and low of the time period, but in the interim is a 'relatively small' wave that might be a triangle or something important. That might get missed just due to sampling error: the time period selected.

What appears below has no tricks in it. It turns out NinjaTrader has a built-in indicator called a zigzag indicator. All I did was set the filter to a 0.5% move, and also select "Use Highs and Lows". Then, I just "hid the price bars", looked for alternation in the move, and tried to resolve any overlaps.

It turns out the count in this wave is the same as that shown in the daily Dow chart, yesterday, with a crisper look to it. Shown are the actual highs & lows of the bars, provided the moves are better than 0.5%. At this location because 1 is shorter than (1), then I think the degree labels in the ES futures work out as well. I will double-check this over the next couple of days.

The key now is that the wave (ii)-(iv) trend line has been decisively violated, we might look for an up wave than makes a decent wave 2 and stays shorter in price & time than Intermediate wave (2).

I'm going to be experimenting with this over the next couple of days and let you know if I like it or not. Right now, it is a really welcome sight to have an ES count that agrees roughly with the count on the Dow (futures). 

The Fibonacci extension ruler is shown as the extension of a (c) wave from the (b) wave of the potential expanded flat. The latest up wave is shown with a dashed line, as we don't have any information that it is completed at this time. 

Have an excellent start to the evening.

TraderJoe