"An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast," as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes (see next section), they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.
Ending diagonals take a wedge shape within two converging lines, with each subwave, including waves 1, 3 and 5, subdividing into a "three," which is otherwise a corrective wave phenomenon. The ending diagonal is illustrated in Figures 8 and 9 and shown in its typical position in larger impulse waves."
|DJIA - Weekly Chart|
|DJIA - Daily Chart|
- Structure: Market traced out the ending diagonal pattern in an overlapping manner. Moreover, sub waves are seen as divided into 3-waves instead of 5. 5-wave advances suggest impulsive rise, while 3-wave and overlapping advances characterize correction or ending diagonal.
- Rapid Rally: This pattern has formed after more than 100% market rally in less than 4 years, which can be classified as a sharp rise. Therefore, sharp rise requirement has also been satisfied.
- Sentiment: Sentiment on this latest up move has touched extreme optimistic levels - levels not seen in many years. Therefore, it meets the requirement of optimistic extreme.
- Divergence: Finally, there is a clear divergence between large cap indices like DJIA and SP500, and Nasdaq. This divergence can be a negative omen for the overall market, as divergences typically occur towards the end of an advance.
- Internal market strength is very strong, which suggests that we have further rally left
- Recent rally saw a market breadth spike, which has previously been a sign of further gains after a brief pause.
- Start of new Bull market in Global Markets and Emerging Markets (A special report was emailed to subscribers in early December highlighting this development). A new bull market typically lasts longer than only 2 months.
- A lot of people are publicizing and accepting this pattern, as logical next step. I have noticed that whenever a pattern becomes public news, it rarely happens
- No major sell signal yet e.g. 8/4 test etc.