On the 2-Hr chart of the SPY Cash Index, below, the EWO (Elliott Wave Oscillator) is back peeking above the zero line. This is the time when the fourth wave survives its test, or the wave loses its shape.
We were fully expecting the EWO to come back to the zero line and had written about it previously. So, it seems for downward continuation wave iv should either end here or try to hold the 38-50% Fibonacci retrace on wave iii. As noted in the chart, this wave can fail at this location since it is potentially an ending wave - if it wants.
We'll see how it goes. Have an excellent start to the evening and the weekend.
TraderJoe
SPY 5 minute - looks like an impulse is developing (with an x1?) for wave c of iv and not a contracting diagonal. I suppose there is nothing at this time that rules out a contracting diagonal to develop instead?
ReplyDeleteWhy do we keep assuming it's a wave 4? All I see is an abc down so far and it looks like we're correcting it now. The bottom so far was the weekly bb and the 200 ma together. Assuming we are going lower than those strong technical supports on this leg seems risky.
Delete@RM .. it's not an 'assumption', it's a 'test'. The Eight-Fold-Path Method clearly indicates if the conditions (38-50% of wave three, and +40% of wave three's trough) do not hold, then 1,2,3 is the same as A,B,C. This is The Principle of Equivalence as I've outlined several times. In other words, it's simply a matter of odds. What tilts the odds a little in favor of the wave iii is the 2.618 extension as shown by the Fibonacci ruler on the left. We are 'supposed' to assume a 2.618 is a three, until that is shown not correct. Also, the Bollinger Bands are an 'odds-making' tool as well. The ES daily bands are still available to be hit on the downside, and price is still below the 18-day SMA, so the daily bias is still lower. Countering that, the daily slow stochastic has just lost its embedded status, so the risk is price could easily retreat to the 18-day SMA. From a technical perspective - daily - there are factors for and factors against, and that's why it is a 'test' and not a matter of opinion. It's one of those times that calls for calm, patience and flexibility, and not a time to 'bet-the-farm'.
DeleteTJ
The comment was for David who clearly states the move is "for wave c of iv". He doesn't say "a possible wave c of iv". Many people miss the bottom of moves by thinking "we are at 4". That assumption has cost me dearly in the past, but maybe none else has had the problem.
DeleteCool. Since you mentioned the weekly, I thought I would bring up this perspective. Right now, on the weekly, we could have our little iv on the 2-hr, fighting the "big 4" on the weekly, below.
Deletehttps://www.tradingview.com/x/eFJwAk3p/
I would just add that the three items that make the A,B,C preferable at this time are these: 1) C/3 is less than 1.618 x A/1, 2) the larger monthly count to V, and 3) the downward overlaps of the Dow and the Russell. Still, there is one very significant factor in favor of the weekly 1,2,3 and that is simply, "The Magnificent Seven". Again. Not arguing - just added for the perspective of all.
TJ
@David .. first, we both agree either an impulse or a diagonal could form. But it looks to me like you are focusing too finely on the 5-min chart. I have pleaded over & over for people to try to follow The Eight-Fold Path Method. First, select the time frame that starts to give 120 - 160 candles on the chart for "the wave of interest". That is the 15-min chart with more than 80 candles at this early stage. See below.
Deletehttps://www.tradingview.com/x/yADhGzUb/
Then, it becomes apparent (as I posted earlier in the comments) that the move starts earlier with the expanding leading diagonal - which was proven to be leading by the higher high on Friday. Friday's wave in both the cash and the futures was likely three of Ⓒ of iv on the 2-Hr. If you don't do this, you wind up with all kinds of degree violations - subwaves that are larger than the larger degree preceding wave in the same direction (the up direction in this case).
Note when you do this, you see the higher EWO on wave -iii/-c, you see the lowest point of the EWO for wave -ii/-b which did not go below the origin of wave -i/-a, you see the great Fibonacci ratio of -iii = 2.0 x -i. And you begin to see the makings of an upward channel. Yes, the Principle of Equivalence says that the -a,-b-,-c is what might allow it to be only wave (i) of a diagonal. But, if the downward waves don't overlap, then, there might not be a case for a diagonal except in wave -v of an impulse.
Remember, the 'first step' is to pick the timeframe that provides closest to 120 candles for 'the wave of interest', not just to pick 'any' time frame. Hope this helps.
TJ
Roberto,
DeleteIt was late last night when I typed that, and I *thought* I had put "proposed" in my comment to reflect the tentative count, but I must have missed it.
TJ,
I see your points, but wouldn't it make sense to pick a smaller timeframe if one is looking for confirmation that the last up wave is a c and not a iii? In other words, the circle a of proposed wave iv is actually wave 1 of a down wave? Being on the 5 minute gives more candles for granularity.
I suppose what I'm getting at is that it sometimes feels like to me that the 8-fold path method is too lagging, if one were to be inclined to be more aggressive in their positioning.
Delete@David: The Eight Fold Path Method is designed to find 'companion waves', the three-to-the-one, the fourth-to-the-two, the five to the one/or/three. As the method states it is specifically designed around five-swings of the EMA-34 with 120-160 candles. It is not specifically designed for trading. Again, it is designed for 'counting'. So, your comment is correct that it lags as we must all actually 'see' a wave terminus to count it (and/or comment on it as complete).
DeleteI don't know how aggressive any one individual wants to be in their positioning, so this blog is not specifically about trading although I have included a paraphrase of Ira Epstein's guidelines for trading. His guidelines are based on the movements of the 'Smart Money' and can be found at the link below (copy and paste to browser).
https://studyofcycles.blogspot.com/2015/11/paraphrase-of-ira-epsteins-rules-for.html
As he'll say, "(he) might be wrong, but (he) never tells a client to go long below the 18-day SMA, or go short when prices are above the 18-day SMA. And (he) never tells a client to buy an upper daily Bollinger-Band, or sell a lower daily band. That is 'period, never!'." Clearly he is looking to position for larger moves and not scalp.
TJ
A new post is started for the next day.
ReplyDeleteTJ