Here are two charts providing the provisional count to a top. The first chart is the ES futures only on an 8-hr close-only basis. The count consists of five minute-degree waves from Minor B to Minor C which would form the Intermediate (V)th wave of Primary ⑤. Under this count the wedge at the top would likely not have been a diagonal; just part of the overall wave Minor C which is part of the monthly diagonal shown in many, many posts on this blog. Within the five minute-degree waves wave minute ⓘ is the extended wave in the sequence. There are ~140 candles in the chart and the wave four indicator on the Elliott Wave Oscillator (EWO or AO) circled right where it should be.
The next chart is of the ES/SPY CFD on the 30-minute timeframe showing how the day unfolded into the cash close. The top shows a tiny truncation (*) in the ES futures, but not in the CFD or SPY.
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| ES/SPY (CFD) - 30 min close only - looks impulsive |
Note there is a five-wave structure to potentially end the move on a divergence with the EWO. Then, there appears to be the start of an impulsive wave lower. (As this is written the after-hours just made another lower low past the daily S2 level to 7,550 in the ES futures, only, so far). Note there is a 2.618 wave down for a third wave.
If this top holds, it would end the contracting diagonal from 2021. The reason the count is provisional is that post-pattern behavior is required in three forms: 1) an impulsive wave in good form should be confirmed, 2) there should eventually be a retrace wave that does not go over the high, and 3) there should be a lower low that significantly exceeds the low of the original impulse.
The confirmation steps, above, are in the future. It is difficult for me to see an alternate at this time due to degree labeling and current overlaps, but I will keep looking.
Have an excellent start to the evening,
TraderJoe
Any one looking this as expanded diagonal https://www.tradingview.com/x/Nt1b1bmc/
ReplyDeleteThanks TJ. "3) there should be a lower low that significantly exceeds the low of the original impulse." Here you mean low of March 29/2026 marked as "B" or 4835 from 2025 ? I mean to ask is what is defined as "original impulse" from 2021.
ReplyDeleteJack Schannep, TheDowTheory.com, September, 1999:
ReplyDeleteOn October 25th,1929, William Hamilton, Editor of The Wall Street Journal, and the successor to Charles Dow, wrote in his most famous editorial “A Turn in the Tide”, that (two days earlier) the Dow Theory “gave the signal for a bear market in stocks“. He noted that “There are people trading in Wall Street, and many all over the country, who have never seen a real bear market…. What is more material is that the stock market does forecast the general business of the country. The big bull market was confirmed by six years of prosperity and if the stock market takes the other direction there will be a contraction in business later…”. Of course he did not expect the stock market to drop 86% from that point and business to enter a great depression, but both happened. The Dow Theory does not predict the duration nor extent of such changes, only that change is coming.
In 1999, when the Dow Jones Industrial Average dropped below 10,466.93, the Dow Theory “gave the signal for a bear market in stocks“. Certainly “there are people trading in Wall Street, and many all over the country, who have never seen a real bear market“, in fact we have been in bull markets for 97% of the time over the last 17 years. And the rest of his quote is also correct: 82% of all bear markets in the 20th Century have been followed by “a contraction in business later” whether it be an official recession, or just a ‘mild’ or ‘growth’ one, or ‘really big one’ like the depression. Fortunately, most “real bear markets“, which I define as a drop of at least 16% on both the Dow Jones Industrials and the Standard & Poors 500 Index, are not as severe as the 1929-32 experience. They average a not insignificant -34% drop over an 18 month timeframe. The ‘traditional’ definition of a 20% drop is widely used but unfortunately excludes several “real” bear markets and their following recessions such as 1923, 1956-7, and 1978-80. Whichever definition you use, a Dow Theory ‘Sell’ signal has been followed by bear markets more times than not.
. . .
Feb 2005 Note: THERE WAS A BEAR MARKET from January-March 2000 to September 2001 in which nearly 1 of 10 stocks lost 90% in value. The final low was 33 months later in October 2002 for a total loss by the Dow Jones Industrial average of nearly 38%, “somewhat” less than in 1929-32 but almost the exact same 34 month timeframe.
We don't have a Dow Theory sell signal yet, just a possible top. And, as I have noted previously, the DJI has become a rather flaky index. We should use the S&P500 and the DJT or a broader transports ETF to measure "the market". To confirm the provisional top, we need to see a significant decline followed by a fairly strong rally that fails.
DeleteES 4-hr: I promised I would keep looking for an alternate. While I don't like it all that much now that we 'do' have overlap, a diagonal could form in this manner.
ReplyDeletehttps://www.tradingview.com/x/hdMJrgec/
I will put this on the main post for the next day.
TJ
...for this alternate to play out, then 7,446 should not be taken out lower or the fourth wave would become longer than the second wave which would violate the 'rules' for a diagonal. But, if the diagonal does play out, it would be the worse signal in modern times - a diagonal at two different degrees of trend. TJ.
DeleteLooks like it contains a flat as one of the sub waves.
DeleteI note in cash overlap was avoided by a point so far. Just to keep in mind
ReplyDelete