The main Elliott wave count so far is playing out as expected.
The main Elliott wave count expected a short swing down to about 1,215. Price moved lower and turned at 1,217.22.
Summary: A little upwards movement to 1,230 would end a triangle. Thereafter, price should break out downwards. If price comes up to touch the dark blue trend line, it should find strong resistance there providing a good opportunity to join the trend. Stops may be money management stops, just above the trend line, or just above 1,236.56. The risk is that the alternate hourly chart may be correct; it expects upwards movement to reach about 1,244 before turning. The risk that the alternate daily chart may be correct does exist, but the probability is very low.
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) may have begun. COT supports this wave count; the majority of commercial traders are short (as of 29th March). While this does not pinpoint when price should turn, it does support a larger downwards trend about here.
The first movement down within intermediate wave (2) fits as a zigzag. So far movement to follow it is sideways, moving in an ever decreasing range.
At this stage, it looks like intermediate wave (2) may be unfolding as a double zigzag. Both hourly charts today follow this idea: the first hourly chart sees minor wave X as a triangle and the second looks at minor wave X as a flat.
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. A triangle for minor wave X would be a shallow correction. The whole structure would have the right look for a double zigzag.
The dark blue channel is a best fit and is so far showing where price is finding support and resistance along the way down. Draw it carefully on the daily chart on a semi-log scale and on the hourly chart on an arithmetic scale. Draw the first trend line from the high labelled intermediate wave (1) to the next high labelled minute wave b. Place a parallel copy on the low labelled minute wave a. Use the upper edge of the channel as a possible entry point to join the downwards trend, but beware the risk is the second hourly chart may be correct and the channel could be overshot before price turns back down. Manage the risk to your account carefully if choosing to trade this short term trend, and invest no more than 3-5% of equity on any one trade.
Intermediate wave (2) may not move beyond the start of intermediate wave (1) below 1,046.27.
FIRST HOURLY ELLIOTT WAVE COUNT – MAIN WAVE COUNT
Minor wave W subdivides as a 5-3-5 zigzag.
Minor wave X may be any corrective structure. At this stage, it looks like it is unfolding sideways as a regular contracting triangle, the most common type of triangle.
Within the triangle, minute wave c found resistance at the upper edge of the dark blue channel, copied over from the daily chart. Minute wave c is 0.8 the length of minute wave b. A common length for subwaves of triangles in my experience is about 0.8 to 0.85 the prior wave.
Minute wave d within the triangle is most likely complete, but this cannot be stated for certain. One of the five subwaves of a triangle may be a multiple structure. So far none of the subwaves of this triangle have unfolded as multiples, so minute wave d could continue lower as a double zigzag.
If minute wave d continues lower, it may not move substantially below the end of minute wave b at 1,209.08. This invalidation point unfortunately is not black and white; minute wave d may end slightly below 1,209.08 and as long as the b-d trend line remains essentially flat the triangle would remain valid. Barrier triangles have flat b-d trend lines.
What looks more likely is minute wave d is complete and minute wave e upwards is underway. Minute wave e may unfold itself into a triangle to complete a nine wave triangle. Minute wave e may unfold as a double zigzag or single zigzag. All three options are open.
If minute wave e is a single zigzag as labelled, then at 1,230 minuette wave (c) would reach equality in length with minuette wave (a). If minute wave e finds resistance at the dark blue channel, then it would fall short of the triangle a-c trend line which is the most typical look for an e wave of a triangle.
When triangles are complete the breakout usually begins swiftly. The breakout from this triangle may come on a news release; it may be a price shock.
Intermediate wave (2) is still expected to end about 1,131.
SECOND HOURLY ELLIOTT WAVE COUNT – MAIN WAVE COUNT
This wave count is identical to the first hourly chart up to the low of minor wave W (off to the left of this chart now). Minor wave W is a zigzag. Here, minor wave X is seen as a zigzag.
Triangles are tricky structures. It is essential to consider alternates when a triangle is suspected to be unfolding. Sometimes a triangle looks complete but is then invalidated at the end of the movement which turns out often to be a combination or flat correction.
What if the triangle is wrong? What else could be happening?
A combination for minor wave X does not work because minute wave a does not meet the rules of a flat correction and so far the movement labelled minute wave c does not either. Minor wave X would be very unlikely to be a double zigzag because the X wave within it is too deep; double zigzags normally have shallow X waves.
Minor wave X may be either a regular flat correction or a zigzag. Minute wave a will subdivide best as an impulse, but it will also subdivide as a zigzag.
Within the zigzag (or flat) of minor wave X, minute wave b is a 0.98 length of minute wave a. At 1,244 minute wave c would reach equality in length with minute wave a.
Minute wave c is not unfolding as an impulse. It may be unfolding as an ending expanding diagonal. All subwaves must subdivide as zigzags within an ending diagonal. The fourth wave must overlap first wave price territory but may not move beyond the end of the second wave below 1,214.61.
This diagonal is expanding. Minuette wave (v) must be longer than minuette wave (iii), ending above 1,239.17.
If price breaks above the dark blue trend line, then look for the next line of resistance at the upper edge of the pink channel.
This wave count is presented as a “what if?”. It is my judgement that it has a reasonably lower probability than the first hourly chart for two reasons:
1. While ending diagonals are reasonably common, the expanding variety is not.
2. The dark blue channel would be breached. This upper trend line has reasonable technical significance, so it is very likely to hold while the correction for intermediate wave (2) continues.
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).
Within intermediate wave (3), no second wave correction may move beyond its start below 1,208.32.
I do not want to give too much weight to this alternate by publishing an hourly chart.
Click chart to enlarge. Chart courtesy of StockCharts.com.
Price is range bound between the pink trend lines, moving sideways. The upper edge is about 1,280 and the lower edge is about 1,210. It should be expected that price will swing from resistance to support and back again, eventually breaking out of the range for the next trend. Only experienced traders should attempt to trade this market while price remains range bound. The rest of us should wait for the next trend to emerge and then join it. The Elliott wave count expects a breakout is imminent, which is supported by declining volume. The Elliott wave count anticipates the breakout will be down, which is also supported by volume. The Elliott wave count and the trend line on the daily chart offers an early entry to the potential trend, but taking this earlier entry necessarily involves a higher level of risk. The safer route would be to wait for price to break below 1,210 on a downwards day with increased volume to be confident of a breakout.
Ignoring the Elliott wave count which sees the end of the last wave up on 4th March, it is difficult to accurately state on which day price entered this current sideways trend. It could be as early as 12th February or as late as 14th March. The earlier date seems more reasonable.
If an earlier date is accepted, then during this sideways movement it is a downwards day which has strongest volume. This indicates a downwards breakout is more likely than upwards, which supports the main Elliott wave count.
ADX is declining indicating the market is not trending; it is consolidating. ATR agrees as it too is declining. Overall volume is declining as price moves sideways. All these indicators are in agreement with price: the market is range bound.
RSI is neutral. There is room for price to rise or fall.
On Balance Volume is the one indicator which here is clear. OBV is bearish. This supports the main Elliott wave count which expects more downwards movement overall. OBV has found resistance at the upper green trend line, reinforcing the strength of this line and supporting the main Elliott wave count and the first hourly chart. With OBV finding resistance at the green line and price finding resistance at the dark blue line, these two lines are working together to show currently where price ends upwards movement. If price again touches the dark blue line and OBV again touches the green line, it would be very likely that both turn down from there.
This analysis is published @ 09:26 p.m. EST.