Tuesday, July 9, 2019

Corrective Wave Down

So far, a corrective wave down has played out as anticipated and held above the ES 2,952 level - which would separate a "second" wave, lower, from a larger "B" wave lower. As of the cash close today, the downward wave is best counted as a double zigzag because of the unmistakable contracting diagonal we counted out live yesterday. 

SP500 Cash Index - 15 Minutes - Double ZZ

If the diagonal wave to "a" is not counted as part of a zigzag, it results either in degree violations or lack of alternation (take your pick - I want neither). But, also note that since (y) is slightly longer in both time and price than (w), then the wave could be the start of an expanding diagonal lower. And that is shown as the alternate count (i), (ii), (iii).. in red, so far.

For the diagonal to occur, however, wave (iv) must become longer in price than wave (ii), but still stay below the high of wave (ii). And those are some pretty finely structured criteria. But, the reason for mentioning it is that it could be a larger "a" wave down in a larger "B" wave lower.

Of course trading above (ii) would invalidate that alternate.

That's all for today, except we are happy to say we were ready for the price spike at the end of the day as we had earlier counted out this five-minute contracting diagonal on the Dow.


It was just a question of whether prices went under the low of the morning or over the high of the diagonal, first. They exceeded the high first - making the structure a contracting leading diagonal shown to you in near-real-time.

Have a great start to the evening.
TraderJoe

19 comments:

  1. I keep asking myself why 4 would have to be longer than 2 for the red LD lower. Are you saying that since 3 was larger and longer than 1, that the diagonal MUST expand (all sub waves?), and it can't just be a case of wave 3 the longest wave, even if all other factors were to fit?

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  2. ES just invalidated any potential of the expanding diagonal 'alternate' count. The one in red.

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    1. S&P500 cash did, too, with a new all time high.

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    2. Hey ET, any update on the near term intraday count on SPX cash?

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  3. ET, Still has corrective look. Thank you for you weekend video!

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  4. Joe, "if" we get downward overlap of July 3rd high, should we be looking at a possible contracting diagonal formation? thanks

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    Replies
    1. As far as I can tell, not unless or until this wave finishes as a 'five'.

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  5. YM has overlap. ES needs another 2 points lower for its own overlap.

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  6. YM extension was 1.78 whilst the ES was the 1.50 variety. Currently still no downward overlap on the ES.

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  7. Fascinating how the gap-fest continues following each seven hour candle interval, this time an inversion gap higher!

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  8. ES 3 waves up off LOD was A = C perfection followed by downward overlap. YM now has the same downward overlap to add to the higher degree one earlier. I wonder if we will revisit the LODs.

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    Replies
    1. Upward retrace was 78% on ES and 68% on YM which brings a triangle into the frame.

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    2. 2987.5 is the approx. cash number for another 78% retrace downward for what would be "c wave" of a triangle. Yesterday's close and unfilled gap sits at 2979.63.

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  9. A new post has been started for the next day.

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  10. ES/SPX went over the top in 3 waves, so did NQ/NDX. YM/DOW didn't make it to new highs. Thus another possibility is today's high was a expanded "b wave" (not expanded in the DOW). Thus we would need count 5 waves down for i of C from the HOD. Not so crystal clear but perhaps not impossible either. A flat would mply another visit to sub 2960.

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