We have been saying for several days that we could only count three-waves-down on the daily chart and that the market would have to 'prove' a fourth wave up and a fifth wave down. The market did not do that. Instead today there was upward overlap on the ((A)) wave in the daily chart below, proving that there was only three waves down.
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| ES Futures - 1 D - Three Waves Down |
You can see that price today neared the 18-day SMA, the 'line-in-the-sand', but did not go over it yet. So the daily bias is still down and the daily slow stochastic is still in over-sold territory. Further, a trend line down from the top (shown in black) was pieced to the upside.
So, the three-waves down could still start a larger diagonal diagonal downward. If you remember our count downward on the SPY (at this LINK), each of the downward number waves was a three-wave sequence. And that got us to the ((A)) wave on the chart, above. So, yes, it is entirely possible to go lower starting with three-wave sequences. But, it is certainly possible to go over the high again, in a five-wave sequence although the probability of that seems a bit lower because this down wave was the longest down wave in price and time since mid-May. If the down wave in May was wave two of the contracting diagonal upward, then we have already started downward, and there is no going back.
No, rather more likely, but not for certain is the probability that we are first back-testing this two-day up trend line on SPY.
Only if the back-test makes a lower high, then fails by making a lower low do we go lower. Since that trend line has four touches on it, and a gap down through it, there may be some significance to it. If prices should crawl up above the trend line, then perhaps it is a sign of a larger triangle or flat at the low. But such a count is becoming increasingly difficult. So let's keep an eye on that potential back-test.
Have a good start to your evening.
TraderJoe
Dow Theory status (wkly) -
ReplyDeletehttps://www.mediafire.com/view/o3g5zu2pxp7sbrf/DowTheory.PNG/file
👍 nice work. TJ’s second chart appears to be linear not log.
DeleteCan't take credit. This was from recent StockCharts vid. I was interested to see what RM looked like with it. :o)
DeleteGood morning all. Here is the ES 1-Hr; be careful if prices get into the overlap zone. The original count has the leading diagonal, then there could be a 'running b wave' and yesterday as the 'c' wave up. But this count would have more probability if there was downward overlap.
ReplyDeletehttps://www.tradingview.com/x/wD2msb74/
The down wave from the higher currently has a > 1.618 wave in it.
TJ
TJ
TJ -
ReplyDeleteIn a contracting diagonal, each subsequent wave is smaller in size than the previous (i.e 5<3<1 and 4<2). However, are we allowed to have wave 4s that are longer in time than wave 2? Similarly, can wave 5 be longer in time than wave 3?
Thanks
..that's pretty hypothetical; would rather see the example, as the time criteria "fight the odds".
DeleteTJ
Here's a chart of QQQ from March 2000 Peak. The top chart is daily and the bottom is the daily over year 2000-2003 showing the larger decline.
Deletehttps://www.mediafire.com/view/d5ovdyf4brb8al4/QQQ_Chart_2000.JPG/file
You probably know where I'm getting at with this, if we don't make a new high on the current ES and many other indices, then the next likely alternatives are either an expanding or contracting diagonal as wave 1(a).
No. You've made a good muck of this one. Wave three in a contracting diagonal can 'never', by rule, be the longest wave in price.
Deletehttps://invst.ly/w4hnw
The pattern down from the top is, however, an expanding diagonal where 5>3>1 and 4>2. Then there is a clear expanded flat, a-3,b-3,c-5 which starts a Flat-x-zigzag wave higher.
What do I have to do to get people to learn the 'rules'?? It is getting to be down-right discouraging for me, just to see person after person 'guess', or 'take a stab at something' without measuring versus the rule.
TJ
By the way .. I had previously summarized some aspects of diagonal formation that meet the 'rules' in this post.
Deletehttps://studyofcycles.blogspot.com/2018/11/diagonal-degrees-and-avoidance-of.html
TJ
Thanks for posting the diagonal rules as a reminder again. Definitely a keeper for reference!
DeleteBut back to my chart, when I applied the fibs, the wave 3 was a hair shorter than wave 1 (log scale). I'm trying to post the chart again but TOS isn't working.
In any case, I see your count also, but it would have never occur to me to place the wave 1 and 2 where you have it. I suppose amateur vs pro eyes.
Have a good weekend
Apologies for multiple posts: On the diagonals, the size requirements are a 'rule'. Are the 'time' requirements a rule or a guideline?
Delete'Within the same year' linear price scale only for price measurements. Inflation just can't ravage that much in the few days of the chart.
DeletePrechter doesn't list time as 'rules'. Neely is much more concerned with time. Me, too.
TJ
ES 5-min; IFF below 4,423 then expanding diagonal down is possible. (Or triple zz within a triangle or something).
ReplyDeleteTJ
..SPY 5-min; less likely a downward diagonal is working out, now.
DeleteTJ
..maybe a triangle or something, or even a larger wave up.
DeleteTJ
SPY 30min - working on variation of Rising Three Methods pattern. [IF] it plays out, will see another strong up candle similar to initial morning candle.
ReplyDeleteSPY and SPXcfd - two concurrent views
ReplyDeletehttps://www.mediafire.com/view/y7mz2qhqdcf8501/CashCfd.PNG/file
Here is both a 'smaller' and 'larger' triangle. Unfortunately, there are several operable counts at the moment. The 'problem wave' is the interior wave labeled as micro w-x-y.
ReplyDeletehttps://www.tradingview.com/x/L32m6d5S/
The smaller blue triangle is already validated, unless it completely breaks down lower. Otherwise, a pop higher might make a larger a-b-c wave higher with the smaller triangle as the b wave. Best to see how the fractals break here.
TJ
SPY 5-min; now above wave brown-d of smaller triangle.
Deletehttps://www.tradingview.com/x/e0W9ygDG/
TJ
SPY 5-min; now above wave brown-b of smaller triangle, proving a triangle.
Deletehttps://www.tradingview.com/x/kAELWhiR/
TJ
SPY 5-min: here is what I have at the end of the cash session. It is possible to count three waves (:3) in both directions.
ReplyDeletehttps://www.tradingview.com/x/9sagx3iS/
The question is why did the up wave reach the 90% level needed by rule for a flat wave? If we are impulsing up, will a long flat provide alternation? It is not for certain.
TJ
There is a new post started for the next day.
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