Objective Waves

As we wait to see if TDST support lines will be broken on the daily or weekly charts (allowing us to take a short position), let’s continue with Elliott.

Elliott is extremely difficult because it is so subjective. Elliott is extremely rewarding because it allows one to visualize a “road map” of price movement into the future. Let’s start with D-Wave, Tom DeMark’s objective version of waves.

Start with a high (or low) that is greater (less) than the previous 21 highs (lows). Notice the Fibonacci number. In our case this is the high of January 19 (see chart). To confirm the first wave down is underway we need to see a low (high) less (greater) than the previous seven lows (highs). This occurs on January 20. The next event to watch for is a high (low) greater (less) than the previous four highs (lows). As marked on the chart this happened on February 2. The lowest low between January 20 and February 2 is marked as objective wave 1.

We now wait for a low (high) less (greater) than the previous 12 lows (highs). As marked on the chart this happened on February 4. The highest high between February 2 and February 4 is marked as objective wave 2. This means that objective wave 3 is underway. It will be confirmed complete when we see a high (low) that is greater (less) than the previous 7 highs (lows).

I will add to this chart in future postings.

Elliott Wave - Part 3

Because of the fractal nature of Elliott Waves, we can say that the double zigzag pattern shown recently on the weekly chart (see January 28 post) is itself one complete wave of an even larger pattern. What is that pattern? It can be *slowly* pieced together over time using the logic of the wave principle.

To start, we know that the completed double zigzag is a corrective pattern. Within which larger waves can corrective patterns occur?

Impulses (Trending, Extended, Truncated) and Leading Diagonal: only in waves 2 and 4.
Zigzag: only in wave b.
Double Zigzag: only in waves b and x.
Flat and Expanded Flat: only in waves a and b.
Triangles (both Expanding and Contracting): waves a, b, c, d, e.
Double and Triple Three: only waves a, b, and x.

The preceding means that the move up from March can be any wave except 1, 3, or 5. That is, it may be wave a, b, c, d, e, x, 2, or 4 of a larger pattern. Over the coming days I will point out the waves (as I see them) on the daily chart. We’ll also apply the Tom DeMark objective wave counting rules.

Daily Chart About to Join the Weekly?

As you know, the monthly chart is on a “sell” which allows for taking a position on the weekly chart. The weekly chart will go on a “sell” and a short trade will be called for on a break of 1044.50.

If the weekly goes below 1044.50 then trades can be taken on the daily chart as well. Look where we found support on Friday’s plunge … right at two previous TDST support lines. A close below 1046.50 would make the daily chart equivalent to the weekly chart in that a potential short trade would be set up.

Approaching a Sell Signal on the Weekly Chart

Here is the latest weekly chart. Why do I use the moving averages I do? Today shows a perfect example. Note how the weekly high and low responded to the; respectively, short (red) and medium (blue) moving averages.

More important is the fact that the weekly chart has now closed below the weekly TDST Support line value of 1069.30. This indicates that the trend is now down on this timeframe and a short trade will be called for on a break of 1044.50 (the low).