EMU - Fifth Extension Terminal

EMU = Early Morning Update, Before the Thursday Opening Bell

Over the course of the weekend, I outlined how because of price and/or time degree violations, the Weekly ES E-Mini S&P500 Index futures could be tracing out the larger pattern known as the Fifth Extension Terminal (or Expanding Ending Diagonal).

I'm sure many of you "rolled your eyes", and said, "yep, sure it is". Again. I am only trying to correctly observe the rules and guidelines to finish a Primary 5th wave, in whichever way that happens. And I am trying to show that you don't need to break the rules or re-invent completely impossible bogus patterns (such as one site's irregular zigzags) in order to complete Elliott Wave counts.

Elliott Wave International may have one way of seeing the market terminate here - which does count correctly. So, we must respect that view. But again, that pattern doesn't channel well, and it may contain a time-degree violation in the cash market and a time & price degree violation in the futures market.

However, yesterday afternoon in the real time chat room, I was able to call a smaller degree Fifth Extension Terminal in real time, and, since I got confirmation on it early this morning, wanted to provide this example to you in near real time at the moment of confirmation. The example is on the NQ Futures - 30 Minutes in the chart, below.

NQ Future - 30 Minutes - Fifth Extension Terminal

The pattern was called in the chat room at the end of wave a of (v). And what is vital about this type of pattern is how violent the fifth wave is. It is, after all, the extended fifth wave. The extended fifth wave is where the pattern takes it's name from. Now Neely says this pattern can often be a "C" wave, most usually, or a fifth wave. And in this case it might be the c wave of a B wave. We can't be certain yet.

But, what we can be absolutely certain of is that a valid diagonal was able to be called in real time. And we know that because you are seeing this chart at the near moment of confirmation. The down move out of the diagonal, completely retracing it, occurred in less time than the diagonal took to build! Thus, the diagonal was fully and completely confirmed.

Now I know what some of you might say. Well, it's some other goofy B wave - like a triple zigzag. But, we know that simply can not be be the case in this instance, because there is a rising pattern - likely an a wave of a larger B wave - appearing as the wedge lines before this wave. Therefore, this pattern must, in, fact, be a terminal, an ending pattern. And triple zigzags are always a pattern into themselves. Further, and very importantly, triple zigzags usually, "most-often", occur in a channel. And the central feature of this pattern was there was no way to draw a channel!

Once again, here is just another view on how the stock market could top - following the same logic - if it does not top with this diagonal following the Elliott Wave International count.

ES E-Mini S&P500 Index Futures - Potential Fifth Extension Terminal

Again, the very specific rules for the pattern are: Wave (5) longer than Wave (3), Wave (3) longer than Wave (1), Wave (4) longer than Wave (2), but Wave (4) does not break below wave (2)'s low, Wave (4) overlaps Wave (1), and each wave is a zigzag pattern.

Have a very good start to your day.
TraderJoe