A Happy Day

Today is one of those particularly gratifying days. That is because it is not only are some wave counts working out as they should - as I see them - they are also beginning to work out in the eyes of others! I can not tell you how pleasing this is. Let me explain.

Yesterday, reader marc, who is a regular contributor here asked me what the count in futures might be versus cash. This is a very astute question to begin with. It shows that someone has their thinking cap on. So I sketched out the potential expanding leading diagonal, lower on the ES 15-minute chart, but I clearly stated that a lower low was needed to attain a fifth wave lower. And regular readers of this site know that the fifth wave must be longer than the third wave.

So, even as I was putting together the contracting diagonal on cash, shown in yesterday's post, marc commented that (paraphrase) "maybe the contracting diagonal will finish in the overnight session to align with cash", and then we expected a retrace. Here is the chart.

ES E-Mini S&P500 Futures - 15 Min - Complete Expanding Diagonal

Downward price movement now has been from 2,970 to 2,942 - some 28 points. And look at what happened in last night's overnight action. From the a wave of ((5)), the market shot up about 9 points in the overnight to make the b wave, and then collapsed into the c wave of ((5)) all before midnight.

And not a lick of those price movements is seen in the cash market. But, now we do have a completed and perfectly valid five-wave sequence lower that not only adhered incredibly well to its trend lines, but also meets all degree criteria. The first sub-wave a of ((5)) is shorter than ((3)), and that is what helps maintain the degree-related criteria.

Even so, the market this morning made a new lower low proving out the status of the pattern as a Leading Expanding Diagonal. So, the post-pattern prediction is actualized!

And what is gratifying is this: given the same rules related to patterns and degree two different Elliott analysts can reach exactly the same conclusions. That is what my work is about: trying to help readers see that without necessarily doing all the work for them.

In the case of Elliott Wave, it is by doing that you will hone your skills. And, the simplest overall rule that one needs to employ is the same one that Sherlock Holmes did, "when you have eliminated the impossible, then what ever remains - regardless of how improbable - must, in fact, be the case".

Now, it's not all that bad in Elliott Wave work, as many of the patterns you will see here are not at all improbable. In fact, they are much more probable. I hope you get to see more examples.

Have a good start to the day.

TraderJoe