Unparalleled 100+ Year Fractal Catalog

In his books, Ralph Nelson Elliott essentially laid out a theory of "parallel" market movements. He gave explicit instructions for how to draw them: what tools to use to construct them, which points to connect as parallel & when, and whether to use log format or arithmetic format if inflation was involved. As you can see from the first chart of the catalog, a parallel has not fully formed yet.

DJIA Cash Index - Yearly - Larger Parallel

Here you can see it is possible to construct a large parallel the lower extreme of which has not been tested yet. This chart is at the SuperCycle and Cycle Degree Level. In the lower left is a "running second wave" which I think the failure to recognize is the downfall of most professional Elliott analysts. First, the "running wave" is an omen of the very, very large SuperCycle wave x[III] to follow.

This shows the upward bias of the market following the depression, and it is the only way that the Cycle wave corrections are shorter-in-time than the next larger degree correction in the same direction. For example, Cycle IV is a full nine-years in length from 2000 to 2009. So, the correction of the larger SuperCycle [II] must be longer in time to meet degree definitions. I have written about this at length before and I have written Elliott Wave International about it to no avail. So now, the chart suggests we are in the SuperCycle [III]'d wave: the wonder-to-behold, the extended third wave, and, although we are still above the EMA-34, this wave is diverging on the PPO Oscillator, the equivalent of the MACD for very long-term charts.

The parallel is rising. It is currently at a level above the high of SuperCycle [I], and therefore one might expect that if prices head lower, they will not overlap wave [I]. Further, there has been no wave yet to come back and test the fourth wave of one prior degree. IF SuperCycle wave [IV] forms, then it might come back to the parallel to test the level of Cycle wave IV, one degree lower.

The next chart in the catalog is the quarterly wave set from 2000, as below. It shows the construction of Cycle wave IV as a Flat wave, and the subsequent Cycle wave V in five waves, with alternation. 

Here you can see also the five primary waves from the 2009 low. And that each primary wave lies on an opposite side of the EMA-34 for form & balance. Note, too, the third wave is the extended wave in the sequence. There is also some recent divergence on the PPO. This wave is also in a parallel, but one that expanded to capture the 2009 low and the 2020 low. It was a smaller parallel before the extent of Primary ④ was known.

The next chart in the catalog is the monthly chart from the 2018 top of Primary ③ to the present. The construction of Primary ④ as a Flat can be seen. Then one can loosely sketch in a parallel. (Warning: this wave has alternates). So far, to the best of my ability, I think it is an extended fifth wave under construction, and it may be at or nearing completion. If this numbering does not satisfy the count, then the next most likely would be an expanding diagonal. We'll deal with that later.

DJIA Cash - Monthly - Primary ⑤

These waves are at Intermediate degree. At present, the rationale for this count was the extraordinary "FED pivot" for the Covid-19 episode and this shortened the duration of wave Intermediate (2) and lengthened the time of Intermediate (4) when interest rates were increased in an unprecedented manner. Price is now down to the mid-channel line.

Next, the chart below is the two-weekly chart from the 2021 top to present. It shows the current Minor degree waves from the Intermediate wave (4), low. Again, this is an attempt to count-by-five with alternation. Here there is a long Minor 2 and short Minor 4, alternating in time and depth. And the chart ends with an expanding diagonal for Minor wave 5. Here, too, a loose parallel has been drawn around the waves. It is likely that if this parallel breaks it will signal something important.

DJIA Cash Index - 2 Wk - Intermediate (5)

Finally, the last chart is the weekly chart, down one level lower and showing the construction of the waves down to minute degree.

Here the expanding diagonal - which a couple of us noted in the blog - is shown in its simplicity. But perhaps that simple megaphone shape is ultimately the most ominous. Currently, there is weekly divergence and a turn down in PPO. If the lower diagonal trend line gives way, it could signal the entire diagonal will be retraced in less time than the diagonal took to build. IF that occurs, it could signal a top for many, many years.

We thought you'd be interested to see a logical progression of the wave degrees from SuperCycle to Minute degree. Whether the market tops here or not is up to the market. The charts suggest it has a higher likelihood than ever. IF it tops, it might occur in such a short amount of time that the FED is caught off-guard, and rate decreases would be next-to-useless given the trillions of dollars in capital lost merely due to market price declines and the reversal of leverage in the system.

Regardless, the attempt to count the waves by five, with alternation, will continue until the market makes its message clearer.

Have an excellent rest of the weekend, and holiday week if you are celebrating.

TraderJoe