The lurching, jerking upward wave can be analyzed using The Eight-Fold-Path Methodology as shown on the ES hourly chart below. With 120+ candles on the chart, the Elliott Wave Oscillator (EWO) clearly shows a second wave and a fourth wave with the EWO below the zero line. The type of wave is the First Extension (xi) Terminal, also known as a Contracting Diagonal.
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| ES Futures - Hourly - Contracting and Overlapping |
The first wave, i, is longer in price than the third wave, iii, but the third wave is longer in time than the first. The time taken by iii in this arrangement is atypical and somewhat contrary to guidelines. But the overlapping fourth wave rules the count.
The pattern gives a clear invalidation for wave iv, and that level is 3,939.75 and it also gives a clear invalidation for wave v in that the fifth wave may not become longer in price than the third wave. At the end of the wave, wave v should also show further divergence on the oscillator. Let's see how things work out.
Have an excellent rest of the weekend.
TraderJoe
Thanks TJ,
ReplyDeleteOn a longer-term chart are we still targeting wave v ending the b wave?
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ReplyDeletenot unless it goes over the prior CPI wave high. Otherwise, v is the end of (c) ((ii)) of the five waves down of ((c)) of 5. TJ.
DeleteI'm confused as to the placement of the invalidation line, as it doesn't appear to line up with any fractal.
ReplyDeleteIt does not line up with a fractal. In a contracting diagonal, the 'rule' is that wave iv 'can not' become longer in price than wave ii. The Fibonacci ruler shows you that 1 = 100% of wave ii subtracted from iii is at 3939.75; so that is a 'hard invalidation' according to the 'rules'.
DeleteFrom a fractal perspective, there is a down (red) fractal at the current wave iv. It is not shown on the chart. And certainly any fractal break of that level would be a warning sign of a potential reversal. That level would be above the formal invalidation by the 'rules'.
Hope this helps.
TJ
Didn't understand. Can you please draw a chart if possible.
Delete@manu ..the chart is above. The red dotted line at 3,939.75 is the same length as wave ii. If wave iv went below that level it would be 'longer' than ii and break the 'rule' for a contracting diagonal. Thus, it is the invalidation level for iv 'by the rule'. TJ.
Deleteyes that helps thanks. my next question is that if you re-draw the bottom trend line to the tentative wave iv it doesn't look like a contracting wave any longer
Delete@David; the Elliott Wave Principle refers to such a feature as a fourth wave 'under-throw'. It is what allows a fifth-wave 'over-throw' of the upper trend line. Clearly, you know that the overnight ES made new higher highs. So, the count appears to be on track. And although the look is not 'perfect', by measurement it is still contracting. It doesn't 'have-to' work out; nothing does. But it has a high probability of making the higher highs. TJ.
DeleteI find it interesting watching the ES market action the last month when seeing the Central Banks balance sheet has turned sideways. Seems like that is having a cage match with the diagonal.
ReplyDeleteES 30-min: here is the overnight pricing. Let's see if there is to be a divergent lower low vs the oscillator for the 'b' wave. Then, perhaps the 'c' wave up, of the diagonal v will occur on tomorrows open.
ReplyDeletehttps://www.tradingview.com/x/rfHHe7zf/
TJ
ES 30-min: with the higher high in the overnight, it is reasonable to conclude that the fourth wave, iv, is "in" the market, as five-waves-up follows it to the purple a wave, up. Therefore, we should now be in wave five, and the ivth wave invalidation level no longer applies.
Deletehttps://www.tradingview.com/x/yynsluQ1/
The wave iv down (red) fractal low becomes the 'wave-counting-stop' and prices below there could now signify a change in trend. Therefore, the new 'invalidation' level on the chart is that wave five, v, should not exceed in length the price length of wave iii, although, on a practical basis, 78% of wave iii would be 'pushing it' from a 'right look' standpoint.
TJ
ES 30-min: as of noon ET, this update just shows that there are two up (green) fractals and two down (red) fractals added to the chart. Further, there is now 'overlap' on the 2nd up (green) fractal back, shown by the blue dotted line.
Deletehttps://www.tradingview.com/x/iWiHXdUv/
The two most-recent down (red) fractals can be exceeded lower without damage to the up-count. The one at the wave iv low can not.
TJ
Reminder: Globex scheduled to close at top of the hour. TJ.
ReplyDeleteWe are seeing some major divergence there on the AO, thank you for the update TJ.
ReplyDeleteWelcome, Kevin. TJ.
DeleteES 30-min: the b wave might be this triangle or a longer one, or morph into a Flat. Watch the highs and lows of the current triangle for clues.
ReplyDeletehttps://www.tradingview.com/x/sYr9NuWY/
TJ
..now above prior ((B)) high in triangle; can be impulse or part of a large flat. TJ.
DeleteSuch bad results and market has no reaction.
ReplyDeleteSPY 1-Hr: here is what cash currently looks like. Higher is still possible within limits.
ReplyDeletehttps://www.tradingview.com/x/6taPQLN0/
TJ
SPY 5-min: up-trending parallel just broke lower. Watch the high and the low of the day.
ReplyDeletehttps://www.tradingview.com/x/EkfRPdzP/
TJ
A new post is started for the next day.
ReplyDeleteTJ