Rationale for the Current Count - ES Daily

Below is the ES daily chart with the current Elliott Wave count. This post is an attempt to explain the current chart rationale as completely as I can. First notice, the prior gray up trend line. Absolutely nothing has changed to the left of that line. The upward count is still to wave Intermediate (3) in blue.

Now when you look at the right side of the chart, you see wave minuet (a), down, and you notice it is a larger wave than sub-minuette iv. It should be. The larger degree label means the wave is actually larger than iv on the left. That's what degrees mean. Now notice that minuet (a), down, is also larger than the prior minuet (iv) down on the left. That's ok. If a wave is larger than a prior wave in the same direction than that means the two waves are either of the same degree, or the newer longer wave is of one degree higher. Either can be the case.

Now, look at minute ⓘ, down. Do you see how this wave is of the same order as the whole of the minute ⓒ wave, up? So, the minute ⓘ down label is the best we can do at this time. It is not longer than the entire prior up wave, but it is on the same order. 

Because the current down wave is longer in price and time than any of the previous corrections on the way up, I said, "there is likely a turn of degree". And that is what this means. We are likely making a new wave down. 

Confirming this, we broke the up-wave trend line from wave (ii) to (iv) in less time than wave (v) took to form. This is Neely's confirmation Step 1. It passed this confirmation test step. Next, the wave has broken the low of the prior wave (iv) in less time than wave (v) took to form. This is Neely's confirmation Step 2. It passed this confirmation test step. Neely estimates when this happens that the odds increase to 90 - 95% that there is a true trend change. So. The above count goes with those odds.

Now, because of the position of the Elliott Wave Oscillator on the daily chart, it looks like only a first bump down has been made - hence a first wave down. Yes, that is a judgement call from working with the EWO over the years. So, be that as it may. Accept it or not.

The next piece of rationale is that the up wave has just about reached the 62% retrace level. So, this seems like a second wave location - even though that location may turn out to be higher, like 78%. If we are dealing with a diagonal down, here, diagonal retraces can be 62 - 81% per The Elliott Wave Principle by Frost & Prechter. And a down-trend line from the highs is very close by. You should draw that one yourself.

It is true, I simply cannot tell you if the diagonal forms whether it will be a contracting diagonal or an expanding one. How is that for Elliott Wave uncertainty, and Elliott Wave probability?? I can't tell you what I can't tell you, and I won't.

One thing I know I told you was on Tuesday August 13th. Quote.

Today saw more of the same "vol squeeze" referred to yesterday and brought ES daily prices up above both the 100 and 18-day SMAs. Temporarily, this flips the daily bias to up and puts a swing-line uptrend into play with the CPI report due out tomorrow morning. 

So, if you were one of those cowboys who took heavy short positions while price is above the 18-day SMA, then you are at fault. Not me. I told you both that there was a squeeze on, and that the bias was up. If you decided to do something different - that was entirely up to you. 

And during the day today, I said unless the day's low was taken out, they could still squeeze out a triangle (higher) or a diagonal (higher). Well, they did still squeeze it into the close. There may be a triangle there. Or more. It would help all to realize how similar triangles and diagonals can be because of their three-wave sub-components.

So, before I leave off for the night, let it not go unsaid. "Yes, there are only three waves down!" Could the entire correction be over? Well, it could be in the same manner that "anything is possible". But then this down correction would seem extremely short-in-time compared to the entire prior up wave. But it can happen. It's just that the odds are lower.

Have an excellent rest of the evening,

TraderJoe