Equality in Time and Parallel Established

In the prior post, we said the correction of the prior up wave was nearing equality in time, and we noted prices were not yet tracking a parallel. In a follow-up chart, we note that both conditions are now met. The down wave is now likely longer in time, and a parallel became more defined.

ES Futures - 4 Hr - DZZ in Parallel

 

It's not that the conditions had to be met, but it is most often the case that a double-zigzag travels in a rather definite parallel. The reason we said the condition of a parallel did not have to be met is because there is clearly a case when it does not: and that's when the second zigzag is part of an overall diagonal wave - either contracting or expanding. And it is often the case that second waves or B waves take more time than their 1, or A waves. That has now occurred. So, this tends to make the down wave less impulsive than the up wave.

Clearly, a second factor in the ES is that the blue b waves upwardly overlap their prior waves.

On the one-hour chart, a potential triangle for the recent blue b wave was being sketched out. It has not strictly invalidated and may yet play out. But it does not need to. It is possible the blue b wave above is just a failure wave. Perhaps the minute ((y)) wave has the 62% retracement level on its mind. See the chart below.

ES Futures - 1 Hr - Potential Triangle

In either case, this (4 Hr) down wave looks like it is occurring on a divergence of the Elliott Wave Oscillator (EWO). We'll see if that holds. 

The primary case for a much larger down wave I can see in the ES at this point would be if the minute ((y)) wave became longer in price than the minute ((w)) wave and travelled below the lower parallel. Then, a significant up wave would have to occur for the fourth wave of an expanding diagonal. But that is all in the future at this point, and accordingly must just be considered an alternate in the event of a collapse in recent prices. If the recent (4 Hr ) down wave is truly less impulsive, then at some point the up trend might resume. We just can't start formally counting it until or unless the high of the first blue b is exceeded higher. And - at this point - trading full candles over the upper parallel would be a sign of strength, and doing the same under the lower parallel would be a sign of weakness.

Have an excellent start to the holiday.

TraderJoe