Intraday Setup 101

As reported on Twitter (@johnusa) yesterday, the AEX (see image) was fast approaching one of its Jupiter lines (red) at around 446. As history has shown, this is often a point of reversal. If this were the case this time it would indicate a top.

Interesting enough, the Jupiter line is descending, indicating a retrograde move. If Jupiter stands for expansion, the retrograde might indicate contraction(?). Also, Mercury is retrograde, which is interesting given the ECB’s QE program.

OK, fast forward a day and for a change, let’s look at the AEX intraday chart below. The yellow labels are Elliott. The blue labels/arrow refer to the text. 

The chart shows the final hour of trading (4:30pm-5:30pm). Since I assumed a potential top around 446 (from the first chart) I was keeping an eye on the intradays moves looking for a trade setup on the short side. Throughout the day the AEX made a steady advance upto 16:45 where it sent sideways in what looked like a triangle (arrow a). Triangles are always preceding the final move in an impulse wave. So with the breakout at (4 yellow) the next move had to be the final. This happened at 17:00 with the first tick down there was an indication that a top was in (arrow b). The at (arrow c) momentum picked up (gaps) giving one more hint the top was in. The next step was to see if the move down was an impulse (5 waves) or a correction (3 waves). At (arrow d) it turned out to be an impulse. Wave 1 and 4 did not overlap. At 17:10 the first impulse down was in. So the next wave had to be a correction up. This turned out to be the case. wave b (arrow e) was a sideways mess, indicating a corrective move, not an impulse. The following wave c was an ending diagonal.  Once completed a swift move had to follow, as this often happens after a diagonal. This turned out to be the case and the AEX went down into the close of the day.

So preferably, tomorrow the AEX should stay below the 449