In Tuesday's post, we showed the expanding diagonal potential in the ES futures contract. (That chart appears here at this LINK.) Today, because of lower lows in both the futures and the cash, the S&P500 cash index 30-minutes can now be counted as a diagonal, too. This diagonal is of the contracting variety, and not the expanding variety like the futures.
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| S&P500 Cash Index - 30 Minutes - Contracting Diagonal |
In the cash market, above, price has already broken the upper declining diagonal trend line and made five waves up. In the futures market, the upper declining diagonal trend line has not yet been broken. It could be.
Further, while we counted five waves up in cash since the morning low, it is possible the fifth wave can extend - if it wants to - perhaps in the overnight.
Can these patterns send price waves over the top? They can; it is possible if they are ending diagonals and not leading ones. The expanding diagonal in the futures market seems to suggest that the diagonal was leading, with a flat wave following it. The timing was quite accurate. So maybe it will simply make a deeper retrace to break that declining trend line, and then head lower to make new lows. These are difficult patterns to deal with - understanding them is really advanced in Elliott Wave theory. So, we must be patient and just count what we see.
There are some who might pose that such a diagonal might just represent an ending wave of a non-overlapping fourth wave up from the 24 September low, kind of like the following.
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| SPX - 2 Hr - Hypothetical |
The question that needs to be asked in that case is whether or not the wave would represent a degree violation because the internal waves of the diagonal look larger than all of minute ((ii)). So, while I think so, I am still learning on this topic. And I hope you are, too.
Have a good start to the evening.
TraderJoe
A few confluent things that suggested a rally was coming following the overnight lows.
ReplyDeletehttps://imgur.com/zaCatk4
ET, what if this represents a running correction with ending diagonal for wave c of B? Assuming that we are in a bigger B wave of the flat starting from the ATH, then it could be that we have running correction starting from I, then extended b wave which is your III now,and the ending diagonal as c wave which is the ending diagonal. Then it would mean that we have c of B in front of us
ReplyDeletePmov.. you need to do the work on this. A 'B' wave up should be in multiples of three waves. Where does your ((a)) wave end? And is b of ((b)) longer than ((a))? If so that is a clear degree violation. Also remember ((c)) 'must' overlap ((a)) to be corrective to it. Let me know what you find.
DeleteNope, does not overlap plus degreee violation. Seems most likely then leading diagonal
DeletePresuming that it is a leading diagonal, would ii be expected to be a sharp to alternate with relatively shallow and slow leading diagonal?
ReplyDeleteCould be. Some are like that.
DeleteIs there anything that rules out the past 2 weeks as a B wave?
ReplyDeleteI was thinking the same thing.
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DeleteI have the B wave as an abcde. Painful.
DeleteThe psychology seems right. Short term heavy bear sentiment wasn't fulfilled, then reversal. Mayhem should wait at least a week. Blue moon next saturday. 36xx?
DeleteI guess it will finish 1 of C from 3403 and work on 2 under 3470 today, next week could have a big surge. Expanding diagonal 1 down with upward flat 2 finishing now is still possible under 3470 and the difference between them would be obvious.
it maybe a failed breakout, wouldn't surprise me to get to 3390 area https://invst.ly/skfpm
ReplyDeleteThis wedge from the low in the ES futures looks interesting as a possible 'a' wave, up. Need to see if it completes properly. If not, consider there is a flat in there somewhere.
ReplyDeletehttps://invst.ly/skg2m
TJ