When the Count is Working ...

... you just keep on counting.

On Wednesday's post we showed the possibility of a fourth wave triangle using The Eight Fold Path Methodology as indicative of a fourth wave in progress. If you did not read that post, then you may wish to review it now. But essentially with 140 candles on the chart, the Elliott Wave Oscillator had gone below the zero line, indicating a likely fourth wave in progress.

The triangle played out on Friday, and we also indicated in the comments on Thursday, as follows.

"A reminder that today is the last trading day of the month - which often sees 'sloppiness' which is sometimes termed 'window-dressing'. Then, tomorrow is the the first trading day of the new month which 'often', not always, sees inflows from 401k's, mutual funds, pension funds, company bonuses, dividend reinvestment and other sources. However, according to the Briefing.com Economic Calendar, tomorrow is not a payroll employment report day."

So, Thursday was the sloppy end-of-the-month window-dressing day, and Friday did provide the often expected inflows. Here is the unchanged, but updated, chart using The Eight Fold Path Method on the minute ((c)) wave.

S&P500 Cash Index - Hourly - The Eight Fold Path Method

So, the triangle completed on Friday, with the expected e:3 wave overlap of the wave (iii) as required. The triangle is shown in brown in the upper right of the hourly chart. That means that wave (iv) is likely completed as we were able to count a five-wave sequence up at the end of the day on the five-minute chart. You can view that smaller chart at this LINK.

Given that wave (iv) is completed, then a new trend line should now be drawn from wave (ii) to wave (iv). That new "Applicable Trend Line" is shown on the chart in black and labeled as such. Any impulsive break of this trend line, lower, and failed back test should at least put the market into corrective mode if not full-on down trend mode.

But first, the end of wave (v) must be found. The first five waves up shown in the chart at the above link are likely wave i of (v). Space should be given for a wave ii, down, followed by a iii, iv, and v, up. OFTEN, not always, the typical triangle target is "the widest width of triangle added to the break out point". I'm going to let you do the math on that one as an exercise to see if you have any interest at all in wave analysis or you just want to continue to receive "free stuff".

Meanwhile, above the prices at specific points you can note some very small red arrows pointing downwards. Those red arrows show how tiny their fifth waves were compared to their first waves. Here I am referring to the unlabeled v of (i), and v of (iii). 

This being the case, it would not be out of the realm of reason to expect that a shorter-than-typical fifth wave could occur. So, be aware that a (v) = (i) might not be expected.

Here are a couple of additional points of reference. The first is the now familiar daily chart with the Fisher Transform indicator that still shows divergence.

SP500 Cash Index - Daily - Fisher Transform Still Diverges

And the second chart is the daily S&P500 cash index along with it's Chaikin Money Flow indicator. Readers should be able to see the divergence - even if higher prices occur.

S&P500 Cash Index - Daily - Chaikin Money Flow Diverges

So, from this chart, the volume is also starting to 'bail-out' on the rally too. This does not mean that further highs are not possible. It does mean that the rally is beginning to run out of support from volume. 

There is one additional "third leg of the stool" that I would like to see fall in place, and that is sentiment-related. Perhaps it will by Tuesday of next week. If it does, I will let you know.

Have a good start to the weekend.

TraderJoe