A Matter of Degree

In yesterday's post, it was shown how it possible that Primary wave four is becoming longer in time. One of the best pieces of supporting evidence for this count is wave degree. Typically, Elliott termed minor degree waves as those that showed up on the 'daily' chart, whereas intermediate degree waves were those that comprised the weekly chart, and Primary degree waves those that comprised the monthly chart. Please refer to the daily chart below for this discussion.

In our prior posts, we had counted down the daily waves to the August 2015 lows as Minor degree waves A, B, C or alternatively minor 1,2,3 (but 5 was not made in the SP500). We said 1,2,3 and A,B,C are equivalent until they are not.

One key point - and please don't miss it - is that the three minor waves lower form an Intermediate degree wave of some label. We had presumed it 'might' be intermediate (A) of a larger primary fourth wave triangle - and  that is still a possibility. Regardless of the specific label at the August low (A) or (W), we then have labeled three more minor waves higher to the November high. So, this structure now makes an Intermediate degree (X) wave - or less likely an Intermediate degree (B) wave. This type of degree labeling is proceeding simply, and smoothly and naturally. There is no 'guess work' or forcing of degrees to some preconceived notion or tortuous attempt to fit "degrees to points", and you can see that the A-B-C down to (W) and the A-B-C up to (X) consume 'roughly' the same amount of time.

But the next point to absorb is that under Elliott's structures, a Primary degree wave is composed of Intermediate degree waves. It would be a mistake to jump from minor degree labeling directly to Primary degree labeling, without explaining where the Intermediate degree went!

In the count above, the Intermediate degree is clearly shown. That is the major point - we are not leaving the Intermediate degree waves out of Elliott's Primary degree labeling.

Having said that, a wave (Y) - while the most likely course to make a 38.2% retracement of Primary 3, is not a 'for certain' wave. It is highly likely, but even it is 'not' for sure. Why not? Well price is currently down to the lower daily Bollinger Band. Sometimes, price bounces off of the lower band strongly. If and only if price makes a new high above (X), then it is 'possible' a barrier triangle is still in play for Primary 4. But that is nowhere near in evidence yet, and every attempt to reach the old highs has been rebuffed with a turn lower. More likely, a retreat from the lower Bollinger Band will only be towards the middle Bollinger Band (aka the 20-day SMA), before resuming lower.

But we think, besides the downward overlap, and the channel break illustrated, there are two more 'telling' pieces of evidence as to why we are still in a Primary 4th wave.

First, if you notice the structure from late August to late September, it forms a FLAT wave in the SP500. And second waves are 'usually' sharp zigzags, not flats. They 'can' be flats, but they are "usually' sharps. So, having a flat wave at this location is a serious warning. It fits the concept of a B wave much better than it does the concept of a second wave.

Second, we know by measurement that the C wave upward stopped just short of a C = 1.618 x A. In other words, it did not make the usual expectation for a strong and powerful third wave of 3 = 1.618 x 1.

Regardless of the eventual path, if we are making a Primary 4th wave, it must be composed of Intermediate degree wave labels that consume proportional amounts of time in the sideways or down direction to what the Intermediate degree labels have consumed in upward direction.

Cheers and enjoy the chart!

Channels and Alternation for Potential Primary 5th

Prices forming channels were important to R. N. Elliott and most practicing Elliotticians today would probably agree channels are important in Elliott Wave work. That being the case, the scenario below is the ‘best’ scenario for making a Primary 5th wave upward – using modern Elliott Wave theory. You will note we posted this potential scenario back on Nov. 22nd. So, today's drop should not have come as a surprise to anyone. We emphasize .. repeatedly ... this is a potential scenario. If you are interested in more discussion of it, it is posted below the chart.

One of the reasons for positing this scenario is that a triangle represents "indecision and a balance of forces" before the Fed meeting in December. Keep in mind there is lots of 'volatility' that can happen in the first half of the month, including the payroll employment report this Friday, and the Fed meeting on Dec 16th. Perhaps after all that is out of the way, the 'smart money' will feel more relaxed and start a rally into year end, and into the first of the year. But, more importantly than that, a triangle would signify that the last wave in a sequence is dead ahead. That's how triangles work when they are in a fourth wave position.

We should note that some people have posted a 'truncated fifth' wave at b of our triangle.

The problem with that scenario besides the fact the b wave of the triangle was clearly counted in real time by more than one analyst we know as a "three" and not a "five" is one key factor. If wave 5 was 'there', then wave 5 would not equal wave 1, which is one of the most common wave relationships. In fact, it would be much shorter. Further, the upward wave to that location would not be in a channel; it would be a wedge. But wedges are 'usually' diagonals, and this one would not be - again greatly lowering the odds of such a forced count.

Rather, 'at this point in time' we would expect the Elliott Wave Oscillator to weave around the zero level in a fourth wave, providing enough time for price somehow to contact and/or slightly break the lower trend line boundary before resuming higher. This could occur in the triangle OR in a double zigzag lower to the trend line. Either a triangle or a double-zigzag would provide the expected level of 'alternation' needed for a true Primary 5th wave.

Tentatively, we have 'sketched in' a lower triangle trend line from circle-a to circle-c. We will allow the lower trend line to be 're-anchored' within limits, if, and when we know that circle-c has ended.

Then, wave 5 should be "about as long" as wave 1. And it would likely fail somewhere near the median line of the parallel Elliott trend channel.

At this point in time, there are other wave counts we have to consider. We have outlined these in the posts entitled "A Hitch-Hiker's Guide to EW Galaxy", and subsequent "Galaxy Update". We have also indicated why this is necessary at this time. The uncertainty is inherent in fourth and fifth waves, and it is not perfectly clear yet which degree of fourth wave are we in. We have called this situation the "Fourth Wave Conundrum" in our YouTube Video, Critique of Elliott Wave for Trading. And it occurs at every degree of trend!

For now, the situation is we are "range bound" between the May 2015 high and the August 2015 low. We are awaiting resolution of the range. We can not 'make up' waves that 'just aren't there' for our personal reasons, and we can not 'force a count' that we truly don't see. We will update as best as possible when the wave count makes the most sense.

Three Examples of Long Term Elliott Log Trend Channels

Long term viewers of my YouTube channel will recall these posts, which were done as live updates at the time, showing the long term trend logarithmic channels in monthly Crude Oil ...

...and in monthly Gold.

To these .. one can add a two-weekly log channel in the Dow Jones Industrial Average, as below.

For each chart, the pattern of alternation is clearly stated. The last chart, that of the Dow also includes one of my favorite indicators. With 120 - 160 candles on the chart, wave iii of 3 is always at the maximum of the Elliott Wave Oscillator, the next major divergence is wave 3, and wave 4 should travel to or below the zero line - just as it has - but not more than 40% of height attained on wave 3 to the opposite side - the lower side - of the zero line... just as it has.

Elliott tells us to chart in log format for long term charts (weekly, monthly annually), but arithmetic is acceptable for shorter term charts (weekly, daily, hourly).

Cheers and enjoy the charts!

Ira Epstein Example - Part 2

In the previous post some of the advanced considerations were able to be outlined but not illustrated by way of example. We left off that post by saying there was an 'outside day down' which is defined as a higher high, a lower low and a lower close than the previous candle. With reference to the chart below, we want to illustrate, now, some of those more advanced considerations.

From Friday's candle, the "outside day down", clearly it can be seen that the futures traded down about 6 - 7 points in the pre-market Monday, but then clearly took out the high of the outside-day down. The consideration we outlined was that if the high of an outside-day down was taken out within the next two trading sessions, it would constitute a "bear trap" - as it is likely that a group of traders were caught short at the lows.

Follow-through by bullish participants can be seen on today's candle (Tuesday) with yet higher highs, putting more pressure on the bears.

So, then, very interestingly, Monday's candle is an "outside day up", and the same rule applies but in reverse. If the low of the outside candle up is taken out in the next two trading sessions, then it would constitute a "bull trap". So far, there is no sign of that, and it can only happen tomorrow or the signal is negated. What's good for the goose is good for the gander.

There remain several things to note on this chart. First, the slow stochastic is still fully embedded. Until the %K line (the red line) crosses back down under 80, it is not likely that price will try to regain the 20-day SMA.

Additionally, the 20-day SMA has recently crossed above the 100-day SMA constituting a "bull cross", the effects of which are already being seen in higher prices. How long this will last is not certain. Sometimes the cross happens very close to the point where the market enters a corrective phase, so even though the cross has happened, it, in itself, could sound a note of caution.

Lastly, note that there are still two gaps, circled in red, on the daily chart which are not yet closed. While some traders may not pay much attention to gaps, sometimes they form 'targets' for the Smart Money.

Disclaimer: Nothing in these observations is to be taken as trading or investment advice.

Paraphrase of Ira Epstein's Rules for Trading

Ira Epstein is a broker who works for the Lind Group and has published numerous videos on YouTube. From that information, a summary of his Rules for Trading that he provides to the public is distilled below.

Charting Requirement

These rules apply to the daily futures chart only. To follow his system, the following is needed.

1. Daily OHLC bar chart
2. Daily Bollinger Bands with 18-day Moving Average (20-day is acceptable)
3. Daily Slow Stochastic Indicator, plotted as 14,3,3.
4. Daily 100-day Simple Moving Average (SMA)
5. Swing line study (if available); i.e. higher highs, higher lows; lower highs, lower lows*

A current example chart that meets these requirements appears below. The 18-day SMA appears as the unbroken red line in the center of the bands, which are gray. The 100-day SMA appears as the green crosses.

ES Futures - Daily - Guidelines Example

Bollinger Band Theory 

Bollinger Bands are defined as a daily algorithm designed to keep the market trading within them 95% of the time. The Bollinger bands were developed by John Bollinger, and are 'volatility bands' constructed around the 18 day (or 20 day) moving average where the upper band and lower band are set at "two standard deviations from the moving average". The "two standard deviations" are what theoretically provide the 95% confidence level that the market will trade within the bands.

One does not want 100% confidence of trading within the bands because one is looking for signs of strength when price exceeds a band, and one is looking for signs of weakness when price can not quite hit a band as a price target.

These bands expand and contract with the volatility in the market. When they contract (get narrower) they often indicate a current period of 'consolidation' in the market. When they expand, they often indicate a time period when the market is trending. When the bands get narrow (consolidate), it often precedes a time when the market will trend.

Sometimes prices will be expected to close outside of the bands. Because of the small probability (5%) of trading outside of the bands, the number of consecutive closes outside of the band will typically be small 1 - 3 is common, whereas 4 - 7 closes outside of the bands is a very, very low probability event. The greater the number of consecutive closes, the lower the probability.

Slow Stochastic Theory

The slow stochastic (with parameters 14,3,3) is a price oscillator developed by George Lane, a large Chicago-based grain futures trader. The slow stochastic is a 'bounded' indicator, and can only travel between 0 & 100%. On the daily chart, values below 30% are defined as "over-sold", and values above 70% are defined as "over-bought".

Over-bought and over-sold on this indicator are potential reversal points in the market. However, an exception to over-bought and over-sold conditions is when the slow stochastic has 'embedded'. The slow stochastic is said to be embedded whenever one of these two conditions is met: both the %K and %D line of the slow stochastic is either over 80%, or under 20% for three consecutive days or more.

Other Definitions

• Line in the sand - the 18 day (or 20 day) simple moving average is termed "the line in the sand". This is a line to which daily price often returns. It is considered to be the 'neutral point' on the chart. Prices often 'return to the line in the sand' to regroup either before or after an important economic announcement. This 18-day SMA is also a "battle ground between the bulls and the bears" and the point where one group tries to wrest control of the market from the other group.
• Positive bias - the market is said to have positive bias whenever it has closed above the "line in the sand".
• Negative bias - the market is said to have negative bias whenever it has closed below the "line in the sand".
• Swing line uptrend - prices show higher highs and higher lows 'over' the 18-day SMA.
• Swing line downtrend - prices show lower lows and lower highs 'under' the 18-day SMA.
• Outside reversal day - same as in all technical analysis (outside day up or down).
• Smart Money - Smart Money is defined as the large hedge funds and institutional traders who have account sizes large enough to make a difference in price movement as seen on the chart as opposed to retail traders who account sizes typically don't affect the overall trend of price.
• Riding the Bollinger Band - there are several times when prices will close exceptionally close to an upper band or a lower band for 'several days in a row'. This often happens when the slow stochastic 'goes embedded', either higher or lower. This is a strong trending sign for prices.

Basic Trading Concept

1. One looks to buy a new long position when prices first exceed the 'line in the sand' to the upside. The target for this position is the "upper Bollinger band". This is because prices have shown they now have a positive bias, and the trade is in the direction of the prevailing trend.
2. One does not look to buy long when price is below the 'line in the sand', because prices do not yet have a positive bias, and the trade is not yet in the direction of a prevailing trend.
3. One looks to initiate a new short position when prices first exceed the 'line in the sand' to the downside. The target for this position is the "lower Bollinger band". This is because prices have shown they now have a negative bias, and the trade is in the direction of the prevailing trend.
4. One does not look to initiate a new short position when price is above the 'line in the sand', because prices do not yet have a negative bias, and the trade is not yet in the direction of a prevailing trend.
5. One looks to sell to 'take long profits only' at the upper Bollinger Band. This is because there is only a 5% probability or less (by definition of the band) that price will trade outside of the bands. The 'Smart Money' is lightening up on long positions at the upper band. If new longs were initiated, this means the retail trader would be fighting what the Smart Money is doing.
6. Similarly, one does not look to initiate new long positions at the upper Bollinger band. This is because of the same probability that such a trade only has about 5% probability or less of success.
7. One looks to buy to 'take short profits only' at the lower Bollinger Band. This is because there is only a 5% probability or less (by definition of the band) that price will trade outside of the bands. The 'Smart Money' is lightening up' on short positions at the lower band. If new shorts were initiated, this means the retail trader would be fighting what the Smart Money is doing.
8. Similarly, one does not look to initiate new short positions at the lower Bollinger band. This is because of the same probability that such a trade only has about 5% probability or less of success.

Other Basic Trading Considerations

1. When the slow stochastic has 'embedded' it is one of the strongest of the technical signals. If prices are going to 'ride the bands' in an up trend, this will most often be accompanied by a slow stochastic which is positively embedded over 80.
2. When the slow stochastic has 'embedded' it is one of the strongest of the technical signals. If prices are going to 'ride the bands' in an down trend, this will most often be accompanied by a slow stochastic which is negatively embedded under 20.
3. Since the third day defines day when the stochastic goes 'embedded or not', the second day over 80 or under 20, is the day 'most at risk' for prices to reverse since, most often, the slow stochastic does not embed. Most often, the slow stochastic just goes from over-sold to over-bought and vice-versa without embedding.
4. When the slow-stochastic has been over-bought, then when the slow stochastic reverses to under the 80 level, then it is most common for price and the 18-day moving average to meet. This does not always happen, but it usually does.
5. When the slow-stochastic has been over-sold, then when the slow stochastic reverses to over the 20 level, then it is most common for price and the 18-day moving average to meet. This does not always happen, but it usually does.

Advanced Trading Considerations

1. When the slow stochastic has embedded in either direction, it is often seen - that when prices return to the "line in the sand" - then the line in the sand will be defended in the direction of the trend that embedded. In other words, price will generally 'bounce off' of the line in the sand and resume the trend. This doesn't always happen, but it often happens.
2. When there has been an outside reversal day down, the high of that day should not be taken out higher in the next two trading days or else it constitutes a 'bear trap' - meaning that a number of players have been trapped in their positions at the lows.
3. When there has been an outside reversal day up, the low of that day should not be taken out lower in the next two trading days or else it constitutes a 'bull trap' - meaning that a number of players have been trapped in their positions at the highs.
4. When the 18-day SMA crosses above the 100-day SMA, some moving average followers will view this as a positive sign. If this happens when price is above the moving averages the cross over can be considered valid.
5.  When the 18-day SMA crosses below the 100-day SMA, some moving average followers will view this as a negative sign. If this happens when price is below the moving averages the cross over can be considered valid.
6. Often times the 100-day SMA acts as either a price target or support / resistance depending on its relationship to the 18-day SMA, and/or the Bollinger Bands.

Example

While these rules may 'seem' complex, the example chart for the ES Dec 2015 futures above helps to clarify them.

1. From June 17 - August 1, price could not attain the upper Bollinger Band, and this is a sign of weakness, not strength.
2. In mid-July price made its target of the lower Bollinger Band, this is a sign of weakness, not strength.
3. Throughout early August, price can be seen to be trading for multiple days on "both sides of the line in the sand", there is clearly a battle going on for control of the market. Further, there is a narrowing of the Bollinger Bands indicating a period of consolidation, to be followed by a breakout in one direction or the other (more likely lower given the above information).
4. When prices break below the mid-August low, the Bollinger Bands begin to widen to the downside, indicating a trend beginning. This breakdown occurs under the 18-day SMA, and would be sold, as the market would have lower lows and lower highs (a swing line trend) under the line in the sand.
5. Prices begin to "ride the band lower" as the slow stochastic embeds under the 20-level indicating the down trend in force. Profits are allowed to build until the slow stochastic turns back above the 20 level, around August 23rd.
6. When the slow stochastic turns back up over the 20 level, it is 'most often' expected for price to meet the line in the sand, and that is what occurs in mid-September.
7. One does not initiate new shorts against the lower band in late August, per the above rationale as the probability of success is 5% or less (less for every day that price closes below the band).
8. One does not initiate new long positions in early September as price has not closed above the "line in the sand". 
9. A new long can be initiated in mid-September, after price closes back above the line in the sand. The target for this trade is the upper Bollinger band.
10. One would not initiate new longs on September 19th, when price is very near the upper Bollinger Band, as the probability of success is only 5% or less, of success. However, profits should look to be taken.
11. A new short position is not initiated in mid-September because price has not closed below the line in the sand.
12. When the slow stochastic turns back under 80, it is 'most often' expected that price will meet the line in the sand, and that is what does happen in mid-September.
13. A new short position can be initiated in late September after price closes below the line in the sand, with a target of the lower Bollinger Band. 
14. One would not initiate new short positions in late September when price closes on the lower Bollinger Band, as the probability of success is only 5% or less. However, buying back shorts to take short profits should be initiated.
15. One would not initiate new long positions in later September as price has not closed above the line in the sand.
16. In early October, price closes above the line in the sand on the second trading bar. One then looks to initiate new long positions with a target of the upper Bollinger Band. 
17. In late October, price has hit the upper Bollinger Band, and one would look to take at least-some profits on long positions. The slow stochastic has not yet crossed back under the 80 level from being embedded, so a trader may still wish to let some partial positions run until it does. This is discretionary.
18. The last daily bar is an "outside range day down", meaning if the high of this bar is taken out in the next two trading sessions, it could constitute a 'bear trap' - meaning some players have most likely been caught short in the trade - presumably giving the market more fuel for a further upside run.
19. Because the slow stochastic is still embedded for many more than three days, when it eventually turns down under 80, and price and the moving average begin to meet, it is a high probability that the line in the sand will be defended! Meaning price will bounce off the 18-day SMA and resume a turn higher. This does not always happen, but it often does!

Repeat this Cycle, and these Instructions Continuously!

We post this information to show two things: a) we care about trading as much as we do about counting Elliott Waves, and b) sometimes Elliott Wave counting can be a great 'assist' to trading, as in when the longer direction has been established. One can 'filter out' short trades or 'long trades' in the above system based on the Elliott wave count in the market. Other times, like now, Elliott Wave analysis can have clear alternatives, and, in such cases one may rely more on plain technical analysis or a trading system like this to help screen for potential trades.

Disclaimer: We make no claims for the profitability of the above rules. All trading results are determined by your decisions, and we accept no responsibility for them. (*) The Swing Line study is one developed by Ira Epstein, and only appears in charting software he provides. To respect the proprietary nature of this indicator, we have not reproduced it here. Instead, if you are interested in examples of the Swing Line study, go to YouTube, and search on Ira Epstein. Any one of his "End of the Day Financial" videos, "Currency" videos, or "Metals" videos will have the indicator applied to the chart.

TraderJoe

Principle of Equivalence

The primary purpose of this post, is to advise that, as of this writing, a marginally higher high over the Sep 2015 high has been made on the S&P500. That means that several upward counts can now pertain to the market. For example, on this daily chart, minute i, minute ii and minute iii are now valid waves of a potential Leading Diagonal upward for example for the minor wave A of the intermediate (B) wave of a triangle. We have shown those waves as circle-i, circle-ii, and circle-iii, which would mean circle-iv and circle-v would follow if this count would play out. We are writing this mid-day, and the day is not done, so minute iii can go higher - if it wants. We again want to emphasize that this is a valid potential count. For the count to be realized, it must play out according to the definition. That has not occurred yet.

However, keep in mind that in Elliott Wave theory, it is 'required' that the all of the legs of a diagonal be zigzags. So that means that since minute i and minute ii must be zigzags for a diagonal, they must also be functionally equivalent to a W-X-Y count : a double zigzag count. That's why on the chart, below, we are showing the same labels simultaneously.

At this moment in time, minute i, minute ii, and minute iii of a diagonal are logically and functionally equivalent to a-b-c-x-a-b-c, or W-X-Y. So, strictly on a 'wave labeling' basis it is difficult to tell them apart.

So, what then provides a road map for the future? Well, first it is very often a 'third' wave that makes a new high or low in the market. It is the wave with the power. Isn't that what we have here? A third wave (in this case of a potential diagonal) making a new high in the market? So, this may be one indicator the current count is correct. However, we also know that in a true contracting leading diagonal, wave iii can not be longer than wave i.

So, that IF wave iii were to become longer than wave i, then the better count may simply be W-X-Y. A long enough interior wave could invalidate a diagonal, and upwardly overlap the minor A wave down. It that case then the wave could be long enough to have formed Intermediate (B), of a triangle all by itself. (We want to emphasize, that, at this point in time, no such formation is in evidence, but it 'could' occur.) But it could, emphasize could, also be W-X-Y of a much larger correction like a potential second wave up, although, here again, there is insufficient price evidence to draw such a conclusion at this time.

Also if Minor A-B-C, down & W, up provide an almost perfectly parallel channel, then a back test of the channel as minute iv, overlapping minute i, staying shorter than ii, without making lower  low  than X is also a very plausible scenario. It would continue the pattern of 'whippy' moves in the market. This might then be followed by another zigzag higher to make minute v, which, in a diagonal must then be shorter than minute iii.

Ok. Fine, but there are two problems here, too. The first is that diagonals should be relatively rare patterns. And, do you see the second problem here? In such a scenario, then the equivalent pattern is W-X-Y-X-Z which could be just a triple zigzag to make intermediate (B) of a triangle - formed of zigzags high enough to have the S&P500 overlap with it's minor wave A, down.

For this reason, it takes a keen view of market oscillators, technical internals, channels and Bollinger bands to sort things out at this time. From our vantage point, we simply wanted to use this live example to show exactly why there are often 'alternates' in a market. Just part of the reason, is that in Elliott Wave counting 1-2-3 is often equivalent to A-B-C (until it isn't by adding a fourth and fifth wave), and a diagonal must be comprised of double and triple zigzags.

Hope this helps!

A Hitch-Hiker's Guide to the EW Galaxy

Because some people keep posting the same information in chat rooms, repeatedly, and because others think I am some kind of Elliott Wave monster - out to seek and destroy other chat rooms - or that I claim that my counts are 'always correct', or others say I am here to promote myself, I want to use that energy to update with this post.

With apologies to 'A Hitch-Hiker's guide to the Galaxy', I am going to offer you these six realistic Elliott Wave scenarios, any of which 'could' occur without any breaking of the Elliott Wave rules. There may be others I have missed. If there are, let me know.

Clearly because they are offered for free, and also because I am not selling anything (check my web site- any and all 'Products' for sale have been removed), I hope it reduces the perception of any pandering or self-interest, other than that people actually learn to count Elliott Waves, as they are described in the texts. Why am I doing this now? First, because this is the most difficult time in history to make good Elliott wave predictions. The market will lurch & jolt; it will cause gains and losses, it will cause people to have a surge in optimism of new highs, and then it will disappoint with overlaps of some kind. If you can learn to survive in this environment, then counting impulse waves higher or lower, will seem like a walk in the park at some later point in future.

The second reason I am posting this, now, is people almost always drag out the very tired comparison to Robert Prechter. Saying, "you know he thought he was always right, too" or some other such nonsense. The fact is Prechter's organization has almost always posted alternate counts, whether you want to acknowledge that or not, or whether you wanted to use them or not! So, please take that argument and use it on someone else.

The third reason is that people keep telling me that because, somehow, a wave did not conform to my expectations that it means that you can't possibly trade using it! Bingo! I agree with that statement to some - even a large - degree. I have made an entire video, posted on YouTube, about "A Critique of Using Elliott Wave for Trading", particularly if it is used alone or in isolation. If you haven't watched it, you should! We are in that period now called "The Fourth Wave Conundrum" in that video: many, many options. And I maintain, that when a wave label invalidates it provides a lot of information for the future.

So, without further delay, here are six plausible scenarios for the future. You will have to decide what you like and what you don't like, and let the market decide the outcome.

Scenario 1 - P5 Failure

Clearly for this scenario, you have to think there have been three Primary waves of a Cycle Impulse upward to at or beyond P3 = 1.618 x P1. That's fine it might work that way in the U.S. It's just not working that way for the London FTSE. One reason to question this scenario is how short P5 would be in relation to P1. It's not a 'deal-breaker' though. It could happen. It just needs five waves up from P4. Other comments are on the chart.

Scenario 2 - Regular P5

This chart has many of the same features as the prior one - just that P5 is allowed to take on a more reasonable length in relationship to P1. Who knows, perhaps P5 would produce a "throw-over" of the channel that would end the move - like the Gold market did. It's plausible. The one thing about this chart is it ignores the overhead supply of the seven month diagonal from last November to this May.

Scenario 3 - Triangle

One advantage to this chart is that P4 is allowed to consume more time in relationship to P2, and price is allowed to contact the lower channel line, and perhaps make a 'false breakout below it' while still producing acceptable alternation in the count.

Scenario 4 : Double Zigzag or Flat-X-Zigzag

This scenario allows price not only to contact the lower channel line, but also re-define it. In other words, we would re-draw the P2 to P4 trend line, when we 'know' where the new P4 is. Then P5 could head upward, and make a wave that is more like P5 = P1. It might also allow a 38.2% retrace of P3 in the U.S., but it might mean more ugliness in foreign markets.

Sceanrio 5 : Leading Diagonal Downward

This scenario would be ugly, indeed, because a deep retrace for a second wave (ii) of a diagonal would have most convinced that new highs are in the offing - yet this scenario would both recognize the overhead supply created, and allow the S&P500 to validate it's ending diagonal triangle - that formed in May, 2015 - like many other stock indexes have done. It would also recognize the extreme leverage and number of people that participate in the market via the ES futures rather than buying traditional stocks, for example. In this scenario, wave (ii), to follow the rules, must now form with a similar structure as wave (B) of the triangle, start with a Leading Diagonal, A, then retrace for a B, then make a C wave up to form a legitimate zigzag.

Scenario 6 - Regular Impulse

 It's funny, but the wave iv of a simple impulse downward has 'not yet invalidated'. Certainly, it has a high risk of doing so - which is why it is presented last. But, still, we can not rule it out just yet. The Dow is only points away. If we can rule it out, we get to take one scenario "off the table". If not, that will tell us something, too.

So, here are six scenarios. And you might ask, "what's the point"? The point is that based on Elliott Wave theory it is 'very to hard say' where exactly one is in the wave count. But it is 'largely' because the down movement consisted of, or started with, three waves down. That very same 'conundrum' happens on all degrees of wave counting - whether you want to accept it or not. That's why Bill Williams developed some indicators that can help in that decision and why they are incorporated into some products like Advanced GET, E-Signal or Motivewave (I have no business relationship with any of them).

Yes, as of Friday momentum looks up. Want to fight that? That's up to you. So, if it's hard to tell where one is, one might want to at least remain flexible, do the best job of short-term wave counting possible, and, if possible, let the market clear up some of the confusion.!

Cheers and the best to you always!