RSI Divergences

blog.afraidtotrade.com/a-great-reference...versals-from-june-3/

blog.afraidtotrade.com/how-do-i-create-the-310-oscillator/

I think the problem here is to understand it is the structure of the wave that determines whether or not the wave is corrective or motive, and has nothing to do with the direction in which it is running. Just because an instrument is making new highs, or lows, does not mean the high is on the back of a motive wave, or the low must be corrective. I think it is easier to think of the markets as going round and round as opposed to up and down. What goes around comes around if you like that analogy. Phi and the 'golden ratio' link to the formation of the universe right down to the shape of the snails shell and when one comes to think of the markets in the same light is when you begin to understand it is the structure which is important. Because Elliott demonstrated the waves going up and down in 5's and 3's doesn't mean all impulse waves go up or all corrective waves go down. I don't think it would be an exaggeration to say the majority of big drops in the market are attributable to impulse waves, which is precisely why the structure of the DOW can be a corrective wave making new highs.

I, like everyone else, am just a student trying to understand how and why this thing works. I don't claim to have all the answers. What I am sure of is there is order in the apparent chaos and the order appears to come from structure - the snails shell being a beautiful example.

For me the value in EWT has to be in appreciating where an instrument has come from in order that it can be determine where it is heading. This can only come from analyzing the structure in the weekly charts and working our way down through the daily into the four hour and beyond if necessary. I don't believe anybody trades the weekly charts but I do believe they are indispensable when studying the shorter time frames as they provide the data for the overall trend.

So many traders pick up on the phrase, 'let the trend be your friend', but few appreciate why this is so important. Let's say you are late getting into a wave 3 trade: you missed the re-test of the top of wave 1. If you are aware wave 3's will make a minimum of 1.618 of wave 1 you know the trade will come back to your side because you are trading with the trend. Now, before anyone gets the wrong idea, I'm not saying wave 3's only make 1.618 of wave 1, they very often extend and can go right on up to 6.814 of wave 1 but, I would take profit at 1.618 then reassess the structure. When the structure gets to 1.618, and there is divergence on the RSI, you can then be confident this is a wave 3 as opposed to an ABC. You are now looking for an extension to your wave 3 so look to the next level of the fibonacci percentages.

I hope this is of some help in understanding why I label my charts the way I do. I know this is not a view shared by all on this BB. That's fine. Remo has his way and Jackozy has yet another way. For me this method is all about structure. The DOW chart is now in an area I looked at many months ago as a possible target in that it is in the area of a 61.80% extension of the move from 572 up to the previous old high 14198 from the low at 6469. It is also in the 61.80 - 74.60% target zone of the extension up from W, X. So a very good place to see a retrace. Corrective waves occur in patterns of 3,7,11,15,19 and 23 swings. So far, if you check out the RSI, we see only 5 swings, therefore 6 and 7 are yet to come. Let's see what happens?

Hi Jackozy, thanks for your reply.

Re the expanded/running flat, I was hoping Diver would elaborate on how this can be a Corrective move to new highs whilst not being a B wave.

Thanks Diver for your reply, my mistake re the use of divergences, so it it only used to confirm motive waves or not?

Have started to read The Complete RSI and find it very good so far.

Thanks guys.

FWIW I think I've been pretty reasonable and balanced in my input to this thread. I totally understand that market analysis has moved on since the 30s (far from having my head stuck there) and have agreed that RSI divergences commonly DO occur at the end of motive waves.

On the other hand, I think it's misleading to tell people that they MUST occur as the pre-eminent condition of determining what can constitute a motive wave. This can lead to extremely confusing, not to say rule-breaking (if we can even use that term as relevant), counts.

I think we'd all agree that no system or method of analysis is correct 100% of the time, yet here we have diver purporting a 100% reliable requirement of a motive wave. It simply isn't so and to tell people otherwise is making a difficult subject even more so.

I'm quite happy to agree to disagree, but I don't think it's necessary to have to be subject to arrogant jibes ("You think I'm wrong but I know you are") and schoolground "pop"'s that my thinking is stuck in 1938. What sort of way is that to conduct an adult debate about a serious subject?

During this discussion, I haven't claimed that anything is categorically true 100% of the time yet I'm being told that I'm definitely wrong simply for pointing out that diver might not be 100% correct? I think a touch of humility might be in order here. Surely we can have a debate without trying to bully people into an erroneous way of thinking?

I will re-iterate my view one final time on this subject before I hope we can move on: RSI divergences do commonly occur between 3rd and 5th waves in an impulse wave but their lack of presence does not automatically rule out the possibility of such a wave. I fervently wish there were such a simple rule to help us with this difficult subject but there isn't. That's why so many find it so hard.

Now then, can we please move on to discuss RSI divergences on their own merit on this thread without reference to EWT as I suspect we'll not move on from here. I've read John Hayden's "The Complete RSI" and have some interesting findings, some of which I was aware of and others new to me; all of which may be of help to us all in trying to win in the markets.

Thanks again.

PS Broad-rock, I quite agree that it's possible to have a corrective wave make a new high in the form of an expanded flat (or running flat) but it would be the B element of that correction which did that rather than the A element which MUST be lower that the preceeding trend's high. An expanded flat would then usually have a C wave below the A whereas a running flat (very rare) could have a C which ends above A.

Agreed remo - one thing that must be noted is:

R.N. Elliott simply did not have enough data when he developed the theory. We have the tools and time that he did not. also the market has changed significantly through the use of technology since then... introduction of electronic trading and financial instruments.

what is commonly accepted practice, to what actually occurs contrary to common practice is another......

This is a good thread.
Diver/Jackozy
People will have different opinions when it comes to Elliott wave that is a given. I personally have created my own version of elliott as many know. I dont talk about it as its pointless and it almost drove me mad when i was trying to teach it.My method uses candlestick charts but im not gonna teach this method so dont ask Ive got my reasons as most know from the days of the private bb

Just agree to disagree on this matter as there is always more than one way to do things.
My methods of trading are different from conventional methods a lot of the time and this board is about trying to show what works for each other . No one is wrong as long as it works for you and you only will know .
Proofs in the pudding

You guys have not been offensive to each other so keep it that way. Just dont get personal like others have.
good thread as its very helpful to others to learn about RSI.