Doji on a Divergence

While there is nothing concrete, yet, warning signs are building. In the chart below, today there was a Doji candle at the recent top of this upswing. The Fisher Transform is still on a divergence (a double divergence - which is quite rare for this indicator). Here is the chart again.

S&P500 Cash Index - Daily - Double Divergence from Fisher Transform

Relative to wave labeling - as awful as it is - for reasons of avoiding degree violations, one good way to label the chart, now, is as the minute ((a)) wave up. That count works as follows.

ES E-Mini S&P500 Index Futures - 5 Hour - Wave in a Wedge

It was not possible to show this count in its entirety until the final up waves today. However, as a five-wave-up sequence, the cash S&P500 truncated twice - the second time today - when compared to the Dow. In this sequence wave ii is only a 38.2% retrace - allowing wave (i) to be the extended wave in the sequence. And wave (iv) did not overlap wave (i).

This 5-hour count assumes there is no additional upward movement. There were signs at the end of the day - the possible truncation, and the Doji candle - that upward movement might be over. But there was nothing conclusive. So, the overnight futures need to be examined to see if the 2,745 level is exceeded lower or not. If it is, a downward wave may well have started. However, it is only overlap of wave (i) at 2,675 that will force that call.

If there is one more downward, and then one more upward wave sequence roughly equivalent to the former ones, then, and, only then, might it suggest that (i) = ((a)) and the new wave up = ((c)), as there would be seven waves up, not five, and that would be corrective. But such a wave is not at all in evidence, yet.

The market is not yet making this call definitive. So be patient, calm and flexible. Remember, even if this is minute ((a)) up, then a minute ((b)) wave could be anywhere from 38 - 78%, as typical. Then, we could only project minute ((c)) from the end of minute ((b)). But that is putting the cart before the horse. Tonight and tomorrow we need to determine if this up wave has ended or not.

If you would like more detail on the possible truncation count, see my comment at the end of the day in yesterday's post.

Have an excellent start to your evening.
TraderJoe

P.S. Is this count workable? All the sub-waves of ((c)) are smaller than ((a)). That much is clear. And there is no overlap between (iv) of ((c)) and (i) of ((c)). Such a count would prevent another round trip to the top.

SP500 Cash Index - Hourly - Zigzag Count

The question becomes, within a zigzag how does the degree labeling of the "b" wave of the zigzag relate to the waves that emerge after it? For those who are wondering, both the wave (ii) and the wave (iv), the downward waves, are smaller than ((b)), which is a downward wave. So, that portion of degree labeling is maintained.