A new low below 1,243.69 has provided some confidence in the main Elliott wave count.
The alternate Elliott wave count remains valid.
Summary: A new low below 1,209.08 would confirm the main wave count and invalidate the alternate. Unfortunately, there is no upper confirmation / invalidation point. The target for this correction to end is still 1,131, which may be reached in about two weeks. The market is still range bound and the main wave count may still change in terms of short term expectations; there are still at least three structural options open for intermediate wave (2).
New updates to this analysis are in bold.
Last published weekly chart is here.
MAIN DAILY ELLIOTT WAVE COUNT
Intermediate wave (1) is a complete impulse. Intermediate wave (2) has begun and is most likely incomplete.
The first movement down within intermediate wave (2) fits as a zigzag.
At this stage, it looks like intermediate wave (2) may be unfolding as a double zigzag. Minor wave X may be a zigzag within the double.
Within double zigzags, the second zigzag exists to deepen the correction when the first zigzag does not move price deep enough. Here, minor wave W ends just below the 0.236 Fibonacci ratio fitting the description of “not deep enough” for a second wave correction. The second zigzag in the double should be expected to deepen the correction; minor wave Y may end about the 0.618 Fibonacci ratio at 1,131.
To achieve the purpose for the second zigzag to deepen the correction the X waves of double zigzags are normally shallow.
Intermediate wave (2) may be still be a flat correction, if upwards movement continues to 1,275.24. At that stage, upwards movement would be 0.9 of the prior zigzag down, so the structure may be relabelled minor waves A-B with C down to unfold. Within flat corrections, the B wave is most commonly from 1 to 1.38 times the length of the A wave, so this gives a normal range for minor wave B of 1,282.68 to 1,311. There is a risk that upwards movement is not over while price remains above 1,209.08.
A new high does not invalidate this main wave count. The most common type of flat is an expanded flat which would require wave B to be 1.05 of wave A or longer. The price point for this would be at 1,286.40.
There is no rule stating a limit for a B wave within a flat nor an X wave within a combination. There is an Elliott wave convention that states when the possible B wave is twice the length of the A wave the probability of a flat unfolding is so low it should be discarded. That price point is at 1,357.04.
This is the risk to the wave count today.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
MAIN HOURLY ELLIOTT WAVE COUNT
Both hourly charts will look at upwards movement from the last high. Movement prior to that is seen subdividing in the same way for both wave counts.
The breach of the best fit cyan channel indicates that the last wave up labelled minute wave c is a complete structure, which looks like and subdivides as a five. For this wave count, the last wave up is seen as wave c of a zigzag for minor wave X.
If upwards movement is over here, then minor wave X is less than 0.9 the length of minor wave W, so intermediate wave (2) may be a double zigzag and may not be a flat correction. Minor wave Y may end about the 0.618 Fibonacci ratio at 1,131.
If upwards movement continues and reaches 1,275.24, then the correction would be relabelled minor waves A-B-C and intermediate wave (2) may be a flat correction. At that stage, the probability of a new high would be reasonable. The most common type of flat is an expanded flat where minor wave B would reach 1,286.40 or above. Expanded flats are very common structures. It remains possible that upwards movement could yet continue while price remains above 1,209.08; the wave count is not yet confirmed. It looks unlikely that upwards movement will continue today, but that does not mean it cannot.
Minor wave Y is most likely to subdivide as a zigzag, so that intermediate wave (2) is a double zigzag which would allow it to reach down to the 0.618 Fibonacci ratio, a common point for second wave corrections particularly the fist big second wave of a new trend.
Minor wave Y may also be a flat or triangle, if intermediate wave (2) is unfolding as a combination. This has a fairly low probability although it is possible. If this turns out to be the case, what it means is the labelling will change at the hourly chart level and the target at 1,131 would be too low. Combinations are sideways movements. To achieve this the second structure in the double ends close to the same level as the first, so minor wave Y would end only about 1,208.32.
So far it looks like an impulse downwards is unfolding. There is no Fibonacci ratio between subminuette waves i and iii. This makes it more likely that subminuette wave v will exhibit a Fibonacci ratio to either of i or iii. Because subminuette wave v has begun with some overlapping it looks like it may be extending. At 1,228 subminuette wave v would reach equality in length with subminuette wave i.
Draw a channel about the new downwards movement using Elliott’s second technique: draw the first trend line from the ends of the second and fourth waves, then place a parallel copy on the end of the third wave. Add a midline to show where price is currently finding support. Expect the fifth wave to end about the lower edge of the channel. When the channel is breached by subsequent upwards movement, it would be indicating that minuette wave (i) is over and minuette wave (ii) has arrived.
When minuette wave (i) is a complete impulse, then draw a Fibonacci retracement along the length of minuette wave (i). Use the 0.382 and 0.618 Fibonacci levels as targets, slightly favouring the 0.618 Fibonacci ratio.
Minuette wave (ii) may not move beyond the start of minuette wave (i) above 1,262.47.
ALTERNATE DAILY ELLIOTT WAVE COUNT
It is technically possible but highly unlikely that intermediate wave (2) is over. This wave count requires confirmation with a five up on the hourly chart for confidence. A new high is not confirmation of this wave count.
If intermediate wave (2) is over, then it is a very brief and shallow 0.31 zigzag lasting only eleven days (intermediate wave (1) lasted 69 days). The probability of this is very low.
At 1,591 intermediate wave (3) would reach 1.618 the length of intermediate wave (1).
Minuette wave (ii) may not move beyond the start of minuette wave (i) at 1,209.08.
ALTERNATE HOURLY ELLIOTT WAVE COUNT
The upwards wave labelled minuette wave (i) is now seen in the same way as per the main wave count; here, a completed impulse for a first wave.
The degree of labelling within minute wave iii is moved down one degree today. Downwards movement may not be minute wave iv because it is back in minute wave i price territory. This means minute wave iii cannot be over for this wave count, so only the first wave within it may be over.
Minuette wave (ii) is most likely to be a zigzag and most likely to end about the 0.618 Fibonacci ratio of minuette wave (i) at 1,229. So far the structure is incomplete.
Minuette wave (ii) may not move beyond the start of minuette wave (i) below 1,209.08.
When minuette wave (ii) is a complete zigzag, then a third wave within a third wave upwards would be expected for this wave count. At that stage, this wave count would require strong upwards movement to show a clear increase in momentum. If this alternate wave count is correct, we should know within about three trading days.
Click chart to enlarge. Chart courtesy of StockCharts.com.
A downwards day with a slight increase in volume offers some support for the lower movement from price. Volume is still light; as price moves overall sideways within a range, volume continues to decline overall. This is typical of a consolidation.
It is still a downwards day which has strongest volume during this consolidation. This indicates a downwards breakout is more likely than upwards.
A range bound approach to this market would expect price to swing from support to resistance and back again, assisted by Stochastics to indicate where each swing may end. At this stage, price has not quite reached resistance and Stochastics has not quite reached overbought. A little more upwards movement would be expected to continue until they do.
There is a great risk to trying to trade a range bound / consolidating market. Price does not move in a straight line from support to resistance and back again, and it may overshoot support or resistance before turning. Trading a range bound market should be done only by the most experienced traders. The rest of us should exercise patience, stand back, and wait for a breakout and the next trend to emerge before we join it.
ADX has been declining and now is flat, indicating no clear trend is in place. ATR agrees as it too is declining. It looks clear today; the market is not trending.
On Balance Volume may indicate the breakout direction for price. If OBV breaks below the lower yellow line, it would be a reasonable bearish indicator. A break below the light blue line would be a strong bearish indicator. A break above the orange line would be a strong bullish indicator. For the alternate wave count to be taken seriously, it needs some bullish indication from OBV.
This analysis is published @ 08:44 p.m. EST.