Why the Nested Count Still Works

The daily chart of the NQ lead contract is below. When we attempt to use The Eight-Fold-Path Method on the daily chart, we find there are only 71 candles (as shown) which is insufficient to be in the range of the 120 - 160 candles needed. But we note that the EWO is on its lowest point, as shown.

NQ Lead Contract Futures - Daily - Nested Count

Because there is no divergence yet, this suggests additional price movement lower is possible. To get 142 candles, you can try the trick of using a 12-hour chart, but the EWO in that case remains on the lows. (Try it!) So, there is no difference in interpretation at this point.

In yesterday's post, we suggested that there is yet to be seen a "kick-off" or a "climatic" pulse lower. IF that were to occur, it would break the "base channel" of one's & two's lower and be a first confirming sign of a third wave. This base channel is also shown above. It is Elliott's preliminary channeling technique.

Next, we note that if this symbol, ⓘ, is for minute-i, down, circle-i, then the first sub-wave of minute-iii, circle-iii, is minuet wave (i). And we note that minuet (i) is shorter in price and time than ⓘ. Further, minuet (ii) is shorter in price and time than minute-ii, circle-ii. So degree labeling definitions are currently being followed. The same is the case in the ES futures. And it is possible for minute-iii, circle-iii to extend by smaller degree extensions.

Please remember when viewing these charts, that in the rollover contract, there is a higher high as shown at the (y) wave high on the above chart. And that is the same in the ES futures. And it turns out that this difference between the lead month contract and the rollover contract matters not for the nested count. The degree definitions still hold. Note in the ES I think the (i) ended just before the expanded flat wave (ii) - which a lot of sites are calling a fourth wave.

For the moment, we know the other count that works is the expanding diagonal. But again, we don't know that downward movement in this wave is over. So why, overall, are we counting as minute-i, ⓘ, down to Minor 1? Let's have a look at the weekly chart, below.

ES Futures - Weekly - Degree Labels Lower

As the chart shows, as long as downward price remains shorter in price and time than the prior larger degree wave in the downward direction, which is Intermediate (A)/(1) based on previous criteria, then the new down wave may be counted as the one lower degree or Minor 1. And its visible sub-waves are the minute degree components. 

Let's see how the week progresses and whether further impulse is experienced - which is certainly possible - or whether a diagonal retraces.

This is the second post this weekend, and if you haven't read the first one yet, you may wish to read it now. Have an excellent rest of the weekend.

TraderJoe

One Thing is Missing

This may be the most boring stock chart you may see. It is the ratio of NYSE Declining Stocks to NYSE Advancing Stocks. In following this ratio for years, a 4:1 to 9:1 ratio is typical of a downward impulse wave. (Similarly, the reverse is true for upward impulse waves: typically, 4:1 Adv/Dec to 9:1 Adv/Dec).

NYSE Dec/Adv - Daily - Tame

Meanwhile the area of 9:1 to 12:1 (or greater) is reserved for "kick-off" waves that start a down move or "climatic" waves that near the end of the move. What do we see? With the exception of the move to the June 22 low, there simply has not been either a "kick-off" or "climatic" wave registered in all the market's grinding in both directions. Yet when we look at the "cumulative" NYSE advance/decline line below, we see clear and continuing deterioration in market breadth.

NYSE Adv/Dec Cumulative - Daily - Lower Lows

In fact, the March 2023 low has recently been undercut and the 50-day SMA has a bear cross under the 200-day SMA. This is another factor tending to rule out the immediate upward resumption of a bull move as many are hoping for. Rather, it begs the question of whether the NYSE advance-decline line will put in a "kick-off" or at least a "climax" move lower, with the signature of the 9:1 to 12:1 ratio of declining stocks over advancing stocks.

Again, for how much the A/D line has fallen already, such a move seems eerily absent. Thus, if this Monday or Tuesday should be an overnight gap lower, one would want to watch to see the level of the declines / advances and see if it is maintained throughout the day.

For those looking for a bottom in this area, here are some items in favor of that, and some items against that. Refer to the chart, below.

Factors For:

1. Price has closed outside the lower band for two days in a row. This lowers the odds to somewhat around the 3 - 5% that the next close will be below the band. Definitely not impossible - just lower odds.
2. There is a way to count "five-waves-down" from the 12 Oct high. So, a rebound wave could occur. But - as we have warned previously - extensions of a fifth wave are possible.

Factors Against:

1. The daily slow stochastic (regular calculation) has just embedded. According to Ira's work, it is one of the most powerful signals in all of technical analysis.
2. There is no reversal candle yet at the bottom of the move. There is not a shooting star or a bullish engulfing - anything that would signal reversal.
3. Price remains below the 18-day SMA, so the daily bias remains lower.

The message of this post is that we could soon be entering the center of a third wave with a gap down move. Such a move might 'also' be the third wave of a fifth wave of a diagonal - but is not yet required to be. One at least has to be aware of this real possibility. I hope to say more on the Elliott Wave count tomorrow.

Have an excellent rest of the weekend.

TraderJoe

Overlap Day

We showed this chart in the comments for the prior post, but it is important enough to make a full post of it. Here is a chart of the ES 2-day futures.

ES Futures - 2 Day - Overlap!

Notice that there is now clear overlap between today's bar down and the A/1 wave up. This increases the odds to over 85% that the upward count is only A,B,C and not the 1,2,3. The only potential up wave would be an expanding diagonal, upward, and it does not have the best-looking trend lines. Further, expanding diagonals are extremely rare patterns that is one of the factors that tilts the odds so heavily.

Note: wave 1 in the expanding diagonal upwards 'has to be' moved - by the rules - to the highest bar in Jan/Feb 2023 because expanding diagonals 'may not' by the rules contain flats in the numbered waves. Therefore, any upward expanding diagonal would be a-b-c to 1 (where a is the location of the current A/1). Sorry if that is complicated, but please try to follow it. 

We'll say more on the weekend.

TraderJoe

NQ Qualifies for Expanding Diagonal

In the after-hours tonight, the NQ1! (roll-over) futures have traded below the 14,412-level needed make a fifth wave longer in price than a third wave. Thus, from the daily chart below, a five-wave-down expanding diagonal structure may be drawn as follows.

NQ (Rollover) Futures - Daily - Qualifies for Expanding Diagonal

This possibility was shown back on Oct 21st in the post entitled, "Will it Activate?", that you can view at this LINK. We had previously stated that just the lead month contract NQZ2023 had already qualified for the diagonal. Readers are quite lucky to see such a chart as this one occurs on the daily timeframe and currently meets all the Elliott Wave rules and guidelines for such a structure. This one occurs in 66 daily candles.

Now that the diagonal has activated, there are a Fibonacci three questions to answer. They are these:

1. Will the fifth wave, circle-v extend to 1.618 x circle-iii as it certainly could?
2. Is the current down wave since 12 Oct all of (c) of circle-v, or is it just wave i of (c) of circle-v?
3. When the diagonal is completed, how deep will be the retracing wave?

As to the last question - if the entire diagonal, the five circled waves shown - is Minor 1, down, the retrace of the diagonal would be Minor 2, up, when it occurs.

Remember, as we showed with the hourly Dow example in the comments for prior posts, a completed diagonal can always convert to a full-on impulse wave just by adding more & more wave sequences, downward in this case, to create a second, third and non-overlapping fourth wave. There is no 'rule' regarding retrace amounts of diagonals, just guidelines.

We hope to say more about the actual counts on the weekend. For the moment, recall that price is still below the 18-day SMA so the bias remains lower, but the lower daily Bollinger Band has been hit again and the daily slow stochastic is still in just over-sold condition and not embedded yet. So again, some of the Smart Money may be taking some profits here, and it will be interesting to see if/when price tries to regain the 18-day SMA for a reset to more neutral conditions, or if price "latches on to" the lower Bollinger Band for a time in the future.

Lastly, if the diagonal should not be correct for some reason, it may be possible to start a nested impulse count. I'm not adverse to that count but am just looking for good rationale for it in the wave sequence. One item that it has in its favor is the possibility of making a "base-channel" lower. We'll explore that more this weekend.

Have an excellent start to your evening,

TraderJoe

By and For the Machines

Three-touch trend lines can better help describe the market movements as they are a little more reliable than two-touch ones. The chart below is of the ES 1-Hr futures. Note that with nearly 120 candles on the hourly chart, one can see the pattern of the dominant trend lines.

ES Futures - Hourly - Expanding Wedge

One can't help but note that the dominant pattern is that of an expanding wedge - at least in the futures. This "grind-and-drop", "grind and drop" to yesterday's intraday low is followed by a "grind & pop" and "grind & pop" higher to the futures after-hours high today. In my experience this pattern makes it extremely difficult for a human trader to gauge. That is probably its purpose.

Note, too, MSFT and Alphabet earning's candle. At nearly exactly 4 pm there was a large machine-driven pop on the earnings, followed by a drop back down to where the candle opened - tough on human nerves. The machines don't care. 

Still, from the standpoint of The Eight-Fold-Path Method, a fourth wave (minute-iv, circle-iv) remains just barely in range. 

The bulls will likely have to recover the earnings candle and make further daily higher highs to be convincing that the down trend is concluded.

Price remains under the 18-day SMA, so the bias remains lower. Price is still scraping along the 200-day SMA, and the daily slow stochastic remains in over-sold territory without embedding yet. The conditions are tough as the over-sold condition is not yet attracting a lot of new money. Consequently, the machines hunt for orders wherever they find them, start-stop, stop-start, grind-whip, whip-stop, whip-whip and little impulsivity shown. These conditions can be due to making a larger diagonal downward, although this segment may not be an overlapping diagonal itself - just part of one.

Have an excellent start to the evening,

TraderJoe

Lower Daily & Weekly Low

The daily chart of the ES futures is below. There was a cash gap down this morning that made a new daily and weekly low. This movement also broke the prior down (red) daily fractal shown. Price ran into the combination of the lower daily Bollinger Band and the 200-day moving average, and it bounced.

ES Futures - Daily - Fractal Break Lower

The daily slow stochastic is in over-sold territory, so it might be a location where the Smart Money took some profits. So, while the trend indications continue lower, a big question will be if the slow stochastic will embed eventually or not. Until then, things could be bumpy.

As we pointed out earlier the NQ lead month contract (NQZ2023) did qualify for an expanding diagonal this morning. So far, the roll-over contract has not. The ES/SPX remains temporarily nebulous as either a diagonal or as a nested impulse. This should clear up in a few days.

The futures need to be watched in the after-hours to see if this will be the second daily close below the 200-day SMA or not.

Have an excellent start to the week.

TraderJoe

Will it Activate?

Below is the 2-Day chart of the NQ 100 futures, and our consistent Elliott Wave Count since the low. To recap briefly, there is a Leading Expanding Diagonal as an A/1 wave up off the of the low, followed by a B/2 wave down and followed by a C/3 wave to the 1.618 extension. The up-wave channels decently, and IF the count is A,B,C up then there is good alternation in a corrective wave with a leading diagonal being followed by an impulse wave. Of course, if the count is 1,2,3 (by the Principle of Equivalence) then wave 3 is the required impulse structure. This is one of the best illustrations of The Principle of Equivalence you will see because all requirements for both structures are exactly in place. Note that the EWO on this time-frame is still within possible fourth wave territory.

Now, IF the NQ is headed downward, it looks like it would be doing so as an expanding diagonal - at least at the beginning. So far, the structure has (iii) > (i), (iv) > (ii) and (iv) overlaps wave (i) without traveling beyond the end of wave (ii). Now, in order to activate a true diagonal, then wave (v) 'must', by the rules, become longer than wave (iii). So let's look more closely at the daily chart.

The daily chart shows the activation level for a true diagonal is below 14,412.00 This would also likely fill gap 1. Then, it is also common for a fifth wave in a diagonal to extend to 1.618 x (iii). If this happens it would likely take wave (v) to around the 13,604 level or lower. Then there would be the potential to also fill gap 2. 

Likely, if this happens, more & more market participants will begin to assess that the market's direction is lower. The ES would be trading below its 200-day SMA, and the Russell 2000 would likely break the weekly low. Of course, there could be substantial retraces anywhere along the way. 

There are two key items to keep in mind. First, the diagonal could convert to an impulse under the right circumstances. We showed in the comments for a prior post how the Dow converted a well-formed contracting leading diagonal into an impulse wave simply by adding & adding multiple waves to the structure. Second, until there is overlap with wave A/1, up - by The Principle of Equivalence - the diagonal can also be considered as its native three zigzags (w), (x), (y), (x), (z) and still be a fourth wave, 4, in this case. Because of the position of the other indexes, it seems this wave 4 would have lower odds, maybe 30-70 against forming wave 4 at this point. But we count every index separately. 

So why is the market doing this? It's all sentiment. The public and the hedge funds are desperate that the magnificent-7 stocks are the darlings and will carry the markets to new highs. So, the move off the high is a grinding one rather than an immediate impulse because so many opinions have to be changed if the market is to move lower. Make no mistake, a wave 4 in the NQ could still turn out to be a correct view, but right now it is just that increasing odds are against it.

Have an excellent start to the weekend,

TraderJoe

The Week Isn't Over Yet, But ..

Something to note - see the ES weekly (closing) chart, below. Be sure to update after the week has closed out.

There is little evidence at this time of any upturn. At the moment, the evidence is to the contrary. And this is on a day when Chair Jay Powell could have soothed market nerves. 

On the daily chart, the wave i, up, of the sequence to the recent high - shown in prior charts - was overlapped downward today. This is another negative sign.

Have an excellent start to the evening.

TraderJoe

Upward Completion ?

We waited overnight to see if the ES futures wanted to add any points on to the ending expanding diagonal. It did not and started lower on its overnight open. Yesterday, we said it 'could' fail if it was an ending wave. Apparently, it did. The daily chart of the ES futures thus has some interesting features. Let's cover them.

There are now two gaps on the futures chart shown by the red circles, both of which are not filled. Price today came back to the 18-day SMA, and it will be interesting to see where it closes (it closed below the 18-day SMA, putting the daily bias as down).

Yesterday's ES bar is a lower high (even though cash SPY ended higher there), and today's bar makes a lower low. The prior low is shown by the prior down (red) fractal. But the next valid daily fractal down is not until the 04 Oct 2023 low. Currently, the closest valid up (green) fractal is on the day of 12 Oct 2023.

The daily slow stochastic is still in over-bought territory - meaning it is not over-sold - which is very, very interesting.

The 18-day SMA is making an approach to the 200-day SMA shown. Earlier in the day we commented that the VIX already has an 18-day/200-day Golden cross meaning the 18-day SMA has crossed up over the 200-day SMA. The VIX is at its daily upper Bollinger Band, but it is not in over-bought territory on the daily slow stochastic, and this is also interesting.

From an Elliott Wave count standpoint, we were also able to show this likely ending contracting diagonal on the DJIA (YM) futures 4-Hr chart this morning.

The above count also had nice divergences in the RSI indicator to go along with each diagonal peak. The Dow spent most of the day reluctantly falling. If this is a true ending diagonal, then the start of the pattern should be exceeded in less time than the diagonal took to form.

Have an excellent start to the evening,

TraderJoe

Hanging out near the highs

The SPY cash 30-minute close-only chart is below. This is to concentrate on the form of the wave without a lot of the noise. It is possible that Friday's low is the low of wave iv with a Ⓒ wave as an ending contracting diagonal within wave iv. So, it's certainly plausible another high could be made.

The fourth wave iv meets the typical parameters of 38 - 50% of wave iii although it is definitely a long and drawn-out affair. So, it certainly would be possible for prices to pop-up to the upper daily Bollinger Band or (significantly beyond that) the 100-day SMA to make a fifth wave. One should watch to see if that fifth wave provides an RSI divergence, as below. The daily slow stochastic is still only in over-bought territory and is not yet even trying to embed.

Then, after five-waves up there should be a reversal of some type, and the question will be how deep the reversal wave is, and whether the reversal is partial or a full retrace plus. Time will tell.

Have an excellent start to the evening.

TraderJoe

Continuation

So far yesterday's ES outside-day-down is acting as a continuation pattern. Monday still needs to be watched. Prices today pierced down through the 18-day SMA, and then - as we wrote in the comments - it stalled there for most of the afternoon. 

ES Futures - Daily - Back to 18-day SMA

As of the cash close price was still over the 18-day SMA, but we could only count an ⓐ-ⓑ-ⓒ up in the cash market after the low. That is not very bullish at this time as the market would have a lot of work to do yet (say, to make an upward diagonal out of it).

Meanwhile, the daily slow stochastic is still in over-bought territory and it is not trying to embed (the readings are in the high 70's only). The daily Bollinger Bands are narrowing in; the 200-day SMA is below. With the Bollinger Bands squeezing in, it could later result in a substantial impulse move.

I would begin to watch to see if this recent pattern of lower high days continues. Sometimes the bigger moves in the market consist of a pattern of bars where - for day after day - higher highs are not made. The opposite was certainly true during the daily up trends.

But while the Jury is still out, it sure seems to be taking its time in Deliberations (meaning it's possible any down move is proceeding as a diagonal only). Time will tell.

Have an excellent start to the evening and the weekend.

TraderJoe

Outside Day Down

The daily ES futures traded higher overnight, then initially lower when the CPI report came out. Then when the cash market opened, prices traded higher enough to allow the SPY to make a new higher high, as well. When cash did make it's marginal higher high, futures did not. One result is that the two are out-of-sync. Regardless, prices headed lower and undercut the prior day's low, reaching down to the 18-day SMA as shown below.

At the 18-day SMA prices bounced a bit, retracing 50% of the cash wave. The daily slow stochastic remains in over-bought territory. Today's bar is important. If the high of an outside bar down is taken out in the next two trading sessions, it might set a trap for the bears. If the low is taken out first, it would probably represent continuation lower, but one might want to see another close below the 18-day SMA before reaching any conclusions.

From an Elliott Wave perspective in the comments for the prior post, we showed the four-hour chart with two good possibilities at this time. As of the cash close neither of them has yet been taken off the table.

Have an excellent start to the evening,

TraderJoe

Core PPI and FOMC Minutes Tomorrow

Prices as measured by the ES futures contract traded higher until about noon today, then began to roll-over a bit. We showed the SPY 30-minute chart below, a few times and noted the pop over the wedge and the measurement of c-5 = (1.618 x a-3) + b-3 target as the Fibonacci ruler on the right shows.

Prices overshot the target a bit, and then came back down to it. In doing so, prices broke the lower up trend line a bit and closed there for several half-hours but did not yet make greatly impulsive moves lower.

With the PPI, FOMC Minutes and CPI in the next few days one might expect some volatility and/or impulsivity lower. If so, keep an eye on the prior iv th wave which is at the 62% retrace level. If that gets broken, then it may be possible to revisit or exceed the lows. However, now is not the time for expectations or heroics in front of these reports until their content is known and understood. Rather, it's time for patience, calm and flexibility.

The lack of downside impulsivity and speed (so far) continue to suggest that if prices move lower, they might do so in an expanding diagonal. I have not completely ruled out the nested count lower (1,2, i, ii..) but in that count downside progress would likely have been more definite. Still, I may put it back on the table depending on any downward movements.

Have a good start to the evening,

TraderJoe

If Not iv, then 'b' ? A Further Analysis

Five things seem wrong about counting the current down wave impulsively. Even though as per the EWO on the prior 2-hr chart of the SPY (see LINK), it certainly looks like a wave iv signature, it might be a wave 'b', instead. The five suspect items are listed below.

1. There's the funny business with the difference between the futures rollover contract chart, just the current month contract chart, and cash. The futures rollover chart has that higher high which can't be a second wave (see the first chart below).
2. The Dow and the Russell have overlapped downward; the NDX & S&P have not. The indexes are not acting consistently - we know because of the magnificent seven.
3. The latest downward wave is longer than the first downward wave in the ES. So, it should not be the subwave of an impulse (see the second chart below). Even given that fact, the daily Elliott Wave Oscillator is lower and not diverging.
4. Looking at the move from the top, several of the segments do not look impulsive. They did not start with decisive breaks and long candles to the downside. They were grinding.
5. Then, there is the weekly channel consideration.

This suggests two likely possibilities:1) It's only going to be A-B-C down of the larger wave 4 up in the alternate, or 2) we are in an expanding diagonal lower. Let's look at the charts.

Chart # 1 - SPX v ES Rollover - Counting Mismatch

As the chart shows the ES futures roll-over chart with the higher high would prevent counting a second subwave (as from yesterday's chart) as ii on 14 Sep. We pointed that out in the comments of prior posts. With this in mind, the next chart shows the longer wave downward wave than the first, and the lower Elliott Wave Oscillator (EWO).

Chart #2 - ES Roller-over Daily - Longer Wave & Lower EWO

As we said, several of the segments from the highs do not look impulsive. Given that, it may be possible to count the segments as a-b-c's as below. This might suggest the market is making a diagonal lower IF new lower lows are made.

Chart # 3 - ES Futures - Daily - Counting as a-b-c's

Then, there are the weekly channel considerations. As we have shown before, the best bullish alternate is that the fourth wave, 4, of an upward weekly channel holds in this index - as in Chart # 4, below.

ES Futures - Weekly - Channel Considerations

So, the three channel considerations are these:

1. If the channel breaks lower, it will be a very large, recognizable symbol of lower waves. Thus, it would likely initiate a third wave lower. The way this could happen from here is if the ES is still in the third wave of a diagonal.
2. Glenn Neely in Mastering Elliott Wave indicates that rarely, if ever, do impulse waves travel in an exact channel. It is usually zigzags that form in that manner. Recall, too, in the preferred count that wave C is still less than 1.618 x A. Our observation in the Eight-Fold-Path-Method states that usually the extended third wave would hike its head above the channel in an up move. That did not happen above.
3. Third - while not of critical import - it is worth noting that there is reverse alternation in the above wave. Wave red 2 would have formed as a Flat, and wave red 4 would have formed as a multiple zigzag. While not proof positive, usually large impulses form with the sharp second wave and the sideways wave as the fourth wave (unless a triangle forms). A triangle is temporality being ruled out for this wave because the downward wave seems to be a double-zigzag. Triangles usually start with a violent single zigzag. The down wave is just not very violent or speedy at all.

So, we will continue to watch for any signs of renewed selling near the 18-day SMA and the prior upward support/resistance zones. And, in particular, we will look for signs of the new lower low and downward break of the weekly channel. 

Why and how might this happen? While I don't delve much into fundamental analysis, perhaps the larger downward third wave would be created by poor earnings reports from the multinationals because of the higher dollar. We are about to go into earnings season. Then, after the third wave is made lower, a fourth wave up in a diagonal might coincide with the typical year-end rally. So, it is worthwhile to keep an eye on earnings this quarter as a further sign.

Have an excellent rest of the weekend.

TraderJoe

EWO (Elliott Wave Oscillator) Back to Zero

On the 2-Hr chart of the SPY Cash Index, below, the EWO (Elliott Wave Oscillator) is back peeking above the zero line. This is the time when the fourth wave survives its test, or the wave loses its shape.

We were fully expecting the EWO to come back to the zero line and had written about it previously. So, it seems for downward continuation wave iv should either end here or try to hold the 38-50% Fibonacci retrace on wave iii. As noted in the chart, this wave can fail at this location since it is potentially an ending wave - if it wants.

We'll see how it goes. Have an excellent start to the evening and the weekend.

TraderJoe

Weekly Dollar Index

The weekly chart of the U.S. Dollar Index is below. There are five minor waves (1-5) down to an Intermediate (A) wave on the left. There is then an expanded flat for what is likely an Intermediate (B) wave.

Notice how the B-3 wave of the expanded flat exactly back-tested the upper down-trending channel line of the Intermediate (A) wave.

(B) waves can be stinky. There can be counted three-waves up to the alternate (B) wave shown in red. But, there can be more waves added on to make a fuller five-wave impulse Minor C wave up in (B). The first target of the 1.618 extension of A-3 on B-3 has been met near the 50% retrace mark. But, if the wave extends, it could make the 2.618 extension shown near the 61.8% retrace mark.

The Payroll Employment Report is tomorrow. Time to start watching closely. Have a good start to the evening.

TraderJoe

A Local Fourth Wave Remains on Track

In the comments for prior posts, we showed this SPY 2-Hr chart. It remains on track for a local fourth wave. The EWO is not near/at the zero line yet.

SPY Cash - 2 Hr - Wave iv due?

As the chart indicates the fourth wave - at this point - can be either of a running triangle or an expanded flat. It's The Fourth Wave Conundrum, meaning there are lots of variations of sideways three-wave patterns, and it happens at every degree of trend. The lower (b) wave is still something of a downside omen, and prices are still expected to contact or get nearer to the EMA-34 on the upside (note there are not 120 candles on this chart).

Have an excellent start to the evening.

TraderJoe

And For Cycle V - By Degree Labeling

So, it seemed the best thing to do now was to revisit Cycle V five and see if anything changes. I spent hours again going over the count. I tried every possibility of extensions I could (x3, x5, x1). I further specifically tried getting the all-time-high to be part of Cycle V. I could not get it to work as the wave is too long compared to other waves. The good news is that the overall interpretation has not changed - at least using the log scale on a monthly chart over the 13-year period. It turned out that the only extension I could get to work was the x1, the first-wave extension. Here is the chart.

DJI Cash Index - Monthly Log Scale - Cycle V Count and Following

The only correction I had to make was to wave x①. Unless interpreted this way, the Intermediate degree waves within Primary ③ are too long in price and time. I tried the expanding triangle count again in 2020. That did not work either. Note specifically that Primary ② is less than a 38.2% retrace - as shown by the Fibonacci ruler - which, as you know, goes along with the x① count. The Fibonacci rulers for waves ③ and ⑤ are shown on the left of the chart.

So, we are where we are. Many people are looking for price to 'go-over-the-top' again. The chart shows "we've already been over the top". The Dow is within limits for an expanded flat Ⓑ wave, after the SuperCycle [III] top. 

If there are three-waves down from the Ⓑ wave top, then a diagonal wave downward may be in progress. It might turn out to be either a contracting or an expanding diagonal. If the mess of a structure from the high is a 'five' then price might impulse lower. If the RSI makes a lower local low, then it may confirm a lower high in August 2023.

Stay tuned, and have a good start to your evening,

P.S. This post follows on directly from yesterday's historical review. If you have not seen that post yet, you may wish to read that one, as well.

TraderJoe

For the Life of Me ..!

Degree labeling may yet help solve another problem. You know if you're an Elliott analyst and concerned about degree labeling then one market problem stands out above all others: the 1929 - 32 'crash' is simply 'too short in time' to allow a smaller degree wave to take place from 1966 - 1974. The 1929 - 32 crash wave took only 3-4 years. Yet, 1966 to 1974 is 8 years. Then too, the 2000 - 2009 correction is nine years. Again too long. Something is grossly wrong for degree labeling definitions to be satisfied. 

Now, it is true that Elliott may have considered the waves to 1942 as a thirteen-year triangle. But there is insufficient evidence in the DJIA for a clear triangle. Still, a thirteen-year structure would certainly explain that eight-year time sequence from 1966 to 1974, and the nine year sequence from 2000 - 2009. These later sequences would be of smaller time degree. But is this correct? No, I don't think so. There isn't sufficient evidence in the record of the DJIA to claim that a true triangle formed. But I did develop this unique and simplified explanation that may account for the time sequences. It is shown in the chart below. Again, I have never seen this explanation before, and as far as I can tell, it simplifies all the degree labeling sequences. Here it is.

What IF Elliott was off by only two waves?!! What, if instead of a triangle, the 1942 wave is that last part of a "Running Second Wave" - a failed double-combination? In other words, label it as cycle W-X-Y. Such a running second wave would presage the truly huge and historic SuperCycle wave [III] to follow. Isn't that what running waves are supposed to do - show extraordinary market strength - or weakness - to follow?

Without this explanation Cycle Wave I (which is supposed to be a sub-wave) is longer in log price than its larger degree counterpart wave in same direction: SuperCycle [I]. But with this consideration, Cycle I is shorter in log price than SuperCycle [I], and it is shorter in time. Then, and only then, do all the other corrections also work out in terms of degree labeling as well.

For additional evidence, look to the peaks of the RSI indicator. And, oh! by-the-way, there are 126 yearly candles on this chart, to boot! And here's a bit of magic - you now know why the Dow had to poke it's head above that 1,000 level in 1973! It needed finish off a fifth wave! Further, this makes wave SuperCycle [II] at least 33 - 40% as long in time as wave SuperCycle [I], instead of only 10% as long in time. Much, much better!

So, SuperCycle [IV] may come back down to the log channel. And it may take a very, very long time to do so. It's a fourth wave. But, first, we must confirm that Cycle Wave V does not contain a triangle and that Cycle Wave V is not ending as an ending diagonal. It is not necessary to form a triangle within Cycle V, or for Cycle V to end with an ending diagonal, but such waves certainly could form given the scale of the move. There are still ways triangles and diagonals could form at the top! We will try to keep you aware of them while the daily bias still remains lower. If the daily bias flips to higher, that would be a first warning that a triangle or diagonal might be in the works.

I, for one, am happy to have this long-standing mystery solved. It's not in the books folks. It's not on other people's web-sites. But it just may be the result of a long-running curiosity and continued, persistent application.

Have an excellent rest of the weekend!

TraderJoe