C-Wave Grinds Higher

At the open, we noted that the 1639ES level was the upper level of support for the market if it had intentions of heading higher for this larger ending diagonal for the c-wave of the larger yellow b-wave.  So, the market spiked one point below it, and then spiked right back above it, thereby effectively maintaining it as support, while stopping those out whose stops were too tight.

With the market grinding higher and higher, and many commenting that the divergences we see really don’t mean that much, as we see it all the time in the futures, I want to comment that there are divergences and there are “divergences.”

If you look at any bull market uptrend in the futures, what you will note is that the wave iii of 3 will always give you a MACD that is higher than the MACD of wave 1.  However, more often than not, in a c-wave, the 3rd wave of that c-wave will not give you a higher MACD than the a-wave.   This is a “divergence” of which I believe one must always take notice.

In our case, the structure would provide that, if this was a bullish rally, we would be in the heart of a wave iii of 3.   But, note the serious negative divergences we are seeing on all time frames.   This is a strong indication, in my humble opinion, of the b-wave nature of this rally.

So, as we continue to grind higher until we complete this c-wave within the yellow b-wave, it would seem that we are completing a wave iii within that c-wave.  Of course, if the market has intentions of going to the 1680ES region, we still can see further extensions in this wave iii higher.   So, we will minimally need a break down below 1639ES, to even consider that wave iv has begun.

And, as an aside, I do want to point out there that is a way of counting this entire b-wave as just about completed, especially since we have now approached the bottom of the blue box.   So, I am going to urge caution to all the longs out there, as, in my humble opinion, we are moving into the danger zone.

Also, please keep in mind that the purple count is the alternative at this time, and only a break down below 1625ES will make me view the purple count as more likely.

 Elliott Wave Chart