SPX 5% ZigZag Chart

The Zig Zag overlay is a collection of straight lines that connect significant tops and bottoms on a price graph. It takes a single parameter that specifies the percentage that the price must move in order for a new "zig" or "zag" to appear. Zig Zag does not predict trends and should not be used on its own. A ZigZag set at 10% with OHCL bars would yield a line that only reverses after a change from high to low of 10% or greater. All movements less than 10% would be ignored. If a stock traded from a low of 100 to a high of 109, the ZigZag would not draw a line because the move was less than 10%. If the stock advanced from a low of 100 to a high of 110, then the ZigZag would draw a line from 100 to 110. If the stock continued on to a high of 112, this line would be extended to 112 (100 to 112). The ZigZag would not reverse until the stock declined 10% or more from its high. From a high of 112, a stock would have to decline 11.2 points (or to a low of 100.8) for the ZigZag to reverse and display another line. The ZigZag has zero predictive power and draws lines base on hindsight. Any predictive power will come from applications such as Elliott Wave or Fibonacci retracements and projections. In this case, a >5% stock price change was used. An ascending wedge is being formed by the ZigZag. A Fibonacci Retracement (green) within a Fibonacci Retracement (red) was drawn. It's an old Constance Brown technique. The Zag retraced within the green Fib 4 times (4 arrows). Perhaps the SPX will go to 1123.19 before the ascending wedge breaks down?