The count below on the Dow Jones Industrial Average, 15-minute chart, is very clear in form and structure. The problem is it has two interpretations.
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| DJIA Cash Index - 15 Minutes - Expanding Diagonal or Triple Zigzag |
Notice how - as an expanding diagonal - each of the waves is longer in price and time than the prior wave. Wave (v) is longer than (iii) which is longer than wave (i), and wave (iv) is longer in time than wave (ii), and overlaps wave (i) without traveling beyond the end of wave (ii). Notice also, that each wave is a zigzag, and how exceptionally deep the retracements are. This is probably where the authors of some books get the deep retracement look to diagonals. Sometimes and in some indexes it definitely does occur.
So far, all well and good. Then notice the classic signature of the expanding diagonal on the Elliott Wave Oscillator below the pattern. Notice how wave (v) is deeper than wave (iii), which is deeper than wave (i), and further how wave (iv) is higher than wave (ii) and does not form a divergence. This EWO signature is one of many to commit to memory. But it helps!
So, here's the problem. Because, by definition, the expanding diagonal has three downward zigzags in it, it can not be ruled out from the simple three zigzag pattern. Duh. It is one of the patterns which is its own alternate. The only way we will tell is if the high or the low is exceeded.
The reason I showed you side-by-side the count of the S&P versus Dow yesterday, is the the S&P would somehow have to be counted differently. By the rules the flat wave shown yesterday in the S&P could only be a "b" wave structure and not a fourth wave. But ...
The reason I showed you side-by-side the count of the S&P versus Dow yesterday, is the the S&P would somehow have to be counted differently. By the rules the flat wave shown yesterday in the S&P could only be a "b" wave structure and not a fourth wave. But ...
During the comments in the previous post we noted that the S&P500 did, indeed, travel to 90% the length of it's May 13th down wave. This (and a three zigzag pattern instead of a diagonal) makes a potential flat wave possible in the S&P500, if the market needs to spend more time in a second wave. That is absolutely not a requirement, but it often happens. The Dow, it turns out, at this level, did not make the 90% mark. So now we have a "split decision". If the Dow makes a higher high than the origin of the above diagonal, it might have to be counted as w-x-y instead of as a simpler a-b-c, with x as this downward triple zigzag. Time will tell.
The bottom line is while the prior prediction of taking out the low of S&P 2,832 came to pass (in a hurry!), it can not be definitely stated whether the upward correction is over or not. The Russell 2000 is at the 138% mark to the down side of it's prior three up waves. So, it may try to make an expanded flat. And, the long holiday is upon us which means the futures can travel lots of places in the light volume.
Tuesday's cash open gap, and whether than gap fills or not, will therefore help set the direction. This is one of those times to enjoy the time off and let the market provide a clue.
Have a great start to the holiday weekend, and keep one eye tuned to see if any important news should occur.
TraderJoe
Incredible analysis TJ, thank you. I am new to EW and I am learning a ton from your posts.
ReplyDeleteGlad to hear it RGTRDR .. that's what it's all about.
DeleteTJ, what is the higher degree wave that the expanding diagonal is in? I thought the most probable count is wave iii or still in wave ii. But wave iii must be an impulse. If still in ii, then the diagonal would be in the B position which cannot be true either. So I am confused. Its a great expanding diagonal though!
ReplyDeleteYes, the triple zigzag form (not the expanding diagonal form) can be the B wave of a larger degree flat correction for ii. There is nothing wrong with a triple zigzag B wave.
DeleteThe main indexes today's move could be (to me, anyway) a B wave - thus have another rally leg to go before we get to any meat of the decline - or about to enter a significant decline phase in a third wave of some kind (impulsive bear or as part a large corrective C wave down,) though the semis suggest the sell-off is about to reverse and go in major up corrective. The semis seem to have been mopping up the end of a major decline wave from the peak - A or an bear impulsive 5 - though that suggests the broader indexes are headed for a rally to retest the old highs. A semi meltdown in a third wave here would leave the steepest decline from a peak I've ever seen in a chart, and I've been chart watching for over thirty years. The semi chart seems to be the clearest to me, which, if correct, means we have much more corrective rally to go just to confuse everyone. The alternative is the semis crash to leave the most vicious, steepest, decline from a peak in history on the charts (which seems unlikely, though possible, to me.)
ReplyDeleteTurn around Tuesday? Surly the end of next week we have a big rally to close out the month. I will be completely shocked if we close in the lower half of the monthly bar. On a monthly bias right now we need to close the month better than 2877.75 looking at S&P. Have a great holiday weekend everyone!
ReplyDeletewhy
DeleteIf it closes in bottom half and is taken out lower next month it would become a valid bearish reversal bar. The signal is valid until the high is taken out. So if June and July are inside months the signal is still valid.
DeleteJoe - Am I thinking correctly that the "a" nor "c" leg of the 5th wave of the expanding diagonal can't be longer than the entire wave 3?
ReplyDeleteThanks.
@ta, no I don't think so, because the sub-wave threes can 'grow by extension'. It is highly likely the "A" will always be smaller than the prior wave, as it is like the first sub-wave of an impulse. C's must be allowed to grow because there is no rule that says C or 3 must be less than A or 1.
DeleteI was rereading your Nov 11, 2018 post:
Delete"Diagonal degrees and the avoidance of conflict"
The following excerpt is the basis of my question:
Now, how about that wave (iv) in an expanding diagonal? Well, there is no rule in Elliott Wave that says a wave four
can't exceed it's wave two in price. Usually in impulses, the net distance traveled by wave fours and two are similar,
but diagonals are different than impulses. And, wave (iv) in the case of the Expanding Diagonal is going to take full
advantage of the fact that there is no such rule. So, it must become longer than wave (ii) in price, and, as long as
wave four's sub-waves remain shorter than all of wave (ii), it can become longer in time as well - with the one
proviso that it may NOT travel beyond the end of wave (ii). No fourth wave is allowed to do that, by rule!
So, how about that often-dramatic wave (v)? It should now be clear that the longer length of wave (iii) in price and
time now establishes the maximum guidelines for the sub-waves a and c within wave (v). But is that all?
If you've ever seen a real, true expanding diagonal, then you know that the price "whoosh" down can be very
dramatic in price. How do we know a) that such a price drop will ever come to an end, and b) when will it end?
Well, it should be clear now there are two limits on the price traveled and time taken by wave (v). And that is simple.
Neither of the sub-waves can become longer than all of wave (iii) in price. And neither of the sub-waves can be
longer than all of wave (iii) in time!
Thanks
Sorry for the way it copied in.:o(
DeleteIf Im reading this correctly, it appears your "c" of the 5th of the exp. diagonal is a degree violation, as it exceeds the 3rd wave both in price and time.
Yes, I have rethought the matter in two specific cases as I have been developing the formalism around wave degree. One case is the expanding diagonal. I'm not going into the second one at this time.
Delete@ta .. and see note immediately below.
DeleteIF you recall the problem with the FLAT wave in the S&P500, you'll see one way to handle that problem 'and' preserve degree labels quite precisely is to declare only a double zigzag. See chart below.
ReplyDeletehttps://invst.ly/avns6
In this case, you'll see that c of Y is just shy of the length of W.
TJ
..and each of the numbered waves i - v of 'c' of W are shorter than the length of 'a' of W.
DeleteET is it possible to count yesterday's low to today's high as 5 waves up on ES, YM or NQ?
ReplyDeleteThis is the only way I came up with ...
Deletehttps://invst.ly/avo4s
TJ
Seems to work. I'm leaning towards the "b wave" scenario at yesterday's low and IF we have "5 up" to start the "c wave" of the flat it would be a good start. However looking at other indices (e.g. NDX and RUT) I think we will need to keep our imagination and options wide open.
DeleteIt's light volume, pre-Holiday trade, and so I completely agree. And who knows if someone will make a press release.
DeleteThe trade wars have held center stage but there is another event which is lurking with little fanfare. European Parliamentary Elections are being held this week from Thursday to Sunday inclusive. Different groups of countries vote on different days. The results will be made known on Sunday evening (5/26) European time. The non-democratically elected EEC hierarchy are hellbent on keeping the status quo so they can keep pocketing their tax free 400,000 euro salaries. If enough non-believers, similar in calibre and ilk to Nigel Farage, get a foothold in the Parliament it may cause political destabilization in the region which in turn may effect the financial markets. Something to be aware of.
DeleteWeekly CL appears to be putting in a bearish engulfing candle and below the 18 and 100 ma with slow stoch. pointing down. https://invst.ly/avo-y
ReplyDeleteI'm holding tight until March low is taken out.
DeleteA new post has been started for the next day.
ReplyDelete