Crawling

As far as I can tell using the 1-Hr ES/SPY (CFD) or the ES alone, which has a delay here, the five-wave structure of the likely a wave from the 4-hr chart in the previous post is now emergent. The chart uses 120 candles. It's a crawler. But it works.

The fourth wave, 4, is between 38% and 50%, with no overlap, so there is no reason to think of any non-impulsive structure. Notice the third wave, 3, "turns-to-the-left" and goes above the channel as I have indicated it should do in true impulse wave structure.

Regular readers of this blog should now explore the channel shown previously on the 4-hr chart. The 'a' wave can have a bit further to go.

Have an excellent rest of the day. I will add the reminder that Nvidia reports after the close.

TraderJoe

'B' is for Belief, Bubble (and Babble, too)

The thing about B waves of expanded flats or running triangles is that they try to get you to believe they are built on something substantial, when they might not be. They might be part of a bubble too. And, as long-time reader and contributor BBRider commented on the prior post, this one is also built on some FED babble. A mumbling, stumbling Jerome Powell, Chairman of the FOMC, said on Friday the FED might be in a position to lower interest rates. OK. With that in mind, we just keep on counting, using parallels and finding clear five-wave sequences where we can find them as on the ES 4-hr chart below.

ES Futures - 4 Hr - Channel Upward

The above count is cognizant of both time and price degree considerations. It also recognizes the following counting items.

• The (c) wave down could be counted as 'five' as a diagonal, pointed out in prior comments.
• The a waves of both upward sequences in (w) & (y) are very, very similar in size and shape.
• The minuet (x) wave, down, can be seen to take less time than the minute ⓐ wave, the prior higher degree wave in the same direction.
• We also said a lower low was needed to call the down sequence from Aug 15th as a five-wave sequence. That lower low did not happen, and there was, instead, a near exact double-bottom leaving only three-waves down.

In terms of price lengths, we know the SPY and the DJI have exceeded their prior highs. So, likely all indexes must be counted in upward sequences, even if the ES has not made a new high yet. It likely will with the momentum from this wave. So, we are watching the typical ⓑ wave external retracement levels to see what information they provide.

Still, things could get very, very whippy near a new all-time high.

Have an excellent rest of the weekend,

TraderJoe

Down But Not Out

Overnight the ES futures went down to tag the 18-day moving average of closes, also known as 'the line in the sand'. Prices have since started to bounce from there as in the daily chart, below. The 18-day SMA is the place where prices often retreat to in order to figure out what to do next. This again might be the case with the FED minutes today, and Jackson Hole on Friday.

Looking at the chart we note several things: 1) there has been a more forceful overlap on L #1. This again is not fatal, but it does rule out some impulsive upward counts. 2) While this morning's lower low has the trend line currently pointing down, it has a prior higher high and now the lower low which is not typically counted as a trend. And it is currently above the 18-day SMA - so even if it was a trend - it is still neutralized by the daily bias still being upward. 3) the daily slow stochastic is currently below the 79% level. That is a warning that price and the 18-day SMA could come together. Well, they already have, they occurred almost simultaneously. 4) The only day that the embedded status can be regained is the next day, if it remains lost through the close. 5) Although not followed by many, we will note there is an upward cross of the 100-day over the 200-day SMA. This has some weak bullish significance to moving average followers.

The overlap of L #2 would provide more information from a wave-counting-perspective but that has not happened yet. So, keep an eye on things.

Have an excellent start to the day.

TraderJoe

Wobbly but Not Topped Yet

The ES daily swing line has wobbled a bit but has not set a clear new downtrend yet. Prices on Friday overlapped the prior high but not by enough to draw any firm conclusions yet. The daily chart is below. Prices retreated from the area of the upper daily Bollinger Band as expected, especially given the daily slow stochastic is over-bought only (for two days). The third day needs to be watched closely to see if gains the embedded status or not.

ES Futures - Daily - Into Minor B

Meanwhile, two other overlap levels are shown which are of interest in ruling-in or ruling-out counts. In particular, we note that if L#2 is exceeded it would probably be below the 18-day SMA and might set a trend.

In terms of an EW count, we still see the Minor A wave at the July high, and the new August highs confirm that the early August drop was only a three-wave sequence (probably ending in the diagonal we counted).

Again, we have no proof positive upward movement is over. It is possible for a Minor B wave to form in numerous ways including: an expanded flat, running triangle, or even more complex Flat-x-Zigzag, Flat-x-Triangle. Those patterns are in the book for a reason.

Have an excellent start to the weekend,

TraderJoe

Hourly Trend Line Becomes Hourly Channel

Today is Friday. Higher highs are possible, although the morning is starting out 'wobbly' - possibly like a triangle or diagonal, there is insufficient evidence for a turn yet. The lower three-touch trend line we cited earlier has held. It has become an hourly channel.

Since 123.6 has been hit and slightly exceeded, then 138.2 may be possible, but not required. Maybe the Minor B wave will be an expanded flat (at least initially) that would add length to the downside. If not, it might become a running triangle with the first :3 waves down as the more violent start of the triangle. Time will tell. The hourly MACD has turned lower again, but could be rehabilitated again, too. Dicey times.

Have an excellent start to the day.

TraderJoe

Hourly Trend Line - In the Making

In the SPY cash hourly index, as confusing as some things might be, there are four or five indisputable facts as shown in the chart below.

The most undisputed item would be the measurement. The up wave made 90%+ of the prior down move. So, if the prior down move is only a :3, then the up move can be the "B" wave of a Flat. If the down move is a :5, then it might be the 'deep retrace' from the diagonal counted provided that price does not exceed the prior high.

The second most likely undisputed item would be that a three-touch trend line has formed in the cash market. The nearly precise rebound off it at the end of the session means the market itself probably recognizes it. So, any break lower and/or back-test & failure of this trend line in the cash market needs to be watched very closely.

The third most likely undisputed item would be the volume on today's close. While a bunch of bulls (green volume bar in the middle of today's session) chomped on the fishhook at the exact high, the red bars started to gain in prominence into the close.

Fourth, like it or not, on this time frame the MACD had a cross and red histogram bars. It remains to be seen if that holds.

Fifth, we counted a wedge to the high. It might be disputed whether it is a true diagonal, and/or whether it has been decisively defeated yet. But the pattern ended on time and without any problems in the measurements. So, it would not be surprising if the up gaps in the chart start filling to the downside, depending on the news tomorrow.

Is there still a way for prices to lurch higher? There is, yet the odds keep getting lower & lower.

Have an excellent start to the evening,

TraderJoe

Three-Fer & The Principle of Equivalence

As you know I count Elliott waves in real time. As far as I can tell, the reason many Elliott analysts make some truly horrendous mistakes is that their Elliott Wave principles are not well founded. As an example, take the ES/SPY (CFD) half-hour close-only chart, below. We are using the closes only - not to hide anything - but to illustrate the overall form of the wave. And we need to tell you that there are at least three reasonably good ways to count this uptrend - being in the channel that it is. The uncertainty in the wave structure is precisely the reason I have developed and added The Principle of Equivalence to my overall wave theory.

If you follow the black count, you can clearly discern the Ⓦ-Ⓧ-Ⓨ triple zigzag count contained within the channel. The two Ⓧ waves would be of slightly different lengths but that would be okay if they are of the same degree. The issue with that count is that we were able to count five-down on the 7th. 

If you follow the blue count, the blue count can correct for this problem by claiming the 'c' wave of a failed-flat at that location. After all, that wave did not travel below the wave on the 5th, and the b wave in that count just ticked beyond the 1.618 external retrace on the 'a' wave down. This is often where the b waves of failure waves end on the upside.

And if you follow the red count, it says there was a gross mismatch ('extreme alternation') between red iv and red ii. But, none-the-less there was no iv to i overlap, so no rules were broken.

So, again, this is why I have developed The Principle of Equivalence. The counts are to be treated as equivalent until there are some distinguishing characteristics available.

For example, we said in the comments for the prior post that because the second Ⓧ wave is larger than the first, it ruled out any further contracting diagonal from that point to the recent high. So, that longer Ⓧ wave is one distinguishing characteristic. We can currently rule out a contracting diagonal and it does not appear on the chart.

Another item to note is within the red count. That count may contain some degree violations because there would then be internal sub-waves of wave iv that would be longer than all of wave ii, the prior higher degree wave in the same (down) direction. And that seems like a violation of degree definitions. So, from this point forward, you can consider the red count to be what I consider a 'cartoon' and just for illustration only. And it will not appear on further charts unless something develops to warrant it.

But - at present - the waves are still in a channel. The timing of the up waves is similar in pace. So, they seem like zigzags. But we also have not confirmed that upward price movement is over. So, a better developed Ⓩ or (c) wave could still form.

But "Wait a minute." You might say. "Isn't The Principle of Equivalence just the same as saying 'there are alternate wave counts'?" In fact, The Principle of Equivalence definitely says there are alternates at some times, but it is also deeper and much broader than only just saying there are alternates. But I will not get into that now so as not to confuse things. But I still caution, The Principle of Equivalence does not say there are any wave labels you like. No. Labels that don't follow the rules or that involve clear violations of degree definitions are still to be avoided to the greatest degree possible.

Have an excellent rest of the weekend,

TraderJoe