To The FlatLanders and Double Ziggers

This is going to be a relatively short post. In the world of Elliott Wave analysis, one sees a lot of counts that just don't make sense. People argue without thinking or measuring or much 'in-depth' investigation. They post some letters and numbers and call it a count. So let's address two recent counts I have seen.

The first one is for the FlatLanders. You know these people. They think the Earth is flat. No, I'm just kidding. But, they think the "three waves up" since 29 Oct, were the three waves of a FLAT wave, presumably as A:3,  and the recent action down counts as a "double zigzag", presumably B:3 wave, and then there will be a C:5 wave up - just in time for the holidays.

But, as the first chart below shows, there is a huge problem with that scenario. The chart is so wrong at this time I won't even put my name on it.

S&P500 Cash Index - Hourly - FLAT? No, Not Yet

According to the published RULE for flat waves, if a-b-c up is to A:3 of a FLAT, then the B:3 wave down must obtain the 90% level. This is a hard and fast rule. I can't change it. It is published. If you don't agree with this rule, you are not doing Elliott Wave Analysis - plain and simple. You are doing something else.

IF the market obtains the 90% level, only THEN will I go along and say, "ah, yes, that FLAT is now a good possibility." But, we are not there yet, and that is one reason I have turned more negative on this market. But, those who claim a flat has already been made, by the supposed downward double zigzag wave as it is below, are just plain incorrect by the rules. As happy readers of this blog, I don't want them to be incorrect. It's just the rules.

Now, let's address that supposed double-zigzag. Again, another chart I won't even put my name on. This one is the S&P500 15-minute cash chart.

S&P500 Cash Index - 15 Minutes - Likely Incorrect DZZ

There are some people who have looked at this wave in a channel and said, "It's a perfect Y = W", double-zigzag. But there are three huge problems with that count.

1. At the W location, there is no fifth wave of a 'c' wave down for W.  Yes, you can try to finagle one, or wrestle one into the count, but otherwise it is simply not there.
2. "Ah", the critics say, "just move that W down to the lower waves after the 13th Nov." If you do that, you lose the Y = W relationship you just had claimed. As Sheldon says, "Bazinga!".
3. Short & simple: X does NOT overlap the 'a' wave of W.

On page 77 of the Elliott Wave Principle, the instructions say that any impulse wave can be construed as a series of A-B-a-b-c, but to do so is specifically incorrect counting. It goes on to say that if the fourth wave (in my impulse count downward) does not overlap, it should be counted as an impulse. Elliott himself said, "count like an impulse when possible".

For these three reasons, the double zigzag downward count is among the least likely possibilities, and that is whether it is attempted to be counted as a B:3 or an X wave. Much, much, much less likely. Not impossible, just way, way down on the list.

And if you are counting the upward wave from the low, as a double zigzag because of the poor momentum, then, the same mistake is being made again. Currently it is a non-overlapping impulse wave in cash, likely a 'c' wave of (ii). And, we showed how it can be a diagonal wave in futures. Will such a diagonal end the move? Only time will tell. If it's an ending diagonal, it must break the low in less time than it took the diagonal to build.

Staying with the rules and guidelines, this weekend, and always.
TraderJoe