In the Dow (YM) futures, we have been counting the expanding diagonal pattern upward. In this count, the internal waves would be 3-3-3-3-3 which are all zigzags. With 126 candles on the daily chart, the EWO has the perfect signature for the expanding pattern with wave (iv) deeper than wave (ii) and wave (iii) greater than wave (i). I do not know if I will ever get to see such a pattern on this scale in the rest of my life. It is truly amazing.
Prechter previously wrote that 'often' these patterns end before reaching the upper trend line. Sometimes they throw-over that line. We'll have to see what this one does but the pattern currently meets the rules for the expanding diagonal with (v) > (iii) > (i) and (iv) > (ii) with (iv) overlapping wave (i) without traveling beyond the end of (ii). And, as the pattern currently stands, within (v), c is only a little longer than equality with a.
Once the pattern ends - if it is a true diagonal - the start of the diagonal should be exceeded lower in less time than the diagonal took to form. This one took about six months to form. If we've got the structure correct that the pattern is a true 3-3-3-3-3 composition of zigzags, the rules state that it almost certainly is an ending diagonal. I may never see anything like the size of it again in my lifetime.
That said, can it go a bit higher? It can. I'm just wondering if the contracting waves at the end - with an overlap in the futures - are finishing the c wave.
P.S. Here is a diagram of this wave form from Neely, Mastering Elliott Wave, page 5-14, showing the minimum retracement as 100%. See pattern in the lower right.
Have an excellent rest of the evening,
TraderJoe
The succession of 3 wave patterns is unlike anything I have ever seen. I think the pattern is quite rare.
ReplyDeleteBtw, I have not found any mention of retrace time rules/guidelines for diagonals of the expanding variety.
ReplyDeleteAfter Fig 1-19, The Elliott Wave Principle, says,
Delete"A rising ending diagonal is usually followed by a sharp decline retracing at least back to the level where it began and typically much further. A falling ending diagonal by the same token usually gives rise to an upward thrust."
There is no distinction in the retrace between a contracting and an ending diagonal.
Yes, I have read the book at least 15 times.
TJ
How common is it to have expanding diagonal as ed. I would think that is counter intuitive. Thanks
DeleteAnd, later than Prechter, Neely has a diagram in Mastering Elliott Wave on page 5-14, where he refers to the pattern in exactly the same shape as a "Fifth Extension Terminal Impulse", with "a wave 2 - 4 overlap", that is a "C-wave usually but can be a 5th wave". Further, he goes on to label the waves as the following: 1:3, 2:3, 3:3, 4:3 and x5:3 because all the segments are three-wave segments, and it is the fifth wave which is extended. This is where the idea comes from that the 3-3-3-3-3 variety is an ending pattern only.
DeleteTJ
The main post was updated to show Neely's diagram on page 5-14, with the 5th Extension Terminal inside the rectangle to the lower right. Note the comment, that the "Minimum Retracement of Terminal, 100%." TJ.
DeleteThe YM extension from 8-8 to 8-29- to 9-11 is 1 X at 43590 slightly higher----or it may have gotten close enough (32) pts
ReplyDeletePattern wise, Vix is looking very much like a cup and handle here.
ReplyDeleteES 30-min: so overnight, from the intraday wave-counting-screen the futures may have completed a contracting diagonal downward, and very nearly a 62% retrace.
ReplyDeletehttps://www.tradingview.com/x/1c5QY20v/
This eliminates the (i), (ii), i, ii possibility, and makes only a i, ii possibility. It is "STILL" a possibility until a lower low is made. So, remove yesterday's wave-counting-stop for the moment. There STILL needs to be a down wave where the retrace does not go over the high.
TJ
GOLD (GC) Futures Hourly - from what I can see, hourly GOLD futures are in a third wave position and should be 'watched' for signal candles possibly indicating a fourth wave. (I did 'not' say 'short'. I said 'watched'.).
ReplyDeletehttps://www.tradingview.com/x/03hGeYa7/
TJ
but from start of chart to wave (iii) is the identical pattern - it didnt get retraced
ReplyDeleteI beg to differ than it's 'identical'. a of (i) can easily be counted as :5, c of (i) can easily be counted as five. How is that 'identical' to a three-wave pattern overall?!
DeleteTJ
3s and 5s arent necessaruly clear cut.. (V) was counted as 5 up not 3 up on monday. isnt this an alternate?
ReplyDeletehttps://postimg.cc/0MWkrbzd
It's not an alternate according to the EWO with 120 candles on the daily chart. That is the benefit of a more objective reference. But let's say you 'demand' it be an alternate. Then, at this stage all you have is 5-3-5 which is an a-b-c which is corrective only. Where's the six levels of nesting on this count? TJ.
Deletei was only counting 2 of the upwaves in the chart, of which 1 a week ago you counted as five waves, to point out its not necessarliy clear if we have 33333. On the point of a nested count, you already replied "we need to see acceleration" based on my chart, and if we go over the top its another possible 1/2. so its very "wedgy" but lacking sufficient overlap which is why this count exists. i would expect the higher we go up without a 3-5% correction it wont seem so stupid.
DeleteThe problem is that the comment above is made without regard to a larger context. What tells you definitively that stocks are going to accelerate higher? You haven't said. What indicators tell you currently what the count is. So far, you are just saying, "stocks are going up, so they are going up." The context I am providing is, "if this count is correct, then the third wave is less than the first wave, so the fifth wave should be less than the third."
Deletehttps://www.tradingview.com/x/6F3zl60L/
There is a clear point where a count like this is incorrect depending on whether a diagonal (shown) or a triangle (not shown) is a possible ending pattern. Am I saying, "There is no way new highs can't be made."? No, the chart shows clearly new highs can be made. But there is also a "non-zero" probability that the high is in, too as a new high was not made on Friday. And this would have followed an overlapping ES expanding diagonal - which is 'often' not always an ending pattern. The other portion of this short-term context is that the hourly RSI has peaked - which usually indicates a third wave, and we are waiting on confirmation of RSI less than 50. Confirmation is what confirmation is. If one acts without first getting confirmation, then it is 'riskier' than acting with confirmation. IF one waits for confirmation, then one acts later than the top but maybe with increased confidence of a turn being made. That's just how it works. TJ.
I have a quant fund for a long long time. Last few days is winding down from 2X to 0 postion. So the best forecast of what market will do for me is something i have devoted decasdes to creating. So i believe thayt an EW pattern that shows low reward to risk at this time is probably approporaye given my forecast. All I am saying is from an EW perspective we cant rule out a very bullish possibility at this time. Sure, there are always counts that by definition will be ruled out sooner. But in your example above, it also could be an impulse up to 3, then a second wave, then we are in 3 of 3. There are many patterns at any point. I use the EW to help be unbiased in my thinking.
DeleteI have already said, in many, many posts that we are in a (3) wave. Did you miss those? It is now largely a question of measurement. Does (3) stay shorter than (1) on the Dow? Or does (3) become longer than (1) on the ES - like it has on the NQ? Different indexes are known to top at different times (eg year 2000). If (3) becomes longer than (1) in the Dow it changes the possible 'solutions' to the Elliott pattern for the Dow.
DeleteBut that said, the Elliott Wave was always, and still is, described as probabilistic in its formation with a lot of 'degrees of freedom' - such as 'failures', 'throw-overs', 'truncations', 'throw-unders', waves that can be their own alternates (diagonals), triangles that can seem to form, but then break down into expanding diagonals, etc.
My task is trying to 'count' these things - or form a completed, coherent Elliott Wave structure given these uncertainties. Would I run a fund this way? Well, let's just see what Glenn Neely - who does both says. "Elliott wave is better at turning points than it is in the middle." That's why he developed Neely River Technology and uses it for his fund.
As far as I can tell, the two objectives are vastly different. And then, relative to a quant fund I'd have to ask, "Do I want to try to compete with Blackrock" in terms of obtaining metrics? See below.
https://www.blackrock.com/us/individual/literature/whitepaper/systematic-investing-designed-for-a-new-frontier-en.pdf
Enjoy the read.
TJ
I agree. I'm on same team as you here. I care more about why EW patterns exist. Why would things expand and contract? Why would we have expanded flats? That's been basis of my tools. More primitive thann EW. my metrics are simple and no degradation over 35 years. We could have interesting discussions beyond simply counting waves. I appreciate you
DeleteFailed 5th wave? Monday should be interesting
ReplyDeleteHi Roberto - can you please leave a little more detail in your posts. For example, could you tell us the instrument & the time frame. We have several different types and styles of readers here. Some only follow the NQ, some the ES, some only the cash indexes. And I do not want to have to keep taking up my time to continue asking. Thanks in advance. TJ.
DeleteI meant on ES. Two peaks this week and today one which tested the highs but didn't break above.
DeleteA new post is started for the next day.
ReplyDeleteTJ