Flexible, Patient and Open-Minded

Yesterday, well before the FED meeting blog contributor Greywaver and I were having a discussion about the potential of the expanding triangle fourth wave scenario. As Gw pointed out, Neely said he has not typically seen them in fourth wave positions. Further, we both understood that the wave (v) from an expanded triangle should try to approach the wave (iii) in height, even if it did fail. And, still, it should measure at least 0.618 the length of wave (d). As Gw pointed out, it didn't. Therefore, the high of that wave provided as a warning in a down count. Further, this alternate was quickly developed and clearly presented.

As noted at about 1:06 PM, wave (v) could have already occurred with wave (v) on the 8th. That would leave the remaining structure as an expanded flat wave with the low at the 'typical maximum' for an expanded flat of c = 2.618 x a.

That measurement held today. Then, before the FED meeting at 12:05 pm, we further showed an internal measurement, much lower than the failure of the expanding triangle at SPY 461.72 and said to watch that level closely because it would likely mean the down wave in progress would likely be ending. That level was beaten twice: once shortly before the FED report, and once after. 

The reaction to the FED's intended actions caused an initial up wave, and then a 1.618 wave following it - all totaling 100+ S&P points from 6,602 to 6,706 in two hours' time. With this, the daily bias shifted to upward, and the daily slow stochastic is still currently over-bought.

The market is especially volatile in both directions. It requires flexibility, patience and an open-minded attitude to count waves under these conditions. What makes me happy, is that we could engage in a real discussion of wave characteristics. We did not get an expanding triangle fourth wave. And this is a good review for all, that under the right conditions an expanded flat can mimic most of the characteristics of an expanding triangle as an alternate.

Can new highs be made in the ES futures? Yes, it is possible, and even probable. We will continue to count waves as best we can as we see recognizable structures. What do I mean by that? I mean specifically that major tops are typically accompanied by either a triangle before the last wave-set or the fifth wave forms a diagonal. We have our antennas up for both, but at this time (if new all-time-highs are indeed made) it is too early to see anything of this type on the daily chart.

Have a good rest of the evening.

TraderJoe