I was communicating with a trader from Brazil and we talked about these diagonal waves. We have a great real world example, but first we have to be on the same page or start with the same chart in its raw form. There is always limited information available, and it takes years to build a decent wave count, so this is just my first look in many years. I am now always looking at the waves for diagonal wave structures first, as impulse waves are rare in todays markets. We may think the above pattern is an impulse and label it 1-2-3-4-5. The big problem is that this is not an impulse wave, but what I call a “Diagonal5”. It is one move connected with all types of zigzags, which must have a specific starting points and ending points. Luckily enough, the above chart has these clear points that we can start with.
I assigned the degree levels as 5 waves up in Minor degree, and the entire structure could be the same as gold or even oil. Where this ETF may go from the 2016 bottom, is a whole new chapter as we have to get the back end right first. The EW future will never cooperate with us if we don’t get the past the right.
The entire bull market is labeled with an ABC1, ABC2, ABC3, ABC4, and ABC5 Minor degree Wave count. Even the 3rd wave has a small expanded flat in it, with the last 5th wave also being a single Diagoanl5. The final last 5th wave crossed to a new high with a 3 wave pattern, but this is an ending diagonal, in a diagonal move. Four types of EW patterns show up just in one single move.
Then we get to the crash which ended in late 2008 along with commodities, followed by a bear rally before the final decline into the 2016 bottom. From the late 2010 top EWZ started into its version of another Diagoanl5.
So now we have two sets of Diagoanl5 waves and the difference is one degree. On the declining diagonal, the 4th wave came all the way back up and dipped well into the second wave.
If US markets succumb to the bear market, then investors could run to the EWZ, ETF for a place to hide. Fundamentals do blind us from watching the patterns, but the job now is to see if a new bull market can be maintained. I see the EWZ crash as a correction, so if this is true, then technically this market should see a new record high once again.
Being as specific as I can, helps me to catch mistakes as fast as I can, using a minimum amount of wave counts.
The above wave count only uses 4 degree levels for 15 or so years worth of chart history.