Wednesday, November 21, 2018

A Flat and a Fade?

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher; DJIA, DJUtil lower
SPX Candle: Higher High, Higher Low, Higher Close - Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

During today's live market session, we wrote than either a triangle or a Flat wave could be in the making. This would have been the possible wave 4 in yesterday's impulse count lower. Why did we say a flat could be in the making? Have a look at the chart below.

S&P500 Cash Index - 5 Minutes - Possible Flat Fourth Wave

Notice that there are a clear three waves up as a:3. Then, as a b:3 wave, the downward wave reached at least 90% of the previous a:3 wave; in fact it made a marginal new low before exceeding the a:3 high early today. (This is what the waves on the hourly chart needed to do to make a flat- but hasn't gone low enough yet!)

Starting with the b:3 wave low, there were a clear five-waves up including a fourth wave triangle iv before making the vth wave up to c:5. Very, very often such a triangle signals 'the last wave up is dead ahead'. Note how that wave iv triangle alternates well with the sharp wave ii, and takes more time than the wave ii. Near ideal wave relationships in time.

As if on cue, slightly before noon prices started to fade and picked up down-side momentum later in the day. So, the whole up move can be wave 4, as per yesterday's downward count. And the whole down move late in the day looks like an expanding diagonal - and maybe stretching out the first wave lower so there are no eventual degree violations.

If a 5th wave down is made in the next trading sessions, there may be a valid downward impulse - and we will consider the implications of that impulse more fully in subsequent posts.

For now, it's time to enjoy the holidays!
Best to all.


  1. Yipee! I thought it was a 3,3,5!

    1. And whoever said, "if you put ten Elliott analysts in a room..."?

  2. I have looked in the EWT book to no avail. We know the retrace possibilities for a zig zag. I was wondering if there are any retrace guidelines for a leading diagonal or expanded leading diagonal.
    Have a great turkey day!

    1. I won't make any up, and unfortunately that means anything from 14% to 99%.

      It depends on the position of the diagonal as A or 1.

  3. Hi Joe

    Would you mind sharing your reasoning behind your thinking that this 5th wave is forming as an expanding diagonal? Assuming it does, can we then expect a deep 4th wave retracement that overlaps the wave 1 low?

    1. The ist wave of the 5th on the five minute chart above is the expanded diagonal only. It is complete. And a partial retrace of it is expected.

  4. Many thanks for the clarification.

  5. I counted wave b:3 already as the final impulse down, but i am sure you will kill my count :). The two days around thanksgiving are seasonally bullish.