We have been proposing that if the market is starting the downward Minor C wave, it is likely starting that path as a diagonal. That's because all we could do without forcing a count was count in three-wave-sequences (shown below). We could not tell before this morning whether that diagonal would be expanding or contracting: it depended on the lengths of various waves. Over the weekend, we also said that today could see inflows typical of 'the-first-day-of-the-month'. It did. We also said Sunday night could provide a gap down. It did, and was quickly back-filled. With that information, here is the hourly chart of the ES futures again.
The only count we can find in the futures that meets the 'rules' is this contracting diagonal. It is satisfactory in that wave (v) is shorter in price and time than wave (iii). And wave (iii) is shorter in price and time than wave (i). Wave (iv) is also shorter in price and time than wave (ii), and wave (iv) overlaps wave (i). So, the typical length & time stamps of a contracting diagonal have been met in full. The only item a little unsatisfactory is the length of wave (iv). It's a little short of the best form, but, still, it meets the 'rules'.
Looking at the up wave in the futures since the diagonal, we count only three waves up so far. That could be it. But don't get confused or frustrated if more upward waves form. Until there are overlaps (downward) that rule out certain wave counts, the three waves could morph into five, as in an impulse. Or, the zigzag could alternatively morph into a double zigzag or it could start a Flat wave.
The retrace right now is shy of 62% by a bit. It could become deeper if the diagonal is leading. But if the diagonal is somehow ending price could even go over the high once more. We think it's the former, but as always, be flexible, patient and calm. There is absolutely nothing in the above chart that rules anything in or out at this point.
Have an excellent start to the weekend.
TraderJoe
👍 thanks
ReplyDeleteMakes perfect sense with the dollar breakout today. Thank you
ReplyDeleteJoe, I'm hoping you can correct my understanding of degree labeling. I feel like I'm missing something. Wave (iv) is smaller in both price and time of the preceding lower degree wave in the same direction, wave b of (iii). Is this not a degree violation? Personally, I find evaluating diagonals to be difficult, so any insight would be appreciated. - HF
ReplyDeleteNo, it's not a degree violation. You are making the common mistake I call, "Counting waves backwards in time". You always count the degree of the waves in the order the market makes them - not by backwards comparison. If waves were counted in the way you suggest the market could never make a diagonal wave - which are allowed in the Elliott Wave Principle.
DeleteFor further information, I wrote a blog post quite a while ago that you can find at this link (copy & paste it).
https://studyofcycles.blogspot.com/2018/11/diagonal-degrees-and-avoidance-of.html
TJ
Wonderful ET, thank you.
DeletePlease see the additional comment to JohnnyG, below, at 12:38 PM. My apologies in advance for the mis-interpretation. TJ.
DeleteThe 4hr may be shedding some light -
ReplyDeletehttps://funkyimg.com/i/3auwn.png
Keep it simple - two legs lower with the same size is a-b-c zig-zag.
ReplyDeleteThe n-th diagonal reversal which will not play out.
If there is a diagonal it is the c-wave of the zig-zag - https://invst.ly/tn-zw
@K .. a very good alternate!
DeleteMorning all
ReplyDeleteSo we have the morning gap, whats new. :)...Have great day all
@JG .. no worries, I deleted the prior post for you. As to your question, when people have asked, will Primary ((B)) be longer than Intermediate (B) I have been very careful to say, "it 'can' be"; not that it 'has' to be. It seems like it should, and it is already longer in price than the largest Intermediate wave on the board.
ReplyDeleteBut, don't mix the two concepts. There is no 'rule' in the Elliott Wave Principle, by Frost & Prechter that says any of the following things about a contracting diagonal:
1. Wave (iv) will be 78% of wave (ii)
2. Wave (iv) will be 62% of wave (ii)
3. Wave (iv) will be 50% of wave (ii)
4. Wave (iv) will be 38% of wave (ii)
5. Wave (iv) will be 23% of wave (ii)
No, wish though there might be, there is are no rule for wave (iv)'s length 'other' than..
1. Wave (iv) must be 'shorter' than wave (ii)
2. Wave (iv) should 'overlap' wave (ii)
That's it. The rules you are seeking would pose a length constraint which is simply 'not' in the book: even if I wish it might be. Further, there is nothing in the degree labeling definitions that says a wave can't be 'shorter' than another wave, and be of the same degree. This allows many wave iv's; triangle, etc. to be shorter than their wave ii.
Now that I have done this work for you, do some work for me. Go to Neely realistic wave diagrams, and look on page 5-6 at Diagram 5-3.b.E where you will find a large wave 2 as a Flat, with a subsequent wave 4 that is smaller than the 'b' wave of 2.
Again, if you impose your constraint, you are 'counting waves backwards in time'. Wave 2 is done & in the market. Faggettaboudit! Wave 4 can have almost any relationship to it, and the b wave in wave 4 - which will be smaller also in this example - can be as needed to make wave 4 (flat, zigzag, triangle, etc.). Wave 4 is the new wave, and you count it's degrees 'forward in time only'.
TJ
Early look at the hrly -
ReplyDeletehttps://funkyimg.com/i/3auXM.png
Note: We have a small pos HD on the last pullback (not marked). Should it reach its target, this will negate the evening star with a higher high. Its always something. :o)
DeleteHD target reached, negating evening star.
DeleteGood morning all - ES 1-hr: Post-pattern behavior.
ReplyDeleteIf we have had a diagonal, the Elliott Wave principle tells us to possibly expect a 'deep retrace'. It doesn't say 'always'. It says often. This morning we are getting such a deep retrace in futures. It is longer than 62%.
https://invst.ly/to824
In fact, the EWP says that if the diagonal is a "1" wave, instead of an "A" wave, then that makes the deep retrace even more likely.
So, here we are with a deep retrace in the futures. Cash never made the lower low. Do we count "1" down in the cash, and an a-b-c flat? Don't know. Won't know until there are further waves in the market.
A diagonal in the futures as 1, might 'align' with "1" down in the cash market. It's speculation until or unless price goes over the all-time-high.
Remember, diagonals are their 'own alternate pattern'; they can sometimes either lead a wave (be Leading) or end a wave (be Ending). That is the difficultly in using them to predict prices.
Personally, I remain absolutely neutral and just counting the shorter term waves I see.
TJ
Cash - open gap at 3850. Looks like we are going there. Either abc is done or possible expanding flat for B wave?
ReplyDeleteMorn Tim
DeleteIm eyeing the gap..stay tuned :)
4hr RSI testing 60 level, haven't yet retraced to .90 currently.
ReplyDelete1hr cash (roughly similar to 4hr futures) showing kicker pattern today.
Deletegap resistance just hit at 3837
ReplyDeleteWould like to see -d on the 60ty without gap fill...Im sure Im asking to much :)
ReplyDeleteHrly cash 2hrs in -
ReplyDeletehttps://funkyimg.com/i/3avaQ.png
The structure looks clearer on YM to me than ES, if this is applicable with the time and price measurements...what is to follow is to be seen.
ReplyDeletehttps://www.tradingview.com/x/dfZ0XoEg/
Edit. Upon reading "Diagonal Degrees and the Avoidance of Conflict", I am liking what I charted less and less due to the time of each proposed subsequent wave taking less time yet with larger price swings. Hmm. I need to study harder.
Delete@tva .. I was hoping your would notice that!
DeleteTJ
Yes GW..rsi looking terrible on shorter time frames...but then you got stimulus, Cbs liquidity talk around the world...almost seems unfair doesn't it? :)
ReplyDeleteES 30-min : 5 closes over the upper intraday Bollinger Band; probability of next closes outside of the band dropping to 0 - 1%; not impossible just getting very low probability.
ReplyDeleteTJ
TJ
DeleteI now have 5 complete waves up frpm 3656.
Good stuff guys..thanks
ReplyDelete..Sorry, I mis-interpreted you & HarrisonFjord and will continue the discussion. In short, a qualified yes! Even in the heat of battle - counting waves in real time I noted how the wave iv was 'bad form'. See the comments at the time. According to the EWP, if a real diagonal has 'guidelines' for each wave ii & iv retrace of 66 - 81% of the previous wave, then 'most likely' the length of wave iv, would exceed the length of wave 'b' of iii.
ReplyDeleteI can not guarantee this because it seems like there are a lot of permutations, like what if the 'b' wave of iii is a triangle? Further, there is no EW 'rule' that states "Wave 4 must be longer in price and time than the 'b' wave of wave 3".
But, it 'does' seem like a reasonable degree expectation since those two waves - 'b' of 3 and 4 - are headed in the same direction at the time, and you are trying to count wave 4 forward in time at that moment.
So, while it is a reasonable expectation, there is no 'rule' for it in a diagonal. However, it is reasonable and logical enough to add it to the degree playbook, for now.
To make life easier, I won't personally be sketching out diagonals in the future unless the typical wave retrace levels are met.
Thanks for thinking this through.
TJ
Margin debt is at all time highs. Usually when this turns down we get a big sell off. These figures are delayed so we won’t know until it’s to late. But with the crap going on in GME & AMC and now they are crashing, I would guess a lot was bought on margin. This could be the catalyst that starts a nasty correction.
ReplyDeleteObservations on tradingview alert's YM analysis -
ReplyDeletehttps://funkyimg.com/i/3avjs.png
Couple of add'l notes:
Delete1. Alternation below/above 45wma (proxy for 34ema)
2. Tline remained below 45wma entire move down
A new post is started for the next day.
ReplyDelete