Elliott Wave chart analysis for the DJIA for 23rd January, 2012. Please click on the charts below to enlarge.
Wave (2) black is seen as a complete double zigzag correction with a zigzag for wave W blue joined by a three for wave X blue and a second zigzag for wave Y blue.
We expect that we may have seen the end to wave (2) black and that price should be moving lower within wave (3) black. However, a trend change is unconfirmed and we have an alternate hourly wave count which allows for further upwards movement.
The trend channel is constructed about wave Y blue by connecting the start of wave a pink to the end of wave b pink and placing a parallel copy at the end of wave a pink.
When the bottom trend line of this trend channel is breached with a full daily candle below it, that will provide confirmation of a trend change.
Movement above 12,876 would invalidate this wave count as wave (2) black may not move beyond the start of wave (1) black.
Main Hourly Wave Count
This is the main hourly wave count that expects wave c pink within wave Y blue is complete.
Wave (iii) green subdivided into orange degree and wave iii orange again subdividing into purple degree. Wave v orange is a slightly truncated fifth wave.
Ratios within wave Y blue are: wave c pink is 5 points shorter than wave a pink. Within wave c pink wave (iii) green has no adequate Fibonacci ratio to wave (i) green and wave (v) green is 39 points shorter than wave (iii) green. Within wave (v) green wave iii orange is 15 points longer than 2.618 the length of wave i orange and wave v orange has no adequate Fibonacci ratio to either of waves i or iii orange.
The trend channel is constructed about wave c pink by connecting the end of wave (ii) green to then end of wave (iv) green and placing a parallel copy to contain most of the price to the upside. This is therefore not strictly how Elliott constructed trend channels. The purpose of this trend channel however is to provide us with an indication of when the trend change is more likely.
Once the bottom trend line is broken with a full hourly candle below it then it is highly likely that wave c pink is complete and that would increase the confidence in the possible trend change.
Movement below 12,573.42 would provide confirmation for this wave count as the alternate hourly wave count would then be invalidated.
Movement above 12,756.58 would invalidate this wave count as no second wave correction within wave (3) black may move beyond the start of the first wave. This would likely indicate that wave (v) green is extending as our alternate expects.
Alternate Hourly Wave Count
This alternate expects wave (v) green is extending and that a little further upwards movement should be expected.
Movement above 12,756.58 would provide confirmation for this wave count as the main hourly would then be invalidated.
At 12,761.19 wave c pink would reach equality with wave a pink and at 12,795.44 wave (v) green would reach equality with wave (iii) green. This provides a possible target zone where wave (2) black may complete. This also indicates that the upwards potential is very limited.
Movement below 12,573.42 would invalidate this wave count as wave 4 purple may not move into the price territory of wave 1 purple.