The Principle of Equivalence - in a potential diagonal

ES futures prices scored higher all-time highs again today. It is possible that a diagonal will end tomorrow and there will be a turn-on-Tuesday. There is also a possibility that this will not happen, and the upward wave will impulse instead. Again, part of the confusion is caused by the compression of the waves made on the FOMC report date - last Wednesday. The chart of the SPY (cash) 15-minute time frame is shown below.

SPY (Cash) - 15 min - Potential Diagonal

We note that the current wave 3 is measured as 0.618 x wave 1. The problem is we don't 'know' the third wave is over. It could be, but it begs waiting to see what tomorrow will bring. The Principle of Equivalence says that within the current wave 3, the Ⓐ and Ⓑ could just be a smaller wave (i) & (ii) with today's high as (iii). We must wait until tomorrow to see what kind of downward movement there is, if any, and what overlaps do or do not occur. 

The overlap level is shown for the wave 4 of a diagonal as currently drawn. Also shown tucked in the middle section of the chart is the 662.75 level where a wave 4 should it develop would become too long in price and invalidate for a contracting diagonal.

We note the MACD on this time scale has some divergence and that is interesting. But divergences can be broken. We have seen that often. But, still, it is interesting. A diagonal should have diverging waves indicating the loss of momentum in the motive wave.

Clearly, the alternate for this wave set would be a non-overlapping impulse. Measurements will become important. The wave degrees shown are just to illustrate the points involved. They will be corrected when we get some confirmation that Minor A is done.

We do note on the daily ES chart that price hit the daily upper Bollinger Band today, that price is still over the 18-day SMA, making the bias still up. And the daily slow stochastic is still embedded, among the very strongest of technical signals. So, there is nothing outright bearish on the chart, with the possible exception of how stretched prices are. But Ira never advises selling when prices have not closed below the "line in the sand".

The Principle of Equivalence says, "keep the powder dry". It says, "evaluate the waves and the lengths of prices seen". 

Have an excellent start to the evening,

TraderJoe