As you know, my position has been that if we are making a zigzag upward, then the b wave overall might be 38% of the a wave. Does that have to happen? No. Nothing has to happen in financial markets, but it is a typical (..and in this case one of the least typical) expectation of a b wave. In the ES 4-hr chart, below, you can see where the 38.2% level is located using the Fibonacci ruler on the left side of the image.
If the a wave ended in the diagonal this Thursday on the fourth RSI divergence, then the true diagonal was retraced in 'less time' than the diagonal took to form. But we could only count Thursday's wave down as a three-wave sequence and it was well-short of even the 23% retrace. And, so far, Friday's wave up is 150% of the length of Ⓐ wave down. This is well inside Ⓑ wave parameters.
We know that after the close, Moody's downgraded the outlook for the U.S.A. to negative (see story at this LINK) and price only started to fall off. But a "spinning top" candle was made. We also know that a new debt deal must be passed by Friday 17th November. Could these be responsible for the Ⓒ wave down?
A measurement for a potential supporting argument is that if the b wave turns out to be an expanded flat, then the Fibonacci ruler on the right shows 2.618 x Ⓐ subtracted from Ⓑ is just longer than 38.2% of the a wave - and this measurement confluence seems fairly compelling. This is not proof - just an argument in favor. A second argument is that the AAII survey of mom & pop investors just took one of the largest weekly jumps I have ever seen. The percent bullishness in this group jumped to 42.6% from 24.3% last week. Staggering.
Well, we'll have to see. As always, I just urge patience, calm and flexibility until various confirmations are obtained. For example, the "spinning top" candle needs a large lower closing candle. And one should draw a revised up-trend line from the low through the Ⓐ wave low. Then, this trend line should be breached lower, be back tested, and proven to fail lower for improved confidence a down move is starting. Let's see how it goes.
Have an excellent rest of the weekend.
TraderJoe
Do you think the semis (SMH) and tech (QQQ) indexes have moved too far on Friday's push higher for those sectors still be in b (circle) of a-b-c of b (bold) as shown in the chart above? Would SMH/QQQ best fit as just completing the a (bold) wave (or a 1?)
ReplyDeleteI had previously written that the NQ already qualified for the potential diagonal below (see 25th Oct post).
Deletehttps://www.tradingview.com/x/HNUyW1mo/
The only dissatisfying aspect of the diagonal count is the relatively mild decline for the first wave. So, the structure can also be counted as a double zigzag (or a triple zigzag) as wave 4 of the prior up trend. Now, price is back up into the territory of the prior wave minute-iv (circle-iv). Will it stop in this area? That is a very difficult call. Clearly, the downward diagonal only invalidates with prices over the high. And, as the Magnificent 7 finish reporting results they have become free to re-initiate buy-backs.
A more salient question for me is, "given 10 of 11 up days for this index, is there 'any' standard retrace due now?".
Time will tell. Patience, calm, flexibility and confirmations (!) needed.
TJ
A new post is started for the next day.
ReplyDeleteTJ