Revising Elliott wave counts with RSI and stochastic guides

A public count that failed its own test

After a 2010 wave commentary appeared, a reader noted that the weekly S&P 500 had already moved above a labeled wave-5 level of 1150 and traded near 1195 without completing a three-wave decline that would confirm wave II.

The author of that earlier count later said the expected Wave II retracement did not form and relabeled the same structure as wave 4 of Wave I, with Wave II still pending on the major indexes.

The author framed Elliott wave as a provisional marker that can be replaced nearby and cautioned against remaining attached to one pattern after price has moved on.

What a ranked RSI stack may confirm

A reader asked whether a wave is counted whenever a 12-7-3 RSI stack is in proper order, 12 above 7 above 3 in an uptrend and 3 below 7 below 12 in a downtrend, and whether those settings are used as a standing rule.

In reply, the author said recent RSI behavior had been more helpful at bottoms than at tops, and that the opposite pattern of usefulness appeared in a bear market.

A stochastic RSI reading as a further guide

The same reply preferred a stochastic RSI cycle reading as a further guide when RSI alone was an incomplete aid to the wave count.

Limits the author named beyond the oscillators

Asked about currency markets, the author said wave patterns are hard to apply in forex because high volatility can rewrite the structure quickly.

The author still expected the outstanding Wave II to take the form of a flat, described as a complex correction, because wave 3 had been smaller than Wave 1 when the earlier article was written.

On the expectation that every wave must be subdivided, the author treated subdivision as theoretically appealing rather than as a mandatory labeling procedure.

Editorial reading

TradersWeek editorial interpretation: write an Elliott label as a falsifiable signpost. The archive count did not survive its own wave-II test, and the same structure was moved to a nearby label.

A ranked RSI stack may confirm that momentum order matches the intended swing. It may not freeze the count after price has already moved above the labeled wave-5 level. A stochastic RSI overlay may add a cycle reading when RSI usefulness flips between bottoms and tops. It does not make the 12-7-3 order a standing rule.

Count-revisability is the habit of changing the working hypothesis once price exceeds a stated invalidation level. The still-expected Wave II, if it is a flat, would be a complex flat: a sideways, multi-leg correction that can stretch beyond a prior extreme instead of tracing a simple three-wave decline. That expectation is the author's archive view, not a present-day forecast.

Editorial note: oscillator order can support a hypothesis. It cannot keep a broken wave-II label in place.