RSI Divergences

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.

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?

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

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