The Fourth Wave Conundrum

Market Outlook: Still in Minor 4 Lower
Market Indexes: Major U.S. Equity Futures were Higher
Today's Candle: Higher High, Higher Low, Higher Close

Stocks as measured by the S&P500 Index closed yesterday at 2458. The futures were higher over night, and the cash market gapped up at the open. Prices traded higher throughout the session, with only a five-point pull-back to hit 2475 by 3:30 pm. Then, there was a four-point pull-back into the cash close to close at 2471.

The S&P500 high of the day was high enough to invalidate the potential triangle shown over the last several days. It's a shame, but it does represent the uncertainty inherent in fourth waves, and why I have coined the phrase, The Fourth Wave Conundrum. You are probably tired of hearing it. You just want to know what your Elliott Wave count is, without excuses. So would I. But the fact is that when a person doesn't know what the count is, then most likely the count is that of a fourth wave or B wave.

As I remarked in previous posts, IF the triangle count had invalidated, then the next best count is the a-b-c-x-a-b-c count of a double zigzag, lower. That count is now shown on the Dow chart below. But the S&P500 can be counted in the same way.

DJIA Cash - Hourly - Beginning of Multiple Zigzag

The upward price movement may not be over, and so, we are not certain the (x) wave has ended. The Dow has one gap above (circled red). The S&P filled that same gap today. The Dow did not. And both markets have the gap up open today. The S&P500 made a second new high today. The Dow did not. With the Payroll Employment Report tomorrow, it is possible the Dow's upward gap would fill.

But, upward movement for the Dow appears to be in a channel, so far, and there were a couple of closes on the 61.8% Fibonacci level. And, we note that at the y location within (x), the up wave now consumes more time than the down wave (in hours).

I have tried to show by labeling the Elliott Wave Oscillator what the support for this count is - the natural rhythms in the EWO, and the depth of the movements below the line, or heights of the waves above the line.

During live chat today, I checked out the measurements for a diagonal down for the S&P500 to the 2417 level, but the middle wave is too long for that, by just a few pips, and I won't break the rules. In some ways a triangle would have been a simple count to manage. This one, might be quite a bit more difficult - because of it's grinding nature and the nature of X waves.

Well, that's it for today. Let's see where things go tomorrow, and have a good start to your evening.
TraderJoe