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Here is my attempt at plotting the waves using RTH data only. Feel that is more reliable than overnight action. Yellow lines are the major wave. Green line are the waves of the last wave. I have the 5-35 oscillator (the "Elliot Oscillator")/ also plotted
It seems we are in wave 5 of 5 of 5 of an impulsive move. I am not using the typical Elliot wave numbering style.
We seemed to have made an ending diagonal at the lows, an impulsive wave 1, a strong pullback, a strong wave 3, a minor pullback wave 4, and now in an elongated wave 5. Today day session seems to have been 3 of 5 and the sell off into the close 4 of 5 and then after hours and hopefully this week we get the wave 5 of 5 of 5 to complete. Wave 5s can be long and elongated. Wave 3 was about 55 points and wave 5 started around 1055, so a 100% would be 1110. I think the 200 SMA will be the end of this wave.
Note I am novice and have no formal EW background or study. Just using some common-sense.
thanks for your answer. I do not understand the logic of the extended fifth waves.
Impulse Pattern
After a topping or bottoming pattern (distribution or accumulation), herding behaviour amongst investors creates a breakout. The breakout also reflects the relief of the investors, when the indecision expressed by prior price action has been removed. A sign of this are breakaway gaps on daily charts, or a couple of wide ranging bars on intraday charts, as can be seen below. Now this is the main section of the trend. The trend usually goes for a time, some times it loses speed (changing the angle). Finally the trend will end either with a climax pattern (trend channel line overshoot) or a wedge pattern. This is the difference between sharp and flat peaks. Index futures usually have flat peaks and sharp troughs.
Correction Pattern
If there is no breakout, the new move is lacking strength and will probably not lead to more than a correction.
Interpretation
You took the RTH session only, while my chart below uses the ETH session. The overnight low shown was the valid retest of the low and the end of the fifth wave down. So your wave count correctly identifies the start of the new upswing that follows the consolidation.
But why is an impulse wave down followed by an impulse wave up? Is this compatible with the Elliott Wave concept? I agree with you that the upswing has the characteristics of an impulse wave, as shown by the breakout. Also agree for the starting point of wave 3.
The initially strong trend so far has not seen any significant correction, so we might assume that we are still in wave 3. We also can take that price action of last Thursday and call it a correction, and assume that we are already in wave 5. But this is leading nowhere.
My idea of wave 5 stands for the end of a trend, so an extended fifth wave would be a useless tool. As a sign for a reversal I either want to see
- a trend channel overshoot (final flag, sharp peak)
- or a wedge (3-push-pattern, flat peak), which creates massive divergences
Given the current context, Wave 5 is going to be the "I do not want to be left behind" or "The PPT screwed my shorts" wave. What you need to look at is the terminal wave of the wave 5 (green) to see the topping patterns.
And there is nothing which suggests that market will move down substantially to get that topping pattern you want. It might be a sideways correction, like the wave 4.
And please take anything I say with a pinch of salt. I am not an EW expert in any ways (not that it helps to be one)
Here is an updated chart. Today we seem to be forming the wave 4 of the 5th. Depending on the unemployment number tomorrow and China numbers tonight we might have another set of the bull-flag type zig-zags (5 wave) or may have already started the wave 5 of 5.
I am using the diamond for the waves of the latest big wave. Also thrown a Fib Extension comparing size of 3 versus 5.
I went and read up a bit about the EW and they have an explanation for the rising values. There is a class of corrective waves called flats which can actually go higher in price than the previous motive wave.
I have attached an updated chart which seems to make sense. Wave iv of 3 was a Rev Symmetrical Triangle (megaphone) and Wave 4 was an Expanded Flat. The absence of the zig-zag corrective waves which lower price confirms the bullishness.
That's different wave count, if I compare it to your first interpretation. But I think this one makes more sense, as the three days were clearly consolidation days, even though for tow of them there was an upward drift prior to the close.
Consolidation means just getting the feel of the new value area, to which prices have shifted after the impuls wave. There is a number of variations for the balancing action, and effectively an expanded fourth wave is one of them.
All that truly changed was the location of the end of wave iii of 3.
More important to me was that the fact that your original question about how to draw corrective waves which have an upward bias has a formal answer. Let us see how this pans out. CL also has a similar wave structure, showing the correlation between the asset classes is very strong.
You see, I would have left the original wave 3 untouched, but extended wave 4 into a complex updrifting correction. This is not quite conventional, as wave 4 should be down, but for me the essential characteristics of wave 4 is its consolidating pattern, as described by a Gauss distribution and the lack of positive feedback.
