Likely Bad News for the Dollar

Yesterday provided a lower low in the Dollar Index which has given it most of the required formation for a contracting diagonal lower. Here is the daily chart of the Dollar Index, showing that potential contracting diagonal.

Dollar Index New Low makes a Contracting Diagonal Possible

The lower low below minute ((iii)) now means that as a leading diagonal, the minute wave ((v)) lower has not failed. Remember, the fifth waves of Leading Diagonals may not fail, only the fifth waves of ending diagonals may fail.

Note, too, the slow stochastic is in over-sold territory, price is against the lower daily Bollinger Band, and there are two clear unfilled gaps shown in red.

Further movement down for the dollar is certainly possible, but to maintain a diagonal shape, then wave minute ((v)) must remain shorter than wave minute ((iii)).

During the day I provided this updated count of the Russell 2000 which accounts for the new all time high. It considers that we may still be in the 4th wave (count in blue) because the lower channel has not been contacted yet.

Russell 2000 Cash Index - Count that Includes new ATH

Many of you will recall I counted the Russell's move down in April as a contracting diagonal. That was a 'good call', as it was, in fact, a diagonal - an ending one. However, since the low of wave minute ((a)) was not exceeded lower that means the contracting shape at the top - which could have been counted as a diagonal - was not, in fact, an ending diagonal, but only a minute ((b)) wave. This is very often the case. And, yes, a flat or complex wave 4, would have good alternation with the sharp wave 2. But, because wave 3 would then be shorter than wave 1, then wave 5 would need to be shorter than the length of wave 3.

In the daily S&P500 cash index, I can provide only this 'partial' count from the low of Minor wave 2. I have taken great pain to follow the guideline that when a second wave retraces less than 38.2%, then it likely means the first wave is the extended wave in the sequence. The resulting count is below.

S&P500 Daily Cash - Interior Wave Only

So, within Minor wave 3, the count is simplified and streamlined now, and follows more rules and guidelines although a good Elliott parallel is not formed for wave 3. None-the-less, the count breaks no rules, and a 38.2% wave could be allowed for the minor wave 4. As of today, the S&P500 did hit and surpass the 90% mark in the upward direction that was needed to claim the three wave ((b)) wave upward. Remember, the signature of the upward ((b)) wave can be very messy. It could be the simple (a), (b), (c) shown, but if a true impulse is not made for the (c) wave, then the minute ((b)) wave 'could' be counted as a (w)-(x)-(y), as well. So far, though the upward wave is still in an impulse channel upward, so the (a)-(b)-(c) for minute ((b)) is more appropriate. If and only if the upward wave does not finish properly will we give it the latter designation. And, recall that, yes, the ((b)) wave can go over the top, with no issue.

Then, too - just like the Russell - a flat for Minor 4 will also alternate very well with the sharp wave we counted for Minor 2.

In Crude Oil, using the 2-hr chart, and The Eight Fold Path Method, it looks like we are coming to near end of a five-wave sequence downward, as the Elliott Wave Oscillator recently hit the zero line in the upward direction, as in the chart below (see the circle on the EWO indicator graph.)

Crude Oil - 2 HR - Nearing a Five-Wave Sequences

You'll note that there are now about 112 candles on the chart, and wave ((3)) of iii is on the low of the Elliott Wave Oscillator, and the EWO returned to the zero line for wave iv. While only more more new low - beyond ((X)) - is needed to prove out this count, there would be nothing wrong, and it would be good form, if wave v became as long in price as wave i, was.

Let's see how this works out. It sure has been odd to have Crude Oil and the Dollar declining at the same time. But, that is a perfect example of why I "consider every market in it's own count" and do not look to the correlations that periodically happen. Sometimes, those supposed relationships just vanish, too!

Have a good night.
TraderJoe