Today was an interesting move for the market. All the downward price action 'acted' like the end of an ending diagonal. We got the classic 'throw over' and 'quick reversal' that accompanies the final stages of an ED. We got the most oversold readings on the 15min and 60 min charts that we've gotten since w2. So while w4 was very shallow, I have no other way to mark it. There are a number of scenarios at play here, and I think they are important to watch:
(1) w4 didn't finish at today's low but instead we've only seen the 'a' and the 'b' and we'll get the 'c' tomorrow. This would reach my original w4 targets in the 925-935 area.
(2) w4 did finish today. There is often symmetry between w2 and w4, and if compare the two corrective waves this is what I have:
- w2 was effectively 15 pts and lasted about 4 hourly bars
- w4 was effectively 14 pts and lasted about 4 hourly bars
We certainly have symmetry here! So how could our w5 play out?
- In this instance w5 can truncate (in otherwords we hit the w5 high at today's close and we have a gap down tomorrow and never look back)
- we hit our wave 5 target: 958-962 tomorrow and reverse
- wave 5 extends higher
Now it doesn't get easy at this point either. In either situation we will have a 5 wave completed price structure and a double top. The 5 waves could be:
- minor wave a. From here we put in minor wave b (somewhere in the 920 range) and then a final minor wave c to finish off a zigzag and primary wave 2 (980-1050 area)
- the end of intermediate wave C and primary wave 2. We have a double top and price collapses. I put this scenario at an equal weight to the minor wave a scenario.
- minor wave 1. Price retraces to the 915-920 zone and then explodes upward in a minor wave 3 (1050-1100) area, then we have a minor wave 4, and finally a minor wave 5 that will complete intermediate wave C and primary wave 2. I hold this scenario as the least likely to happen.
In the end I am saying be cautious. The 915 area should hold on any retracement for one of the bullish scenarios to kick in. If not, then the double top will likely hold and we will be visiting new lows in the near future.
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Many of us would be lost in the EW wilderness without you and Mortie @ BW. Seriously -- the clarity of presentation, in particular, even for a relative noob elliotician such as myself to be able to discern it, is great.
ReplyDeleteI know I often just drop in to say thanks and best of luck with trading, but I don't do it enough. Thanks so much Rich!
Zach, I'm glad you enjoy my posts. My goals have always been to chart the market in a way that can be understood by anyone with a basic knowledge of EW and TA. Now let's see if the market behaves!
ReplyDeleteNice Work, Rich!
ReplyDeleteYep, all ingredients of at least a pullback are there, it's a matter of Mr. Market cooking it or not
We, at OEW group, have a pivot around 961+/- that we think should offer some cap to any posible last dash of a W5
I, personally, think 55 EMA , at most, will hold any possible drop from here
keep up the ood work
piazzi
markettime.blogspot.com
Rich, great work. Back when the market was around the 870 area, I remember you calling for a return to the highs based on the downmove not being "impulsive" enough. Great call.
ReplyDeleteMy question is, at the end of today's post, you say that a failure of 915 could lead to a return to new lows. Do you mean new bear market lows (under 666), or new recent lows? Also, I see that you have outlined the bullish possibilities fairly well. Can you also outline your possible bearish wave counts that have us going under SPX 666 before year's end?
Thanks in advance,
John
Piazzi - I think that if we get that low the bulls will have lost their grip on the market (I'm seeing the 55 ema at 905). Of course, it won't be confirmed until we break the intermediate wave B low @ 869.
ReplyDeleteJohn,
In my post I wrote "the end of intermediate wave C and primary wave 2. We have a double top and price collapses. I put this scenario at an equal weight to the minor wave a scenario." I won't get into detailed wave counts of how we would get from where we are to new lows, but that is certainly what I am saying: Primary wave 3/C would be upon us.
Thanks Rich. That's all I really wanted to know anyway.
ReplyDeleteKeep up the great work!
John
I'm trying to figure something out about the count. According to EW Rules, W4 can't close below W1. And W3 cannot be the shortest wave, and is typically extended 1.618 length of W1 projected from W2 in time. However, I can see an ABCDE progression replacing 1234 but that would be a corrective wave structure and not an impulse wave structure. I'm just trying to understand the count playing by the rules... Thanks for your charts...
ReplyDeletembewtrader - if you're talking about my chart in this post, then that would be an ending diaganol. The structure of an ending diaganol is 3-3-3-3-3 instead of the usual 5-3-5-3-5 and can only occur in the last position of a wave. Since this occurs in the subdivided wave 5 position of a larger wave 3 it is perfectly legitimate. In an ED, waves 1 and 4 overlap, which and they make a wedge type pattern on the charts (in this case a bearish wedge). They typically end with a throw over the top line and a quick reversal through the bottom line.
ReplyDelete