E-T Missed a Diagonal! Duh!

People have often criticized certain aspects of my wave counts, saying that I find too many triangles and or diagonals, and that they are just not that common. Well, here's one that got away! I did not find this diagonal wave in real time early as it was being constructed. I only found it today when today's upward waves did not make sense. What prices did today was break key trend lines, only to re-accelerate higher temporarily. So, somehow that seemed like an a-b-c wave up but the wave lengths just were not making sense.

So now let's look at the diagonal and the rather precise Fibonacci measurements inside the wave. I'm so happy in hind-sight that this happened on a multi-hour time scale so that people don't brush it aside saying, "those only happen on smaller time-frames, like five-minutes..". The chart begs to differ.

ES Futures - 1 Hr - Expanding Diagonal

 

Now I have been counting waves for years, and not even I was exposed to the five-times (really, if you look at and count the lower wicks) that the market slammed into the 4,270 level - each one a fraction higher. "What the heck kind of multiple bottom is this?" I had, indeed, previously measured that the b-3 wave was a 90% wave to the already-formed a-3 wave, allowing for a flat or combination construction, but this one made me focus on the wave now labeled ((3)) which failed to go over the prior high. "It's a failure", I proposed. I keyed in on it. I locked in on the failure, incorrectly, in this instance. No this kind of wave makes one think the analyst is the failure. But I digress.

Instead, look at the Fibonacci ratios: wave ((3)) is an almost precise 2.618 extension on wave ((1)). And as I have written many, many times on this blog that you just don't get 2.618 waves all that often. They are not typical wave three extensions. No, they are usually found inside of triangles and diagonals. They are typically made on the news, and cause people to say, "hey, what the heck just happened?!"

Then, there is the bizarrely long wave ((4)), which almost makes it to wave ((2)), but not quite. And I mean bizarre. Even in retrospect it almost caused me to discard the structure as a diagonal. But I could only count three-waves-down, and couldn't call it an impulse, when Mitch did his Save the Republic from the Democrats thing, and foiled what initially had promise for a fourth wave of an impulse, lower - from ((3)) to ((4)) - and the market took off. Why was the noon switch around occurring in the candles? Was this going to be an a-b-c or an impulse, or what? And, then as the day progressed today, the price lengths got too out of control to maintain an impulse.

But, look what happened overall. From a Fibonacci perspective, wave ((5)) turned out to be an exact 1.618 x wave ((3)). Stunning.

Then, one of our alert readers (TimH) asked, "Can Y be 1.382 x W?".  "What the bloody-heck?" I smurgled to myself, "I'm trying to count these confounded waves! And I can't find it! I can't find it. Leave me alone!" 

"Wahl, ah, yea, I guess so - just don't go too far, because the usual is for equality.", I actually and politely replied. 

And then all the ratios fell into place, and the count cleared up. So what is the moral of the story?

In case it is not yet clear, wave counting in real time with an aim to predict real turns, takes time and effort. The biggest efforts are 1) in knowing what the pattern rules are, and 2) in measuring the patterns. Now many people do not wish to go through this effort for themselves. That's OK, but they just won't experience the internal workings of wave theory. 

TimH was measuring! And at the end of the day, that's what made me feel best. He will likely wind up getting it, if he already hasn't gotten it. And that's wonderful.

Others may rely on a wave analyst to do it for them, but without cross-checking, how do they have enough confidence to act on a correct count? Further,  because of the time and effort involved - which I prefer be directed at education rather than me counting waves for you, when someone asks me, "uh, yo, whatz yer long term & short term count in Crude Oil, or Cotton?", well I may come up empty-handed. Why? Because of the rather sizeable effort involved to get it as right as possible. This is the potential benefit of a large EW service IF you can find enough competent analysts. They could have the resources to specialize.

Did I mention there is a third biggest effort to expend? You have to be almost instantly willing in your mind to cycle through the five major categories of Elliott Waves (Impulse, Diagonal, Zigzag, Flat and Triangle), and ask, "which of these are you, you dog-goned wave?!" And, you have to be mentally flexible and resilient enough to be temporarily incorrect for minutes, or hours, or sometimes even days, as things progress. But not just once - over and over again on every wave count, until the proficiency begins to set in. My hope for you is that it does.

By the way, you don't think someone from the markets called up Mitch McConnell, and said,"Hey Mr. Senator; we're looking at a failure here on the markets, and if you don't pitch in, then everyone's 401K is instant pudding!" You don't think old Mitch did it of his own accord do you? Things don't work that way - not precisely for the noon hour when there otherwise should have been a fourth internal wave down for the potential impulse.

Well, anyway, is there another quick lesson besides the diagonal I can provide? Sure, here's a quick one. Real third waves turn to the left, not to the  right. Keep in mind the chart below is fully a 2-Day chart.

Soybean Futures - 2 Day - Real Third Waves

How  real? Well. Let's go from the 2-Day chart to the weekly chart.

Soybean Futures - Weekly - Duh!

Now compare this to what our stock market has done since the Oct/Nov correction in 2020. You decide. Yes, I know that Soybeans are a commodity versus ownership, and that there is a certain urgency when China places it's order. But, the principle of a third wave is the same. I think that is why Neely developed his 0 - 2 trend line criteria. I'm not certain. By, the way, the turn to the left shown is only the ((iii)) wave in the 1 wave up. See if you can find where the 3 wave, itself, takes another turn to the left.

Have fun, and have a good evening. (Oh, and by-the-way, if you want to see how that internal count progressed today, step-by-step, it's in the comments for the prior post. It shows you the final count on the wave ((5)), up. Better late than never, I guess).

TraderJoe