Last week’s analysis of the Dow expected an end to a fourth wave correction to be followed by a new high. However, the structure for the correction was incorrect on both hourly wave counts.
Price did make a new high and has remained below the maximum point. The wave count at the daily chart level remains correct.
Click on the charts below to enlarge.
Because for the Dow the structure at intermediate degree for wave (C) is an ending contracting diagonal it must be over here. Wave 5 blue may not be longer than wave 3 blue, because a third wave may never be the shortest wave.
The structure of wave 5 blue may now be complete.
Primary wave B is a 155% correction of primary wave A. This is longer than the maximum common length of a B wave in relation to an A wave within a flat correction, but I have seen B waves this long. It is a bit unusual but not invalid.
This trend change would be initially confirmed with movement below 13,447.11. At that stage the alternate below would be invalidated.
Further confidence in the trend change would come with movement below the lower trend line for the ending diagonal.
Within wave 5 blue pink wave c has no Fibonacci ratio to pink wave a.
Ratios within wave c pink are: wave (iii) green has no Fibonacci ratio to wave (i) green, and wave (v) green is 10.95 points short of 0.382 the length of wave (i) green.
There is a strong bearish engulfing candlestick reversal pattern at the high. Price may have found resistance about the upper edge of the diagonal trend line.
When this trend change is confirmed I will calculate downwards targets for you. To do so prior to any confirmation would be premature.
If we have had a recent trend change then we now have a clear five down and an incomplete three up on the hourly chart.
Ratios within wave (i) green are: wave iii orange is 8.6 points short of 2.618 the length of wave i orange, and wave v orange is 2.49 points longer than 0.236 the length of wave iii orange.
Within wave c orange of wave (ii) green, wave 5 purple would reach 0.618 the length of wave 3 purple at 14,022.
Thereafter, the next downwards wave for (iii) green must take price to a new low below the end of wave (i) green at 13,834.40 and should exhibit an increase in downwards momentum.
Wave (ii) green may not move beyond the start of wave (i) green. This wave count is invalidated with movement above 14,058.27.
Alternate Wave Count.
It is possible, but unlikely, that wave (iv) green ended as a large flat correction and the last wave upwards, wave (v) green, is incomplete.
If we see a new high next week then this alternate wave count would be correct.
The maximum length for wave 5 blue is still at 14,098. Wave 5 blue may not be longer than equality with wave 3 blue, because wave 3 blue may not be the shortest wave within the ending contracting diagonal for wave (C) black.
Wave (iv) green may not move into wave (i) green price territory. This wave count is invalidated with movement below 13,447.11.