Waiting for definition

On the way up in the wave count, using the 0 - 2 trend line was effective in helping us determine counts. You can see the last one on this ES daily chart from the lower left wave iv to the lower terminal of wave ② and breaking this suggests that waves ④ & ⑤ have been made.

ES Futures - Daily - Rollover Contract

It takes time and patience to identify this line and to use it as intended. For example, on the right-hand side of the chart, there is only one point which could be identified as a second wave in a base channel. And while this is possible, there is a > 90% down wave, and no lower low in the futures yet. When people see a wave that is > 90% down it should almost immediately raise the hairs on the back of the neck and shout something like, "B wave or Next Impulse or Barrier Triangle". That's what I'm forced to think every time. That means the situation is under-defined at this time. The "B" wave option should be obvious now to readers of this blog. It suggests a return to the 6,100 level from here. And the barrier triangle option should also be easy to spot: a = 5,866, Ⓐ = 6,100 Ⓑ = 5,870, Ⓒ = 5,990 or greater, Ⓓ = 5,866 and Ⓔ = 5,950 or greater as b to be followed by a c wave down. Remember that even a barrier triangle, with its flat bottom would temporarily point lower.

Meanwhile, the "Next Impulse" option may not seem that obvious, but it is shown on this four-hourly chart, below.

The key to this count is that the recent Ⓐ-to-Ⓑ leg down only looks like a "three", although it may be a truncated 'five'. And, if it is a "three" then just the "recent" up wave might be a Flat construction and not the entire wave sequence. The current up-leg could then become a 'five' to make the 3-3-5 flat sequence. Then, it is within the realm of possibility that a wave iii downward begins.

Thus, we must wait and get a bit better definition while the algos whirl and whip within the range until they breakout. So, what is the benefit of the exercise with these many options? Well, each option provides "hard stops" where the wave counts invalidate. For example, the barrier triangle invalidates above 6,107. The nested count invalidates above 6,050, as it would be outside the declining trend line which would attempt to form the better-defined 0 - (ii) trend line; this is also the upper limit of the current "base-channel". And the large overall flat option would only invalidate beyond the prior ATH.

So, with clear knowledge of these invalidation points, depending on where upward movement ends - if it does - it can help determine which count is in force.

Have an excellent start to the week.

TraderJoe