With all apologies to the Foo Fighters lyric from the song Everlong, the lyrics were rolling around in my head this weekend while a number of us have noted that one of the down-trend lines from the high has been modestly broken to the upside. This can happen in a fake out, and it is not too much to worry about at this time.
However, when such things happen, it is often a sign to look out for triangles or diagonals. Remember, we said the minute ((b)) wave in the ES 'could be' a triangle. There is not much of a sign of one yet, except for the broken trend line. But I decided to look that the Nasdaq 100 and see if it offered and clues. The pattern below on the weekly chart might prove interesting.
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| NQ 100 Futures - Weekly Close - Contracting Pattern |
As far as I can tell, even if there is a modest truncation at the high, or not, then the pattern might resolve as a 5-3-5-3-5 Diagonal. As things stand, the only thing weird about it would be that wave 4 would be relatively long in time compared to wave 2. But the measurements are still ok, for now. And it is in a possible fourth wave position, so one might give it some leeway.
Whether the pattern completes properly or not is probably in the hands of the Smart Money. But one of the things this proposal does is provide a hard cut-off for invalidation. Since in a contracting diagonal wave 4 cannot become longer in price than wave 2, then any weekly close over 13,025 before making wave 5, down, would likely invalidate the pattern.
A new lower low is possible. It could be roughly as long as wave 3 but doesn't have to be as long as a new low were made, and the wave did remain shorter than 3. And it should be made in five-waves. But, at this point it is just a conjecture, not a certainty. Five waves down from here in the NQ would match up well with wave minute ((c)) in the ES, if that is to occur. So, we'll see.
For this pattern to become a "leading" diagonal, it would have to make a new lower low - at least on an intraweek basis. Not so, if it is an ending diagonal (with three-wave segments instead), but still should terminate near the lower trend line.
This is the second post since Friday, and if you have not seen the first one, you may wish to have a look at it now.
Have an excellent rest of the weekend.
TraderJoe
Amazing analysis Tj. Thanks
ReplyDeleteI get 13270.50 as the invalidation level using candles
ReplyDeleteYes, that would be the intraday invalidation. On a practical basis, the wave won't have the 'right look' at about 80 - 90% of the prior wave 2. I just won't 'look' contracting. TJ.
DeleteCould the contracting diagonal you propose also be read as a nested 1 - 2, (i) - (ii)?
ReplyDeleteno; not likely because in a nested 1-2, the (ii) should be shorter-in-time than 2 to conform to degree labeling. A smaller degree wave must truly be shorter in price & time than the larger degree wave.
DeleteTJ
Thank you for the update TJ, could that wave 4 be some sort of expanding diagonal pattern?
ReplyDeleteNeed to clear the 13-Dec high for that consideration. Today didn't do that, but the odds look like 50-50 so I'm not adverse to the count. The market has to demonstrate it. TJ.
DeleteWhat would be least expected is a harder sell off into FOMC, instead of floating around as they usually do. Put/call still very low, looks like the majority of the market participants are not expecting much movement until later in the week. Meanwhile we may be inside a 3rd wave down....
ReplyDeleteA new post is started for the next day.
ReplyDeleteTJ