Evening Spitball Session: Let’s Count the Major US Indices as One Because Geeks Do Weird Shit Sometimes

The million-billion-trillion dollar question is: are we going to revisit those lows again? And, the fact that I am presently carrying 3 counts on the counts page should be some indication of how much I don’t know the answer to that.

And while the S&P 500 has built a respectable bullish wedge, the Russell has not, and the Nasdaq’s wedge is more parallel lines and so not such a great wedge as it lacks good contraction in price.

But, one way we may eliminate some of this noise is by combining the major US indices into a single ticker to examine the structure of the market as a whole (past members have seen me use this before, e.g., here and here). By combining the ETFs for the S&P 500, the Nasdaq 100, the Dow and the Russell, we get this:

We were in a range, fell from that range, and haven’t really fallen from the second range, nor have we really recaptured it, either. We are in an area that has served as support before, but we do not yet have this level as support yet now.

From an Elliott Wave standpoint, it’s hell to try to count. If this were a major high, total bear market material, we would like to see 5-wave declines, indicating that we are experiencing impulse waves down. And yet, what we see are primarily two 3-wave declines:

So, hmm. There’s not a whole lot we can do with those. They can really only be “A-Waves” or “B-Waves” or internal waves of diagonals or triangles and since they both face down, back to back, they can’t easily be “A-Waves” or “B-Waves.” But in no case do they look like impulse waves. We may be left with diagonals then, as this looks nothing like a triangle. And so I’m sort of inclined toward a thought I’ve had before for the S&P:

Now, this makes a pretty picture, but that doesn’t mean it’s right. But, it solves the problem I see with all the 3-wave moves. An ending diagonal is composed of 3-wave moves. And in this case, since wave 3 (in orange) cannot be the shortest wave, and since 1 is longer than 3, this puts a hard cap on the length of 5 (which I’ve noted on the chart).

What we are trying to do is render intelligible, chaos. This looks nice and orderly, but, as Heraclitus once said, “Nature loves to hide.” So something could be going on that I do not see. But, this count looks good, and suggests another drop may be coming, but that it will be limited.