While this count is not ‘proven’ yet, one way to count the current SP500 Index uptrend is as an Expanding Ending Diagonal. As you probably know, the expanding diagonal pattern, ‘must’ have five three-wave sequences – where wave (5) > (3) > (1), and Wave (4) > Wave (2), with Wave (4) overlapping Wave (1). All of these requirements are met in the chart below. In this case the pattern also includes a “throw-over” of the upper trend line, and prices trading back under the upper trend line. This type of pattern is also commonly referred to as the ‘megaphone’ (More text below chart).
Potential Expanding Diagonal
Looking for the “uncertainty” in this count, it is whether all of the legs can be counted as zigzags. I have proposed one manner by which it is possible to see the up-legs as zigzags. That proposal does away with the fourth wave triangle discussed earlier and reverts back to the simple flat for wave 4 (shown in blue).
Why propose this count? Because most likely a large Elliott Wave sequence that has gone “too far, too fast” will end with a diagonal sequence of some type. And the rise from 1820 has occurred without even one 38% pull-back after wave 2, making it a good candidate for a “too far, too fast” move. Adding to this is the length of wave 3 at 4.236 x Wave 1; quite a long move in itself.
Nothing is for certain, of course, but the potential diagonal seen here means, at the very least, one should not be surprised if the market were to reverse sharply from this location. Although weekly prices did end at a ‘new high’ as the media will report, they did not end at the high of Friday’s session – which is something new in and of, itself.
Further evidence that a count of this type ‘might’ apply is the ES futures tagging it’s daily Bollinger Band on Friday, and divergences with the advance – decline line.
This is the “five wave” count up from the bottom at 1820.
Hourly SP500 Index from 1820
The best alternate for this count remains the triangle discussed last week, and Friday’s action as iii of 5, where 5 would = 1.
Cheers and enjoy the charts! E-T.