Sunday, March 15, 2020

No Preconceived Notions - 2

The title of this weekend's post is "No Preconceived Notions" for a reason. Yesterday, we covered the case for how an impulse could be made. We said one thing not to like was that the third wave did not reach the 1.618 extension which is more typical for an impulse. Yet, we know the third wave is longer than the first.

We also noted that a lot of stimulus is currently being applied. There is potentially legislative action due next week, and there is a Federal Reserve Meeting and rate decision to follow. With that in mind, we said the best that one might do this week is to count the internals of any upward wave, and see which pattern it fits best. A second pattern that could work equally well is that of the expanding diagonal.

ES Futures - 4 Hr - Expanding Diagonal

Things to watch for. In this count wave 4 would need to become longer in price than wave 2 and should become longer in time, as well. Wave 4 needs to overlap wave 1, without also exceeding the end of wave 2.

Then, IF a lower low is made, wave 5 would need to become longer in price than Wave 3, and would likely become longer in time, as well. 

Such a diagonal might also explain the current time signatures that wave 2 is a bit shorter in time than wave 1, and wave minute ((ii)) is also shorter in time than wave ((i)).  This count might also better explain why there is no seeming "three-of-three" peak at this length in the EWO of about 100 candles.

In this count, if wave 4 gets underway, then it's Elliott Wave Oscillator should make an equal high or higher high to the point it did for wave 2. Then, the EWO on Wave 5 would make a lower low than it did on wave 3.

Also, it means on the fifteen minute chart, that the three most recent up waves might develop into a longer impulse instead of the zigzag. We just have to count to see which it becomes.

So, we have no preconceived notions. We will watch and we will count. Please note that this is the second post this weekend, and you may wish to read yesterday's post as well.

Have a great rest of the weekend.
TraderJoe

38 comments:

  1. If an expanding diagonal develops, does it imply that it would be A wave of larger corrective structure?

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  2. Thanks TJ. Also would you mind posting a longer term count starting 2009 for a big picture context?

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  3. IF futures open and go down, then all the cash indices work with Friday being wave 4 from ~3130 and 15 and 30 minute EWO would look right. ES futures would have a 1-4 overlap and retrace a bit more than .618 of 3 though, but maybe there is allowance for distortion.

    COMP, NYA and SPX all rebounded right to the 0-2 line.

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    1. I think 1 is actually at 2715 ES so overlap did not occur. At this time, looks to be down at the open.

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    2. Nice catch, thanks. It's a good start. If it works, should be 2350ish Tuesdayish then back to 2700ish for the big 4.

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    3. JoeM, Its kinda messed up, something happened with how the ES and MES is traded. My charts from friday shows no overlap and know there is. Must be the mix of contracts or moving to a different month.

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    4. If 1 ended at the first spike lower, it was 2715.62 on Investing.com vs. 4 high of 2705.88 - so good enough for now, it will all play out quick enough. The immediate downturn, if it plays out as the wave 5, makes 2 and 4 similar duration and alternate mild/sharp. The news with the market reaction looks good for a wave 5 of 3 down.

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    5. tonights/this week's down being 5 of 3 is my count as well. fridays spike up was so close to invalidating that i worried all weekend.

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  4. I would also add that if a criticism of an 'impulse' structure is that the market did not reach 1.618, then a criticism of the 'expanding diagonal' is that wave 3 is not 'longer in time' than wave 1. But, we know that this up wave is already 'longer in price' than wave 2. I'm thinking, so far, the direct intervention on wave 3 may have been intentional, with the 1/2 point drop in rates and the $1.5 Trillion in stimulus.

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    1. ..so if this wave up, results in a lower low at some point, it should be a wave 4. If it is longer in price than wave 2, it most-likely must be of the same degree or a higher degree. It is 'possible' a triangle could correct some lengths.

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  5. Wow Fed just cut rates again

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  6. (From CNBC) Federal Reserve cuts rates to zero and launches massive $700 billion quantitative easing program.

    (From CNN) Illinois Governor closes restaurants and bars.

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  7. tomorrow it goes up with the drop in rates

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  8. Wonder if we'll actually get a real dead cat bounce off this.

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  9. ET,
    Thank you for you help yesterday.

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  10. Anybody ever get this?
    "order type rejected while the market is in reserved"

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    1. We still could get a 5th wave that gets down to 1.618 and is not bigger than 1.

      https://imgur.com/lM3U1PC

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  12. Order flow was so heavy that futures market went into something called pre open. Just could not handle the orders at open.

    TD had over 75 calls in queue when I got in.

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  13. I have always had this in the back of my mind. Tell me I am crazy.

    Classic stages of a bubble. https://commons.wikimedia.org/wiki/File:Stages_of_a_bubble.png


    Dow.

    https://i.redd.it/w5vuijjivoa41.png

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  14. Maybe dax have potential for a similar impulse as S&P500, dax actually reached 1.618
    https://invst.ly/q4rc5

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  15. There is now clearly a fifth wave down (or b of 4). I think it is 'sufficient' to say there are five waves down. And yet, there are ways for further evolution. Again, this could be the b wave of a flat 4, the lower wave of a "running triangle", or wave 5 could become an extended wave.

    https://invst.ly/q4tf4

    TJ

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    1. And the reason wave 5 would not be over as a fourth option is because we do not have a wave 4 with a long enough time and EWO is not near the zero line?

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    2. yes, Tjchuck .. fourth waves most often show clear alternation with second second waves. If the second wave did not have a lower b wave, then the fourth wave might.

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    3. Thank you for the info on alternation I was not thinking about that

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  16. 5 waves up so far. Price breaking the trendline.

    https://imgur.com/a/RiJnLoq

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    2. Trend line broken and rested to some extent.

      https://imgur.com/a/PejdDk5

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    3. Down wave has now taken more time than the five waves up mentioned by EDT.

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    4. This might be the case. Invalidation point 2416.5 where v will become longer than iii.

      https://imgur.com/a/zZ0ANea

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    5. Took out minute iv now might be beginning of up wave.

      https://imgur.com/a/RfdTiRw

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    6. Testing the upper trend line of downward channel.

      https://imgur.com/a/erBm2Xt

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  17. Hi Joe
    I'm curious if the attached is an acceptable application of 8 fold path. I realize it is a very short time frame and that EWO may be distorted from starting after limit down, but would appreciate your thoughts.
    Thanks

    https://imgur.com/a/Okg96XW

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  18. A new post is started for the next day.

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