Local Degrees and Count

Yesterday, we suggested that a short position might find "bad positioning" being initiated too low in the wave count - except for the ultra-nimble. By the close that seemed to come true. Today, using the ES futures we'll show again what we think the local degrees are, and what the wave count is. First, here is the scenario from the Minor A wave high, using the ES 8-hr futures, as shown below. The minute ⓑ wave high is at the 150% level on minute ⓐ.

ES Futures - 8 hr - Minor B Overall

Overall, we are trying to complete minute wave ⓒ of Minor wave B. Friday's down wave portion may have completed minuette wave (i) of that wave. There should be five sub-waves of minute ⓒ, and they should be (i) through (v).

The local down count of minuette wave (i) appears to be a non-overlapping impulse, but one that is a complete mess because waves ii & iv formed in reverse order of typical with wave ii as a long-in-time complex Flat wave, and wave iv as the relatively short sharp for alternation. So, that count appears on the ES 2-hr futures chart, below.

ES Futures - 2 Hr - minuette (i)

Because it is very clear that waves v and iii are clear impulses, I assume that wave i was also and it can be counted that way. Wave v is the longest in the sequence, followed by wave iii, followed by wave i as the shortest. The waves do not channel exactly, but that's what we expect from an impulse. Further, wave Ⓒ of ii was a true diagonal as its low was exceeded in less time than the diagonal took to build.

I have looked at the cases for both contracting and expanding diagonals, but they wound up not following the rules or guidelines. Wave two in a diagonal simply may not be a Flat, or the rules are broken. It 'must' be a zigzag. To me the down waves of the Flat are what I call guard bars in that they actually prevent overlap with wave i by acting as resistance against the up move. I won't break the rules, first, and the guidelines are applied secondarily.

Yes, I too initially thought we were making some kind of diagonal downward. But the market had a different idea in terms of price lengths and formations. Specifically, the up-wave portion of Friday's move is the largest up wave in the sequence thus far, and, hence, it may represent a turn of degree.

The impulse does suggest that we will eventually go below the low of the minute ⓐ wave of the overall larger expanded flat wave - and perhaps substantially so (i.e. 1.618 or 2.618 x from the minute ⓑ wave).

Have an excellent rest of the weekend,

TraderJoe