Since mid-last month, the broader equity market has been grinding higher — but not with confidence.
The advance has been marked by choppy, overlapping price action that feels more hesitant than bullish. Yes, prices continue carving out higher highs and higher lows, but MACD momentum tells a different story. With every push upward, the MACD weakens, flashing warning signs beneath the surface. Taken through the lens of Elliott Wave theory, this unfolding pattern carries all the classic fingerprints of an Ending Diagonal — a structure that often signals a trend on borrowed time.
Key Characteristics of an Ending Diagonal:
1. Position in the Wave Structure:
A. Occurs in Wave 5 of an impulse wave or Wave C of a corrective pattern (such as a zigzag or flat).
B. Rarely, but sometimes, seen in Wave 3 of an impulse, but this is generally associated with a leading diagonal, not an ending one.
2. Structure:
A. Composed of five sub-waves, labeled (i), (ii), (iii), (iv), (v).
B. Each of these sub-waves subdivides into 3 waves (i.e., they are all corrective or "3-wave" structures, often labeled as a-b-c).
C. This gives the whole pattern a distinct 3-3-3-3-3 internal structure.
3. Price Behavior:
A. Overlapping waves: Wave 4 often overlaps with the price territory of Wave 1, which is normally a rule violation for standard impulsive structures — but it's allowed in an ending diagonal.
B. Converging trendlines: The upper and lower boundaries of the diagonal typically form converging lines (like a wedge), though they can also be parallel in some cases.
C. Diminishing momentum: Often accompanied by momentum divergence, meaning price makes a new high or low, but momentum indicators (MACD, RSI) do not confirm.
4. Implication:
A. An ending diagonal suggests the current trend is running out of steam.
B. Once complete, a sharp reversal or significant correction is expected.
In my analytical view, the byproduct of an Ending Diagonal often lures market participants into a conflicted state — cautious, yet unable to ignore the persistent upward grind. You’ve probably heard the old market adage: “Don’t fight the tape.” In this case, that mentality sets in as traders, wary but worn down, finally throw in the towel and join the advance — only for the market to seemingly punish that decision with a sharp reversal.
Many experienced traders describe their Ending Diagonal experience the same way: “The moment I finally stopped fighting the trend and got long, it was as if the market was waiting for me — and reversed hard.”
That is how I would describe this micro ED we appear to be in the final stages of what I’m counting as the micro wave v of (v) of Minor A.
For now, no key structural support levels within the Micro Ending Diagonal have been breached, so the advance can certainly stretch a little higher. But make no mistake — in my opinion, this remains one of the most dangerous, deceptive patterns to engage with.
Last week, I closed my short out-of-the-money ES call positions during the micro wave iv pullback (not shown on the above chart). Ideally, I’m looking for an opportunity to reestablish a similar position this week. From there I will reassess the larger Ending Diagonal pattern you see outlined on the chart above.
The advance has been marked by choppy, overlapping price action that feels more hesitant than bullish. Yes, prices continue carving out higher highs and higher lows, but MACD momentum tells a different story. With every push upward, the MACD weakens, flashing warning signs beneath the surface. Taken through the lens of Elliott Wave theory, this unfolding pattern carries all the classic fingerprints of an Ending Diagonal — a structure that often signals a trend on borrowed time.
Key Characteristics of an Ending Diagonal:
1. Position in the Wave Structure:
A. Occurs in Wave 5 of an impulse wave or Wave C of a corrective pattern (such as a zigzag or flat).
B. Rarely, but sometimes, seen in Wave 3 of an impulse, but this is generally associated with a leading diagonal, not an ending one.
2. Structure:
A. Composed of five sub-waves, labeled (i), (ii), (iii), (iv), (v).
B. Each of these sub-waves subdivides into 3 waves (i.e., they are all corrective or "3-wave" structures, often labeled as a-b-c).
C. This gives the whole pattern a distinct 3-3-3-3-3 internal structure.
3. Price Behavior:
A. Overlapping waves: Wave 4 often overlaps with the price territory of Wave 1, which is normally a rule violation for standard impulsive structures — but it's allowed in an ending diagonal.
B. Converging trendlines: The upper and lower boundaries of the diagonal typically form converging lines (like a wedge), though they can also be parallel in some cases.
C. Diminishing momentum: Often accompanied by momentum divergence, meaning price makes a new high or low, but momentum indicators (MACD, RSI) do not confirm.
4. Implication:
A. An ending diagonal suggests the current trend is running out of steam.
B. Once complete, a sharp reversal or significant correction is expected.
In my analytical view, the byproduct of an Ending Diagonal often lures market participants into a conflicted state — cautious, yet unable to ignore the persistent upward grind. You’ve probably heard the old market adage: “Don’t fight the tape.” In this case, that mentality sets in as traders, wary but worn down, finally throw in the towel and join the advance — only for the market to seemingly punish that decision with a sharp reversal.
Many experienced traders describe their Ending Diagonal experience the same way: “The moment I finally stopped fighting the trend and got long, it was as if the market was waiting for me — and reversed hard.”
That is how I would describe this micro ED we appear to be in the final stages of what I’m counting as the micro wave v of (v) of Minor A.
For now, no key structural support levels within the Micro Ending Diagonal have been breached, so the advance can certainly stretch a little higher. But make no mistake — in my opinion, this remains one of the most dangerous, deceptive patterns to engage with.
Last week, I closed my short out-of-the-money ES call positions during the micro wave iv pullback (not shown on the above chart). Ideally, I’m looking for an opportunity to reestablish a similar position this week. From there I will reassess the larger Ending Diagonal pattern you see outlined on the chart above.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.