Yesterday’s main Elliott wave count expected to see some downwards movement to a short term target at 1,298.55 (although I had strongly suggested this target was too low) before price turned back upwards again. We did see downwards movement followed by a turn back up, but downwards movement was just over $6 more than the target and moved slightly below the invalidation point.

I have two wave counts for you today.

Summary: It is still more likely that primary wave 4 is incomplete and we shall see a new high above 1,345.22 before it is done. Next week I expect to see upwards movement to a new high above 1,322.83 on Monday or Tuesday for a third wave of an ending diagonal. The alternate idea sees primary wave 4 complete, and this would be confirmed with a new low below 1,280.35.

Click on charts to enlarge.

Primary wave 4 is an incomplete regular contracting triangle. Primary wave 2 was a deep 68% running flat correction. Primary wave 4 is showing alternation in depth and some alternation in structure.

Within the triangle of primary wave 4 intermediate wave (E) is unfolding as a zigzag: minor wave A is a five wave impulse and minor wave B downwards is a zigzag. Minor wave C must subdivide as a five wave structure.

At 1,346 minor wave C would move slightly above the end of minor wave A at 1,345.22 and avoid a truncation, and intermediate wave (E) would fall short of the (A)-(C) trend line.

There are three nice examples of triangles on this daily chart: within intermediate wave (D), within minor wave A of intermediate wave (E), and within minor wave B of intermediate wave (E). In all three examples the final subwave of the triangle ends comfortably short of the A-C trend line. This is the most common place for the final wave of a triangle to end and so that is what I will expect is most likely to happen for this primary degree triangle of primary wave 4.

Within minor wave C no second wave correction may move beyond its start below 1,280.35.

Intermediate wave (E) may not move beyond the end of intermediate wave (C) above 1,392.30.

Main Hourly Wave Count.

There are two possible structures for minor wave C. I had expected to see the more common impulse, but movement back into what was wave 1 price territory for an impulse has invalidated that idea. The upwards wave labeled minute wave i is a clear zigzag which is complete.

The other structural possibility is an ending diagonal. Within an ending diagonal all subwaves may only subdivide into single zigzags. With the first wave up fitting best as a zigzag this may be what is happening.

Within a diagonal the second and fourth waves most commonly end between 0.66 to 0.81 the prior wave. So far minute wave ii is a 0.71 length of minute wave i, nicely within the common length. The target would see it reach down to 0.81 the length of minute wave i.

Within minuette wave (c) of minute wave ii, subminuette wave iii is 0.48 short of 2.618 the length of subminuette wave i. At 1,289 subminuette wave v would reach just short of equality with subminuette wave iii, and minute wave ii would reach the maximum common length of 0.81 minute wave i.

Minute wave iii must move above the end of minute wave i so a new high above 1,322.83 is required. There is not normally a Fibonacci ratio between actionary waves of diagonals, so I cannot calculate a target yet for minute wave iii. The ratio between minuette waves (a) and (c) within minute wave iii may be used to calculate a target for minute wave iii to end, and I will do this once minuette wave (b) is over.

Overall the bigger picture remains the same: minor wave C is still extremely likely to move at least slightly above the end of minor wave A at 1,345.22 to avoid a truncation, and the target at 1,346 where minor wave C would reach 0.618 the length of minor wave A remains the same. Only the structure to get there is different.

Diagonals are choppy and overlapping, but have a definite trend (unlike their sideways cousins the triangles). They tend to be longer lasting than impulses. The target at 1,346 may now be further away in time. If minute wave C lasts a Fibonacci 21 days it could take another two weeks.

Minute wave ii may not move beyond the start of minute wave i below 1,280.35.

Alternate Daily Wave Count.

This wave count is one I have referred to before as a possibility, but have not published for you. In the interests of considering all possibilities after the invalidation of the last hourly wave count I will publish it now.

It is possible (but unlikely) that primary wave 4 is over.

If primary wave 4 is over then primary wave 5 downwards would reach equality in length with primary wave 1 at 956.97. Primary wave 1 was a remarkably brief 3 weeks duration. I would expect primary wave 5 to last some months, and is already longer than one month.

The only structure which fits for minor wave 1 is a leading contracting diagonal. While leading diagonals are not rare, they are not very common either. This slightly reduces the probability of this wave count.

Within diagonals the second and fourth waves are commonly between 0.66 to 0.81 the prior wave. Here minute wave ii is 0.61 the length of minute wave i, just a little shorter than the common length, slightly reducing the probability of this wave count. Minute wave iv is 0.66 the length of minute wave iii, just within the common length.

Leading diagonals in first wave positions are normally followed by very deep second wave corrections. Minor wave 2 is deep at 65% the length of minor wave 1, but this is not “very” deep. This again very slightly reduces the probability of this wave count.

The biggest problem I have with this wave count and the reason for it being an alternate is the leading diagonal following the end of the triangle for primary wave 4. When triangles end the first piece of movement out of the triangle is almost always very strong and swift. Diagonals are not strong and swift movements. To see a first wave out of a triangle subdividing as a diagonal is highly unusual and does not at all fit with typical behaviour. This substantially reduces the probability of this alternate wave count. I would judge it to have less than a 10% probability.

Within minor wave 3 no second wave correction may move beyond the start of its first wave above 1,322.83.

Only if this wave count is confirmed with a new low below 1,280.35 next week would I take it seriously. After that a clear breach of the lower (B)-(D) trend line of the primary wave 4 triangle would provide full and final confirmation of this alternate. A full daily candlestick below that trend line would provide me with 100% confidence in this wave count.

This analysis is published about 12:20 a.m. EST.