Ending Triangle on the Dow? Time for a Short?

[Mercury]

Another potential rally ending signal emerging on the Dow (see also Shell Oil in Trade of the Month).  The whole move up from the recent low could either be a Wa or a completed A-B-C, difficult to tell at present, but either way it looks like it is due a drop and perhaps the FOMC is the catalyst for that.  There is Neg Mom Div on the Hourly chart, a good EW count to the overall move and a triangle formation noe completing with 1-5 touches completed. Also a Head & Shoulders top is emerging.

 

The Daily chart is also bearish, hit on a major tramline plus Neg Mom Div.  Again, don't know if this is an A-B-C completion or just a big A but time will tell.

 

Short at 17255, here are the charts:



[Welshman]

Hi Mercury thanks for that, interesting , I agree with short soon ...... I have attached my chart with my favoured count , a 4th wave triangle and I have as an alternate 1,2's..either option anticipates a turn very soon. The Market hit a high of 17380 tonight after the FOMC and has retraced a little but its a little too early for me yet,as I need to see a confirmed 5 waves down (say on the 1 minute chart) before I'll consider my entry.

 

Good luck!  

 

Oh, and  - if the traingle count is correct of course we have another long term high to come........

[Welshman]

Also should have said that if the triangle hypothesis is wrong and the alternate count is correct then .....there'll be a rather large sell off. Only price action over the next few days/weeks can confirm.

 

Good luck

 

[Mercury]

Interesting alternative count for the big daily price action on the Dow.  I didn't see a potential large triangle, you are going for an A-E count?  That would indicate a rally off the E touch to a higher high?  I have seen an alternative count of an A-B-C, which would also indicate a large rally to a new all time high but at present I prefer the bearish count.

 

You did better than me in waiting for the turn, I got in too early and am now riding some losses against the turn down, not a good place to be...  Nevertheless all the indicator point to a significant drop soon (whether the beginning of something major of a leg down before a larger leg up I don't yet know).  One difficult with EW is finding the right count on a long wave and this rally has been very strong, a factor of the current market almost certainly driven by central bank interference in a supposed free market, very annoying!

 

But c'est la vie, one has to trade the market that is there.  On which note, I have update my analysis for yesterdays price action and now see a much stronger set up for an ending triangle on the hourly with a good 1-5 count off the Wb and strong negative indicator action.  The Dow is also at the 76% Fib.  I'm going short again here, let's see what happens next...?

 

As always if someone has a different take I'd love to hear it!

 

Here is the chart:



[Welshman]

Yep, if it's correct Triangle A-E (seems to be working ok so far...). Again if it's correct you (are) and I (will be) trading the E leg in which case we should expect a higher high after completion of E. Looking good for you now and you'll be gaining the benefits of early entry, well done. E Waves are very tricky and it's difficult to anticipate their completion - the only thing we know is that it can't exceed 15450.3 (C wave low) if it does then the triangle hypothesis is invalidated and we're likely then in a larger move down in Wave 3 .

 There's a similar situation in EURUSD, very tricky triangle and I took a short position a few minutes ago - I'll post the chart here when I have time.

 

Good luck to you mate, nice aggressive entry:)  

[Mercury]

Always a risk trying to hit the top, I should probably play it a little cooler but sometimes it just seems to scream at you...  It will be interesting to track the Dow and other main stock indices over the coming months.  If you are right with the triangle (and others with their A-B-C) then a new all time high is on the cards but that doesn't scan with the general sentiment I'm picking up.

 

Right now I am leaning the other way such that I believe we have had the high back in May 2015 and a large wave 1-2 down done and a W1 of W3 down done and are in an A-B-C retrace to W2 of W3.  I am not sure if we have hit Wc or just Wa, though reaching 76% Fib on the Dow is more suggestive of Wc I think.

 

If this scenario is right we should get a relative shallow drop to a new W1 with a retrace (could almost reach a double top) and then a massive drop that will not stop until we get below 10000ish.  If Wa is where we are then we will get a deeper drop to Wb before a Wc in a 1-5 formation.  Alas this latter may look like your We so could be hard to tell at this point.

 

Given all that I will be taken a few positions on the way down but moving stops to BE quickly to protect against a rally back up and searching for one of the 3 possible scenarios to present itself.  The more people looking at this the better so let's keep posting thoughts and observations as I do not want to miss either a new higher high or a massive drop...

[Mercury]

Similarly to the FTSE, are we seeing an ending Triangle break and kiss back on the S&P500?  If so the Kiss will be a great place to chance a Short (and could signal similar on other main indices).

 

Chart: