Diagonal Still Playing Out

The thing about diagonals is that they are often difficult to trade, especially if you are unsure if the diagonal is actually playing out.

Our preference has been that this c-wave for wave (ii) was taking the shape of a diagonal.  But, how deep it was going to drop in this c-wave was a question, depending on extensions.  As I noted in an update today, as long as we remain over 2104SPX, the diagonal pattern will be my primary pattern for this c-wave.  And, even though we did hold it today, the market may still try to loop down one more time to give us one more lower low in this c-wave of 3, but, clearly, it is not necessary.

Once we move through the 2145SPX region, I am going to expect that we will test the 2153-2160SPX region, and the down trend line for a 4th wave.  This should set us up for one more down leg in a 5th wave of the ending diagonal by the end of the month.

Alternatively, the move off the lows can be considered as a 5 wave structure, which COULD suggest this wave (ii) completed as a WXY pattern.  But, that would only be my alternative, and would have to prove itself as shown in the blue count back on the chart. 

For now, the diagonal remains my primary expectation, as long as we do not break below 2104SPX before we break over 2145SPX.  But, should we move through the down trend line, it will open the potential for wave (ii) having completed.

Avi Gilburt is founder of ElliottWaveTrader.net.