Brutal Counting

Today we counted down a likely third wave with two, not one, expanding diagonals at different degrees of trend. The wave counting is brutal. The intraday trading subsequently difficult. There can be no question that our diagonal target was met. And it raises the point that this monthly count may still be on the table for the S&P and the NDX. The ES futures are shown here to be representative.

We have shown the skeletons of this count many times. It is the diagonal count to a Primary ⑤th wave that would end Cycle V. Now, finally, on the downside, there is something to work with. Wave (3) is just barely longer than wave (1) in price, and it is clearly longer in time.

We made a notation on the chart regarding possible potential alternation in wave (4). Interested readers should view it. Please keep in mind that I have sketched out an idealized wave (4). Like all fourth waves they can get much crazier than this. Sometimes in a diagonal, wave A comes very down near the trend line before the bounce. Sometimes there is a triangle in the middle of the fourth wave to slow things down and cause traders to lose money fast. Sometimes the Minor B wave bounce is 90% or very nearly there to confuse people with a flat.

But first things first. Overlap on 4,808.25 would first be expected. Then, after overlap, wave (4) must hold above wave (2) to avoid invalidation. Often the fourth wave takes more time than the second wave. So, that's the way we've shown it. And it often retraces 62 - 82% of wave (3) in price. So, the Fibonacci ruler is shown as a guide.

Careful readers might note that the Minor A wave of Intermediate (3) is shown as an expanding diagonal itself. This is what is known as a fractal of the larger pattern if it should play out as shown. It is the only way I can count the wave to observe degree labeling requirements.

Keep in mind this is a monthly bar chart. So, this pattern can take a very long time to come to fruition. To novice technicians it might look like it is forming a large head & shoulders pattern which then fails to play out. 

And if it does invalidate? Place a Primary ⑤ and Cycle V at the high of 2022, a Primary Ⓐ at the bottom of October 2022, and a Primary Ⓑ at the high in 2025, and Primary Ⓒ and cycle a at the low near 2,000 (price) to match the low of Primary ④. We just think the market should have the option of ending a very long wave with a diagonal, and the above count is it, for now.

Have an excellent start to the weekend.

TraderJoe

Lower High, Lower Low

The swing-line indicator now has a lower high and a lower low underneath the 18-day SMA on the daily chart of ES futures shown below.

ES Futures - Daily - Lower High, Lower Low

Daily price is now down past the lower daily Bollinger Band, with a close below it, dropping the odds to 6 - 7% of a further lower close below the band (not impossible, just lower odds). But the daily slow stochastic is not yet even in over-sold territory. So, the trend is down until it isn't.

Further, I have sketched in the wave ii to wave iv trend line with a parallel copy placed on wave iii. This is Elliott's second parallel technique and is often the first target for a fifth wave, v. The next targets, if the first is exceeded, would be 0.618 x net [ i - iii ], or v = iii. So, there could be more downside. Just be cognizant the Payroll Employment report is coming up tomorrow, and it could wreak havoc with volatility.

We will note that 'many' chartists will not be very persuaded there is an uptrend coming until or unless there is an outside bar up, tomorrow, with the close respectably in the upper third of the candle. Then, the low of that bar would have to hold for two days, and price would have to make a close over the 18-day SMA again.

So, be careful. One initial target is dead ahead. Have an excellent start to the evening,

TraderJoe

Rules Not Broken

Nothing about this count breaks the 'rules' of Elliott Wave. The overnight wave is the very definition of impulsivity.

Wave iv may be a failed 'double-combination' wave. It is 13 bars long compared to wave iii's 8 bars. So, it is longer in time, as Neely likes to see. Also wave iv breaks the Neely 0 - ii trend line.

Price is down at the lower daily Bollinger Band. Can it go lower? It can. We'll be on the watch.

Have a good start to the evening,

TraderJoe