Friday, August 24, 2018

The Measurements are In!

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

The market, as measured by the cash S&P500 Index, ended the week with a daily gain of +17.71 points and ended the week at a second set of new historic highs. Here is the daily chart for reference.


S&P500 Cash Index - Daily - New Historic Highs

The Elliott Wave Oscillator on the daily chart is still green and rising. With today's gap up, and follow-through, we think it signals the start of wave sub-minuet .iii of minuet v of minute (iii) within the Minor 5th wave. If so, the upper channel boundary should be the first price target. A wave .iii needs to get enough distance in it so that a wave .iv does not overlap wave .i

With regard to the Dow Jones Industrial Average, and the title of this post, the daily chart now also shows it is in a supportable Minor 5th wave configuration.


DJIA Cash - Daily - Minor 5th Wave

The problem for the Dow all along has been the marginal new lower low at where it shows the Minor 4th wave location. Over the course of the last four days, however, the measurements have now come in that show that the Dow (as an alternate) can be making an expanding ending diagonal for it's minor wave 5. That is because by the gray Fibonacci ruler, wave minute (v) is now longer in price than minute (iii), which is longer in price than minute (i) of such a diagonal. Also, wave (iv), by the red Fibonacci ruler is just barely longer than wave (ii), and these "longer than" wave relationships also hold up for the amount of time spent in each wave, as well. It is clear than wave (iv) overlaps wave (i) without traveling below the low of wave (ii), also.

So, from a pattern perspective, the pattern looks and measures in a manner that no Elliott Wave rules for an expanding diagonal wave are broken. This is in distinct contrast to all the Elliott Wave web-sites and services that found contracting diagonals in this pattern, patterns which broke the rules, and their patterns were not predictive. They kept predicting a crash when none occurred. That is the danger of breaking the Elliott Wave rules - whether for someone else's system of counting or not.

The reason why the pattern may be the alternate is whether the internal structures of the waves counts best as zigzags or not. I have my questions about it, and time will tell. Again, that is why the pattern is the alternate for the S&P even though it may be correct in the DJIA.

Have a good start to your evening and your weekend!
TraderJoe

4 comments:

  1. Hi Joe, learning from all the work you put in for the rest of us.
    I have a question on the Dow. Could the price action from 26616 (Jan 26 hi) to 23997 (Jun 28 lo) be a complex minor 4, instead of 26616/23344 (Jan 26/Apr 2)?

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    Replies
    1. Hi, Welcome, and don't think so. When someone shows you what the best possibility is, what is your rationale for asking for something different? I.e. what would be the rationale for your count?

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  2. Do ending diagonals quickly get retraced to the starting point? Just wondering if there is a long volatility setup coming up. Thanks!

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