Possible five wave impulse down complete but no technical damage so far...


Today was a volatile day and great if your a trader but not if your a position trader or worse swing trading. Yesterday the experts said there was a Covid surge and today they said there isn't and not going to be. This is causing a Social Mood on steroids market!

Yesterday was a 90% plus (NYSE) declining vs advancing down day, the markets traded back below the 200 day MA, volume was heavy, there was as perfect of an Island Reversal as you will ever see and the candle sticks gave a big sell...this is all bearish at least for the short term if not long term.

With all of that...here's what Elliott has to say which is what we really need to know.

This morning we saw a big gap higher on the news because the experts said we wouldn't have a virus surge and even if we did we'd be prepared for it. This was good news and it could have been a "break away gap" starting another rally, however, it didn't last and price filled the gap canceling the immediate bullish possibility.

The high after the open captured the 38.2% retracement of yesterday's wave-iii decline into the close making it a good wave-iv and also testing the lower trend-line that was broken yesterday. Then price fell to a new low by around 14 e-mini points.

The chart above shows wave-iv forming a "flat" pattern....this is because the decline from the morning high counts as three waves. If we make it a "flat" then the drop to the new low was a small impulse. Also, wave [C] within the "flat was 61.8% of wave [A]....same calculation as the entire rally that just came to an end where wave [c] was 61.8 of [a].

The alternate to this is that the new low today is an "irregular" wave [B] of wave-iv that will form a slightly larger "running" or "expanding flat structure for wave-iv that would be followed by wave-v to new lows.

Technically all we have so far is that the decline looks like an impulse whether complete today or with another low on Monday. The drop, for now, has only retraced 50% of wave [c] so, we need to see an over-lap of wave [a] and ultimately a break below wave [b] shown on the chart to further confirm the bearish scenario.

Have a great weekend!

Follow the Trend
and
"Trade Safe"

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