Another possibility. This works just as well as the 1-2, 1-2 concept as either way we are moving into wave 3.
Here we have the S&P, the Dow and, for a change, also the DT Transports.
The S&P has the clearest triangle. It is symmetric and looks pretty good. To be complete the thrust has to rise above the black line, the top of wave d. The Dow is roughly in the same position but needs to rise a little more. The transports do not have a triangle at all, at best it is a range and it is far from breaking out to the upside.
So far the move up does have some of the characteristics of a thrust. It has been up quite relentlessly for two days now. If it does prove to be a triangle we should shoot up by about the measure of the “mouth” of the triangle. Then it is straight back down. We will see. This is a case where you do not want to count your chickens even one minute too early.
The pragmatic theory about triangles, to open this blog with a contradiction in terms, is that triangles occur in 4th waves in 5 wave sequences, just before the end in other words. They tell you that you are nearing the end of the upward (or downward) trend. The market at this time is pretty well 50/50 which is why you see these gyrations.
Triangles also occur in B-waves as in an A-B-C correction and/or as a first wave down also in an A-B-C structure. Here too the market is pretty well 50/50 and undecided un till it breaks. There are a few requirements that all triangles must meet which is pragmatically determined by simple observation. All legs must be 3s. Normally there are 5 legs within the triangle. The upper and lower trend lines of the triangle must have an opposite direction.
Depending what level of resolution you use you may get different results. This chart has hourly inputs. In Hi-Low charts the lows are equal at about 23350-ish. Note that it is possible to draw both a 4th wave triangle and a B-wave triangle. Technically the 4th wave fails perhaps because the a leg may, repeat may, be 5 waves rather than 3. Moreover both trend lines – in black – have a negative slope another dubious factor. I might also add that this thing is getting long in the tooth.
As a B-wave there is nothing incorrect at all, so we have to consider the possibility that this is a B-wave triangle. If so a drop of 3000 to 5000 points is not unreasonable. This should resolve itself in the next week or so. Also a series of 1-2s is still possible.
It has taken almost two months, longer than we would have thought, but now it certainly looks like this index is ready to go. Today we overlapped in such a way that we have to assume that this last corrective move is over. This implies that we are in the third wave which is normally the most exciting part. Given that wave one was roughly 3000 points we would expect wave 3 to travel more than that. We will see what happens.