Contracting Triangles

Market Update for Friday, April 28, 2017

CHART SHOW REPLAY

Short tonight, for a change. The Chart Show was extensive.

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

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Market Update for Thursday, April 27, 2017

CHART SHOW signup for Thursday

A bit longer tonight AGAIN) … about 17 minutes. I put in a short lesson on flats.

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

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Market Update for Wednesday, April 26, 2017

A bit longer tonight … about 17 minutes. Today was a big change in the market and took some working through.

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

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Update: Tuesday, April 25, 8:50am EST

Above is the 60 minute chart of ES. We have what’s shaping up to be a double top this morning and I expect something similar in SPX at or shortly after the open. This may result in an expanded flat, which simply means that the top of the C wave (where we are) is higher than the A wave. The wave down from here should be in 5 waves and should go to a new low.

I think the triangle idea is out, certainly if SPX opens at at new high.

USDCAD has hit its target at 1.36 and I’m expecting a reversal there, as well, but if you’re going to play either one, be careful with your entry. Safest to wait for one wave of 5 down to a previous 4th wave and then a second wave up in 3 waves.

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Market Update for Tuesday, April 25, 2017

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

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Update:  Monday, April 24, 2017, ~9:40am EST

More surprises! Above is the 60 minute chart of ES, showing the bullish jump to the 2377 area, a result of the French preliminary vote. We seem to have morphed into a barrier triangle … s0 far. The next move should be down into the E wave—the wave up is certainly in three waves.

I want to see what happens to the SP500 pattern before I absolutely confirm the barrier triangle. In this index, we haven’t quite tested the previous high, which we’d have to do for barrier pattern. At the moment I can’t think what else could be taking place. If this is indeed still a triangle, the target for the E wave bottom in ES would be around 2327.

Currency pairs jumped a bit, but as I mentioned in a comment right after the open, they all appear to have traced out 3 wavers before the jump, so I expect them all to slowly come back down as the E wave unfolds in the US indices. It looks to me as though that will set everything up for a potential turn into the 5th wave in the US indices and the C wave in USD currency pairs at the same time.

EURUSD has dropped to the 38% retrace level of the move up today in what looks to me like 5 waves, and we look to have a second wave retrace, but it needs to start coming down, which will help confirm the move in ES. It it does exactly that, the fibonacci ratio lines hit 1.049 exactly, which is the larger 62% retrace target which has been my preferred target all along. We’ll see what happens.

I was long ES over the weekend. I reversed to a short at about 2371 just after the market opened.

My predictions for gold and silver remain intact—they moved slightly but not enough to change the picture.

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Interview Playback: Recorded Wednesday, April 19, 2017 Interview by Dale Pinkert You can watch here.

Last weekend here, I wrote a post on combination waves. I’ve also written about how much I dislike fourth waves for the very reason that (at this high degree of trend) they are made up of multiple patterns. The challenge becomes figuring out the patterns early enough to take advantage of them. It can often be difficult.

My top level “guess” based on what I was seeing, was that this second pattern would turn out to be a contracting triangle (info below). Although technically we can’t absolutely confirm the triangle until the D wave is in place, at this point, there’s really no other pattern it could be. This gives us some high probability trades before it’s complete.

I’ve fleshed out the contracting triangle pattern in more depth below.

Currencies are relatively quiet at the moment. The next major move for them will be the final wave to the longer terms targets that I have mentioned in previous posts and videos. Nothing has changed in that regard. They may make that turn at slightly different times. I will try to keep on top of them for you. I’m expecting a transition into the final 5th wave in the US indices later this week.

Gold, silver, and oil are all heading down.

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Contracting Triangles

Contracting triangles are the most common type of triangle. When they’re in the fourth wave position, they predict an end to the entire trend with one more wave (fifth wave).

Rules (these are “hard” rules; they cannot be broken):

• A triangle always subdivides into five waves.
• At least four waves among waves A, B, C, D, and E each subdivide into a zigzag or zigzag combination.
• Wave C never moves beyond the end of wave B, wave D never moves beyond the end of wave C, and wave E never moves beyond the end of wave D.
• A triangle never has more than one complex subwave, in which case it is always a zigzag combination.

Guidelines (guidelines can be broken but it’s rare that they are):

• Usually, wave C subdivides into a zigzag combination that is longer lasting and contains deeper percentage retracements than each of the other subwaves.
• Sometimes, wave D subdivides into a zigzag combination that is longer lasting and contains deeper percentage retracements than each of the other subwaves.
• Sometimes one of the waves. usually wave C, D, or E, subdivides into a contracting triangle. Often the effect is as if the entire triangle consisted of nine zigzags.
• About 60 percent of the time, wave B does not end beyond the start of wave A. When it does, the triangle is called a running triangle.
• Sometimes. either waves A and C, or B and D will end at almost exactly the same level. When the flat line is on the top, it is called an ascending triangle; when it is on the bottom, it is called a descending triangle (both of these are barrier triangles).
• When wave 5 follows a triangle, it is typically either a brief, rapid movement, or an exceptionally long extension.

Opportunities this Week

There are opportunities this week:

• ES/SPX (up in D wave and then down in E wave)
• AUDUSD (short)
• Gold/silver (short – watch  video)

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Here’s the latest daily chart of ES (emini futures)

Above is the daily chart of ES (click to enlarge, as with any of my charts). We continue up in a very volatile D wave of a contracting triangle, which should be the last pattern of this fourth wave combination, and lead to the final fifth wave up.

Triangles in fourth wave combinations are “terminal” patterns—there will not be another pattern following it within the combination. While some combinations contain three patterns, when you see a triangle, you know you’re in the final pattern. The triangle will play out in 5 waves (of three waves each). On this one, we entered from the bottom (the fourth wave low) and so we’ll exit from the top.

I’m looking ahead to the area of April 26-27  for a possible turn up into wave 5 (April 25 is an Andy Pancholi turn date for SPX and there are other asset turn date clustered about the 25-27 timeframe).

Summary: We’re in the final pattern an ABC 4th wave correction. We’re in the D wave of a triangle. The target for the top of D is 2370 (possibly reaching that target on Monday, April 22) and the E wave still has to play out.

After completing the larger fourth wave, we’ll have one more wave to go, which could be an ending diagonal as a fifth wave. The long awaited bear market is getting closer.

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Here’s the latest HOURLY chart of ES (emini futures):

Above is the 60 minute chart of ES (click to enlarge). Please watch the video to get the full story on what’s happening short term.

This chart shows what appears to be an unfolding contracting triangle. We’re in the (D) wave on the chart. I put the target at 2370—1.618 X the A wave from the bottom of the triangle (marked (C)).

The final set of waves up in the past week looks like an ending diagonal, but the trendlines don’t seem to be converging, so I’m more inclined to just call it a channel. You can see the five marked waves in the chart above—I’m expecting a wave 5 up starting on Sunday to the target.

So, look for a continuation up on Sunday through Monday perhaps.

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Some housekeeping:

Andy Pancholi Turn Dates (April, 2017)

• SP500: Tu25
• EURUSD:  F21, Th27

New Free Blog Post: Elliott Waves and Probability

The CHART SHOW signup is live for Thursday, April 27. You can sign up now in the usual spot: webinars

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Here’s a video overview of the market for Monday, April 24, 2017

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

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Charts Going into Monday

Above is the 2 hour chart of SP500. As with ES, we are continuing up in the D wave of a triangle. The target for SPX is ~2366 (the C wave of this move at 1.618 X the length of the A wave up—not shown here, but are in the video).

The final fifth wave will begin after the fourth wave ends (at E) of this triangle plays out.

Above is the daily chart of the US Dollar. No change here in terms of my long term prediction—we’re heading down to the 91.88 low.

On a near term basis, the retrace up that I predicted may may have ended. We’ve passed the 62% retrace level, so we could continue down from here, but as with EURUSD, there’s the option of one more leg in this wave ii before we turn down in the larger wave 3 (opposite direction, of course for EURUSD).

Longer term, once we continue back down, 1.618 X the first wave, (the target for the third wave) is somewhere close to 94.83. The movement of the dollar determines to movement of just about everything else these days. The longer term target for this wave down is 91.88.

Above is the daily chart of EURUSD. The bigger picture is that we’re headed up towards a target of 1.16 (and change) before we get a really major turn down (a fifth wave).

On a short term basis, the predicted turn down is still in progress. From the top of wave 1, we’ve traced out an a and b wave. We should have one more wave down to a target of 1.05-1.0437 (the two horizontal lines on the chart).

If it drops to that level, it would be an excellent entry for a multi-month rise to 1.16. However, that 1.04369 level must hold.

More in the video, of course.

Above is the 2 hour chart of USDCAD. Well … we’re getting close to a turn-down. The RSI indicator has a large divergence in just about every timeframe.

Looking at the subwaves, I’m torn between a top at 1.3536 (the previous wave blue (3) high or a final push to 1.36, the larger B wave high. One of these will lead to a multi-month wave to 1.19. I would expect the turn to coincided with that of AUDUSD, as they usually move together. It may also coincide with the end of the triangle in the US market.

Opportunity. Above is the 2 hour chart of the AUDUSD. This week we retraced to a level that suggests another “B wave” or our journey down to the target..

We’re continuing down to one of two targets. The first on (.7413) is the point where the C wave is 1.618 X the A wave. the lower horizontal line(.73876) is the 62% retrace level.

One of these will form a bottom, which will be  a perfect set-up  for a long entry for the final wave up to the eventual target.

I’ve an eventual top target of .828 for this pair, which is just shy of the 38% retracement level of the entire larger wave down (from the year 2011), which would make this wave 4.

Above is the daily chart of GBPUSD.  This week, we moved up to a new high. This confirms wave 1 (the  motive-looking wave that I was concerned about) and gets rid of the uncertainty about medium term direction.

The second wave in this case did not retrace 62%, which is not necessarily unusual because this is a corrective set of waves, but it obviously makes analysis more difficult and I’m not about to make a call on anything that I’m not sure about. I’m sure now, and the direction is up. The question becomes, “What is a safe place to get on board.” That depends upon your comfort with risk. The less risky spot would be after a g0od-sized retrace (in the neighborhood of 62%).

More information on the short term prognosis in the video.

Above is the 7 day chart of USDJPY. I have changed my perspective on this currency pair after zooming out to a 7 day chart to see what was going on at a much higher timeframe. USDJPY has not provided the setup I expected and so it needed a rethink.

From 2012, we traced out a five wave motive pattern to about 126.00. We’ve retraced back down in three waves to complete blue A wave. However, this wave did not travel the expected distance of 62% of the motive wave up. All the waves in this retrace pattern are corrective, so it’s difficult to tell where it’s going next. We need to wait and watch to see happens. There’s no reliable set up, at the moment.

The blue B wave up is in three waves, so it should retrace. I would like to see a drop to the 62% level. How we’re going to get there is the question.

Opportunity. Above is the daily chart of gold. No real change here since last weekend. We reached up beyond expectations, but the structure up looks to be in three waves (as is silver). Silver is weaker and has only managed a double top. I expect a drop to at least a new low. More info and a chart of the subwaves are in this weekend’s video.

I’ll communicate a target once we see an A wave (or first wave) down.

When we reach our target, we’ll turn back up. The final upside target is around 1585.

Above is the daily chart of WTI oil. Oil has dropped nicely into the start of the C wave and I expect it to continue down. We may get a smaller b wave along the way, but the target for the present time is ~40.68.

The longer-term target is around 33.00.

Finally, we should get an E wave up to the upper trendline to complete the larger pattern. That would be followed by a final 5th wave down to a new all time low.

Good trading!

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