Brother, Can You Spare ...?

...no, not a dime, but a few years? The depression question, of course, was "brother, can you spare a dime?" But this post refers to the fact that there is a "time" relationship in a potential ending diagonal and a 'prediction' that the chart below makes. The chart is of monthly log style in the S&P500 cash index using the Zigzag Indicator to get the price vertices correct. And it has a lot going for it including a rather nifty overall look.

S&P500 Cash Index - Monthly Log Scale - Degree Resolution

The degree labels seem to resolve really well. Inside of Primary ⑤, Intermediate (1) is log shorter than Primary ③ the previous higher degree wave in the same direction. Primary ② and ④ look well-coupled and, for alternation, whereas Primary ② is a "running flat", Primary ④ is an "expanded flat" with a more extended Intermediate (B) wave and a lower Intermediate (C) wave.

From the indicator, the peak of the RSI is on Minor 3 of Intermediate (5) of Primary ③, and the first divergence is on Minor 5 of that same wave. The RSI is diverging since.

The Prediction

So, the prediction from the wave structure is that since the low of the diagonal was in 2020, then the entire diagonal should be retraced down to its Primary ④ beginnings in less time than the diagonal took to form. With the current year being 2026, that means it has about six years to accomplish this. Often, though, in an aggressive down move it can take 50-75% of that time, there being no published "rule" to this effect - just a tendency.

We know that traders tend to be an impatient lot as a group. They want to see fireworks to kick this thing off. That could happen. We have yet to see a 1-to-10 or 1-to-12 down day on the NYSE Advance/Decline line. But those have happened before, so we'll be on the lookout (BOLO) for one fairly soon to start a breadth thrust to the downside. We're not going to assume this will happen. It simply won't surprise us if it does - and we wouldn't call it a 'capitulation' as the financial media will likely try to say. Rather, it probably would be a "kick-off" to any downward wave sequences.

Epic Fail

Could we go higher from here? I suppose it is possible, but I can't yet find another good count to do that with. We have already tried one alternate ending diagonal, published it on this site as an alternate, and the market simply wouldn't have it. That failure seems to be one more signal that the market is more intent on correcting at the moment, than in going higher. So, we'll monitor closely for other alternates up to a point, but not for long. In the interim we'll listen to the market and see what it's telling us.

Meanwhile, have an excellent rest of the weekend. This is the second post since Thursday and if you have not read the first one, you might want to check that one out, too.

TraderJoe