Elliott and the Recent Down Move in SPY 15min

Jun 17, 2009: 1:14 PM CST

I mentioned last night in a lesson/example on intraday Elliott Wave that a fractal 5-wave structure had completed.  If we look up to the 15 (or 30) minute intraday charts, we see another ideal example of the expected Elliott pattern.  Let’s see it as another example to try to learn this concept of how momentum lows and divergences fit into an Elliott pattern.

So far, we peaked at 955 on June 11th and have completed a 5-wave down impluse into today’s (June 17th) lows.  Without going into too much detail, here is the breakdown.

Remember that new momentum lows often precede new price lows.

We had a new momentum low in June 12th and then price formed a clean bear flag (which I also mentioned in an educational post as it completed) which led to the new price and momentum low of June 15th.

I’m using the 3/10 Oscillator but you could use a Rate of Change or any momentum oscillator for your momentum lows.

You likely should have recognized the large impulse down (almost vertical drop) as some sort of 3rd wave, meaning you could have anticipated the 4th wave reaction into resistance and then shorted the developing 5th wave down which has now completed.

I always say you can’t recognize the first or second wave easily (or at all) in real time, but you certainly can clue into the power of a third wave.  Reference back to my post “The Best Trades in the Elliott Structure.”

That being said, wave 4 retraced to the falling 50 EMA and the day’s “Pivot Point” as well as just shy of the 38.2% Fibonacci retracement of Wave 3.  This was a powerful spot to enter short to play for a possible 5th wave down.

The 5th wave down sub-divided into its own fractal 5-wave pattern which has now terminated for the time being at the lows of June 17th.

Notice also the positive momentum divergence that formed as the 5th wave completed.

What I’ve noticed – in terms of applying Elliott Wave intraday – is that you get new momentum lows at the end of the first and third waves (both of which hint that a continuation move is likely) but then the final fifth wave terminates on a momentum divergence, signaling a possible revesal.

We got that today.  Will it hold?   Let’s see if this plays out in some sort of upward retracement in real-time and follow that as the ‘next likely immediate swing.’

My Los Angeles Expo Presentation “Idealized Trades for the Intraday Trader” will be broadcast live with me in a chat room taking questions during the presentation.  It will air on MoneyShow.com July 1st at 12:00pm EST.  Click to learn more and for FREE registration to this special event.

Corey Rosenbloom, CMT
Afraid to Trade.com

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8 Comments

8 Responses to “Elliott and the Recent Down Move in SPY 15min”

  1. Dominick Says:

    Thanks Corey, I was looking for a post like this to tie it all together. Now I'm trying to get more familiar with the ABC correction portion and how it would look more intraday. I started reading up on Elliot but I have a long way to go. That is why I have been hunting for chart examples. Thanks again.

  2. Dyugle Says:

    http://www.tradersedgeindia.com/elliott_wave_th
    This is the basics of the theory.

  3. Dominick Says:

    Thanks Dyugle

  4. Corey Rosenbloom, CMT Says:

    Corrections are always the hardest – I haven't mastered real time trading of those as I have found impulse patterns – particularly trading after observing a possible 3rd wave – to be so much easier and profitable.

  5. Corey Rosenbloom, CMT Says:

    Very nice resource! Thank you!

  6. panepon Says:

    Thank you every time.
    I entered long at 904(e-mini s and p 500)but exited 906 because of fear and greed.
    I wonder good way to defeat them ?

  7. Bob Says:

    Great example of a five wave contraction.

    With such five wave patterns, you point out (nicely) that selling momentum is building in wave one and three and slows in wave five creating a clear divergence and signaling a probable end to the move.

    Q? How do the momentum dynamics differ with respect to a three wave correction, and what might tip a trader that a three wave pattern was playing out, not a five wave pattern?

  8. Bob Says:

    Great example of a five wave contraction.

    With such five wave patterns, you point out (nicely) that selling momentum is building in wave one and three and slows in wave five creating a clear divergence and signaling, a probable end to the move.

    Q? How do the momentum dynamics differ with respect to a three wave correction, and what might tip a trader that a three wave pattern was playing out, not a five wave pattern?