Plausible Count and Prediction in TNX

The yield on the 10-year Treasury Note is at an interesting location. With about 102 candles on the 2-day chart, slightly lower than the recommended 120 candles for The Eight Fold Path Method for Counting an Impulse, we see that the Elliott Wave Oscillator is nearing the zero line again.

TNX - 2-Day - Running Triangle?

In this count, we note that wave Minor 2 is much less than 38.2% retrace. This often means that wave one is the extended wave in the sequence and wave three should therefore be shorter than 1. In this chart it is, assuming the higher EWO is helping us find the wave three location.  If wave 2 is a short sharp, then wave Minor 4 could potentially be a 'longer-in-time" running triangle with bullish implications. One of the purposes of the triangle is to equalize the net distance traveled between waves 4 and 2.

If the triangle is correct, as the EWO seems to suggest, it could be over already as it as already formed a legal running triangle by crossing back over the high of wave Minor 3. But, it could have one more spike lower and still be within the realm of the proper look. Further, if the triangle is correct, then wave Minor 5 should be shorter in price than wave Minor 3, since wave Minor 3 is shorter than wave Minor 1.  However, such a wave would allow interest rates to near or tag the 2.0% level before a significant retrace wave sets in.

Why count this way? I contend that one of the most common mistakes is to place the wave 1 all the on the left in August, and assume everything else, upward is part of wave 3. If you do that you will find that wave 3 is necessarily longer than 4.23 x wave 1! And then, minute ((i)) of Minor 3 would be much longer than Minor 1 in price length, and several other degree violations would occur.

Again, we note how difficult it is with proper degree labeling to exceed 2.618 as a wave extension. I mean you can count this way if you wish, but notice the difference in these two predictions:

1.  Counting with degree labeling says wave 5 will be shorter than wave 3.
2.  Counting without degree labeling says wave 5 can be any length, even longer than 3!

This is one of the benefits of counting properly with Elliott Wave: it leads to a definable prediction about future waves. And, it also provides a clear make-or-break point. If wave 5 is even one-tick longer than wave 3, it means the count must necessarily be reassessed. This is objectively different than dealing with other styles of technical analysis. It is even objectively different than counting incorrectly with Elliott Wave. Look at the difference in prediction: if wave 5 can even be longer than wave 3, then where is the make-or-break point??!!

That being said, since the entire up wave is longer than 1, if you include the segments in the triangle, and since some triangles break down instead of up, then the second bit of information from this chart would be that maybe wave 4 can hold a Flat style wave instead. That is possible but less likely because then time of the down wave and internal price lengths of the down waves really stretch their similarity to wave 2. And if downward overlap occurs instead of even a Flat, then we must conclude there was only ever an A,B,C up.

I have tried to stress repeatedly just how much information one can get from a properly constructed Elliott Wave chart. I know some people simply do not like this. They do not like "one procedure, and one procedure only", even if it is well mathematically based. They like it their way. That is just human nature. Yes, there is still uncertainty in the conclusions drawn on the above chart, but the benefit is it is uncertainty within defined limits. Maybe this clear example provides the lucid rationale.

This is the second of two posts this weekend, and if you have not seen the first one, you might like too.

Here's hoping this helps, and have an excellent rest of the weekend and/or holiday!

TraderJoe