How the Dow? (You had to be there!)

I have been droning on for days and weeks now about how the market recently has been starting down from its local highs in expanding diagonals. I asked you not to get perturbed with me: the market is making the patterns; I am just trying to count them. Now why is this at all important? Well, if you were trading in the years 1990 - 2007, you would have seen the venerable Dow Jones Industrial Average make this pattern in the weekly chart.

I counted this pattern in real time, and so I remember it well. I also remember where I was able to take advantage of the count, and where the count was able to take advantage of me. It is definitely an expanding diagonal pattern, with ((v)) > ((iii)) > ((i)), and ((iv)) > ((ii)) where wave ((iv)) overlaps wave ((i)), but yet wave ((iv)) does not travel above the high of wave ((ii)).

The diagonal is just the Minor A wave. There is a large three-wave B wave, up, after that, followed by a strong and swift non-overlapping Minor C wave down to make the even larger Intermediate (A) wave which is a wave in a three-wave sequence from the high. The Expanding Diagonal Minor A wave is a "Leading Diagonal". There is a lower low after it. It did not 'have to be' leading, but it was. Diagonals are 'often' A waves. This one was, too.

After Intermediate (A), down, not shown but almost all chartists know there was an Intermediate (B) wave that went marginally over the Dow's 2000 high prior to the financial crisis Intermediate (C) wave to the 2009 low. So how does this apply to today? I think each major equity index is in this position shown for the Dow and the SPY below.

As far as I can tell, we have three waves down in each index in 5-3-5 format as Minor A,B,C. I have also shown a tentative larger blue Intermediate wave (1) for the Dow. Will an expanding diagonal or contracting diagonal come to fruition? I simply do not know. I am counting waves. But, as in the Dow example, the retraces can be quite severe. So, one must be patient and follow the rules for both types of diagonals.

Is it possible to "go over the top" again? Yes, it is. With a pattern like this The Fourth Wave Conundrum is in full swing. We are watching it operate on a lower time scale on smaller waves if you are following the comments.

But, be forewarned. See what that Dow did in 2000? Just keep it in mind is all I ask. You had to be there to see it, to experience it, and to fully understand its implications. All I can do is share that with you, and hope it provides some learning for those who didn't experience it.

Have an excellent start to your evening.

TraderJoe