How, Not Why

IF you've ever done a crossword puzzle, you know it is veritably the crossword editor's job to use clues as tricky and obscure as possible. When, we look at this ES futures 2-hr chart, we see the potential count of one of the supposedly less probable patterns, the contracting diagonal (alternately a triple-zigzag in a wedge).

ES Futures - 2 Hr - Wedge

Whether it's a diagonal - or its related alternate cousin, the triple zigzag - is of a little less importance at the moment, than 'why' it has formed. It's almost as if the market (or its largest players) is intentionally trying to provide the most obscure counts. And, of critical importance, we don't know that the pattern is completed yet.

I know how it has formed - it is the result of the algorithms attempting 1) to stay over the 18-day SMA, and 2) trying to target the upper daily Bollinger Band. These are goal-seeking algorithms trying to destroy every trade made in the market in an effort to reach their goal, well - except those trades made in accordance with the algo's goal, and sometimes even those.

Again, these patterns are supposed to be among the last to be considered using wave analysis. But here they are.

It is good to have this understanding. Using it, I was able to call out the low probabilities of selling near today's lows. And, when a fourth wave didn't develop downward after almost a 2.618 extension - also called out in real time - then it was possible not to spend a lot of time or effort fighting upward wave counts.

All I can say is that it is a very long wave in time. The amount of retrace of the pattern, if any, is quite uncertain. That is not my fault. If the pattern is the diagonal, it 'could' lead to higher prices. If it's the triple zigzag (for a second or a B wave) it could lead to lower prices. The uncertainty is not mine. I am just counting waves locally according to the rules until the appropriate pattern emerges.

Have an excellent start to your evening,

TraderJoe