Elliott Wave Interpretation For The Financials XLF

Reader Vasu requested that I give my interpretation of the current possible Elliott Wave Count on the Financial ETF (XLF) and without further hesitation, here is my current take on the Elliott count on the XLF.

XLF - Financials ETF:

On the normal site, this count is impossible to read - you’ll need to click the image to view the large-scale chart.

I’ll let the numbers speak for themselves in terms of the past count - to my knowledge, each Wave is internally valid in terms of how I labeled them (meaning each wave satisfies the Elliott Rules as I understand them).  In short, Large scale (circled) Wave 1 terminated in January (though an alternate interpretation has the termination point in March) while large scale (circled) Wave 2 terminated in May (any interpretation supports that count).

The question still remains:  Which Elliott Wave 4 Rally Are We Experiencing Currently?

There’s little doubt that we’re in a Wave 4 rally among Elliotticians, but there is indeed widespread debate about WHICH Wave 4 we are in.  Reader Vasu pointed out that the Financials tend to lead the market and that’s generally correct, to get ahead of the market, it might be beneficial to keep a close watch on the XLF.

I have us currently in small fractal wave iv of the fractal wave (3) of larger structural wave 3 (circled) down.  I know that’s not what a lot of people - myself included - want to hear but that’s the count I’m getting and I’m certainly open to other interpretation and discussion by readers.

IF this is the correct count, then we’re likely in the B wave of an “ABC” pattern.

I see it another way - we could be already starting the fractal v (fifth) wave of the 3rd wave down, provided you interpret my lowercase “abc” of A wave as a complete corrective wave in and of itself - a valid interpretation I believe.

To be ‘fair and balanced,’ (and hopefully less confusing) I wanted to provide a more Conservative Elliott Wave analysis on the same chart, which has us officially completing the 3rd Wave down in November.

If the more conservative count is correct, then we’re already in Large-Scale Wave 4, which means the final termination point for large-scale Wave 5 will be higher than under the previous, more ‘aggressive’ count (that still has us in Wave 3).

From a non-Elliott perspective, I want to point out that we’re experiencing overhead resistance via the 50 EMA and are forming this counter-trend rally on diminishing volume - both of which are bearish.  Nor is that a base upon which to build a large-scale Wave 4.

I do want to caution my hesitation for embracing this count fully (though I would like to do so) because this has fractal waves 4 and 5 of the Larger (circled) 3rd wave taking less time than fractal Wave 2 did.  In other words, Waves 4 and 5 played out in less time than it took for fractal Wave 2 to play out - that bothers me.

I again want to open the discussion to your counts and analysis - and strongly encourage you to do your own analysis.  These posts are for educational purposes and to help you apply possible Elliott counts in real time.

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