Market Indexes: Major Equity Indexes eeked out gains, except transports and utilities
Today's Candle: Higher Low, Higher High, Higher Close
I am pretty much going to let this chart speak for itself. Because, in the Dow Jones Industrial Average cash chart, a wave (v) is now longer than a wave (iii), and wave (iv) is longer than wave (ii), and wave (iii) is longer than wave (i), with wave (iv) overlapping wave (i), but not traveling beyond the low of wave (ii), with all three-wave sequences, then the pattern of an expanding diagonal - or megaphone - may be seen.
This one even has trend lines that look the part! In other words, the wave pattern almost has exactly the right look. If wave (iv) took a little longer in time than wave (ii), it would be perfect.
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| DJIA Cash - Hourly - Triple Zigzag or Expanding Diagonal (Megaphone) |
There is no doubt that the above structure - as shown in black - is a triple zigzag. The issue is this: usually - most often - ending expanding diagonals usually occur 'over' their wave ((iii)). This one occurs inside it's wave ((iii)). So, there are three possibilities now. First, triple zigzag B wave. Second, ending diagonal. Third, leading diagonal. And, usually, the fifth wave (v) of an ending diagonal almost always occurs over it's wave ((iii)).
The pattern is there. The question is what to do with it. We'll leave that up to you. We will note that the ES futures are right up against their upper daily Bollinger Band, but the slow stochastics are now embedded for the third day.
The pattern of the EWO is quite amazing; the peak of wave z, is taller than the peak of wave y, which is taller than the peak of wave w. And the trough of wave (iv) is lower than the trough of wave (ii). This is the usual and customary pattern of an expanding diagonal on any time scale.
The only thing we can say is that if wave (v) were to conclude above the high of wave ((iii)), and there is a quick retrace, then the ending diagonal pattern gains considerable credibility. For this to happen, the downward wave must travel below the start of the diagonal at ((iv)). If this does not occur, then the pattern is either the B wave or a leading diagonal.
Even as I write that last sentence, having a leading diagonal at an all time high in the market makes me gulp, gasp, and shake my head, tsk, tsk. But, I've been fooled before. Let's see how it goes.
Have a good evening.
TraderJoe
Doesn't (iv) need to be lower than (ii) for it to be considered a megaphone?
ReplyDeleteNo. Just the opposite. That's why it doesn't work when people try that pattern. That would be an expanding triangle. Please read The Elliott Wave Principle by Frost & Prechter.
DeleteThanks TJ. Why does it make you shake your head?
ReplyDeleteOdds would be exceptionally low.
DeleteTJ, just an observation following on from your earlier dissertation about 'Cash' vs 'Out of Hours'. I'm looking at an hourly chart which includes 'Out of Hours' for the DJIA and on that one your red (iv) would end on Friday 8th rather than Tues 5th. That would take care of (iv) taking longer than (ii).
ReplyDeleteGiven that it is still hanging up there, there is a good chance it will finish above ((iii)).
Very difficult to count the longer (iv) as a five wave sequence to end an a-b-c zigzag. Look that one over.
DeleteHi. In the S&P (futures and cash), lines do not diverge (they are converging). Therefore, if the pattern ends up not being a triple zigzag, I'm expecting it to be an ending contracting diagonal (much more common than expanding...), with wave (i) located at your current (iii). The current rise would then be wave (iii), followed by a decline below (i) and a subsequent and final wave (v) ending who knows with a throw over... Makes sense?
ReplyDeleteNope. Makes very little sense. Ending contracting diagonal 'almost always' have wave (i) over the prior market high, so that it's 'motive character' is seen to be expressed. Same with (iii) - a higher high. Best count may be the B wave.
DeleteOr the triple zigzag being wave (i).
DeleteI covered that contingency when I indicated the leading diagonal possibility. But, that needs to be proven, yet.
DeleteJust bear in mind for the leading diagonal wave (i), in the S&P500, you would want exactly the same 'megaphone shape' that you have in the Dow - that you don't have in the S&P500. This again tends to reinforce the B wave.
DeleteI agree with you that a leading diagonal has not the highest probability at this stage, and, if it actually unfolds, then I imagine it would be contracting rather than expanding.
DeleteSo, yes, I'm expecting the current overlapping structure to be a corrective B wave but of a running triangle that would complete minute wave four - an expanded flat or a combination would also be valid scenarios, considering their sideways characters in alternation with the sharpness of the respective minute wave two zigzag (from Mar 1 to Mar 27).