Patience

There are times, particularly when the market is in a corrective sequence, where an Elliott Wave analyst simply must stand aside and have the patience to wait for the corrective count to clear up a bit. For example, one might have just noted that a zigzag wave completed. But will that zigzag turn into a double zigzag? Or will those first three zigzag waves down lead to three-waves up in a flat wave? Or to a triangle?

This is the very essence of the Fourth Wave Conundrum. With just a small paragraph above, we definitively outline why the Elliott analyst simply can not know the precise wave count at every point in time - as much as some publications and web-sites say they do. We are currently in such a situation.

From the standpoint of The Eight Fold Path Methodology, there are now 123 candles on the weekly chart for the "wave of interest". This is now well within the range of the recommended 120 - 160 candles. And, even within this methodology, there are two good and clear options for upward price progress. The first is the Smaller Triangle scenario.

S&P500 Cash - Weekly - Smaller Triangle

Price can still be seen to be trading in the main channel, after having aggressively attacked the lower trend channel boundary. Minor 4 would be completed, and we would have finished minute ((i)), up, and are working on a flat wave for minute ((ii)). Nothing says minute ((ii)) downward is definitely completed yet. Only a new daily higher high over wave ((b)) would do that. This scenario tends to agree with the Elliott Wave Oscillator (EWO), which is a key tool in The Eight Fold Path Method.

Yet, a different outcome - with maybe only slightly lower probability - is shown on the next chart.

S&P500 Cash - Weekly - The Larger Triangle Scenario

Again, nothing says the minute ((e)) wave lower is completed yet, so we could not say that Minor 4 would be over yet. In fact, for this scenario, it would be best if minute ((e)) extended a bit lower in price again. But this count does not agree as well with the Elliott Wave Oscillator, nor has wave ((e)) come back down to fully test the lower channel line again. And, with the wider triangle now, it seems less likely to get an exit from the triangle near its apex for many, many weeks yet. Those are the factors that result in this second count having the somewhat lower probability. Still, it is plausible.

But, there is one common "bottom line" factor to both price charts: prices should not trade below wave minute ((c)) for the triangles to remain "healthy". Breaking the ((c)) wave low is a "make or break" scenario for the triangle counts. Just like breaking minute wave ((b)) higher means price is likely breaking out of the triangle to the upside, then breaking minute wave ((c)), lower, means a downside break of the pattern would be most likely.

We should note that making a new all-time high in the S&P500 or the Dow are not foregone conclusions or preordained. There are possibilities that allow failures or lower lows. But, there is insufficient, and even contradictory evidence, for the lower case at this time.

Therefore, we remain patient, calm and flexible as we approach the Nation's Birthday celebration. Have a great weekend.
TraderJoe