The Risks are Piling Up

The OHLC version of the chart in the prior post for the weekly ES futures is below. Yes, there are ways that higher highs can be made. But the risks are piling up. Even a 38% retrace shown is almost 1,000 ES points from here. And deeper retraces are certainly possible.

Besides retrace risk, there is also the risk that the entire upward movement is over. If the up wave sequence is an A,B,C instead of the five waves shown, then there is a (likely lesser) risk that Intermediate wave (4) could be undercut.

For the short term, it is suggested to pay close attention to the 18-day SMA, and whether price closes above it or below it on a daily basis.

Have an excellent start to the evening,

TraderJoe

Mikey Likes It!

Hey Mikey. With all apologies to the Life cereal commercial from the 1980's, we noted in the prior post we were not a huge fan of indicators like the RSI, or PPO - which are implying a decline - for counting waves. There are several other factors that currently say, "well if a decline does happen, it may still not be the onset of the bear market". One of those factors is the NYSE Advance/Decline Line ($NYAD). Readers of this blog should look up the cumulative value of the indicator if they are interested, but it has recently reached a new high in the last couple of weeks. I have written several times before that major bear markets have rarely started with such little divergence indicated. With that in mind, we must still allow this count of the extended first wave in Minor A. The count is shown below in the weekly closing chart of the New York Composite Index (NYA).

NY Composite Index - Weekly - Minor A

In the extended first wave count, the third wave is shorter than the first, minute ⓘ. So, as long as the fifth wave, minute ⓥ, stays less than the third wave, this count can be valid. We will note that while the Sep - Nov period brought some level of decline, it was quite meager. It could be, but just doesn't seem like, a Minor B wave that really causes significant market vexations, like, say, a long in time Minor B triangle. So, maybe that decline is just a fourth wave. Cautionary note: while this down wave does not have closing overlap, it does have a tad bit of intraday overlap.

None of this completely discounts what the RSI and PPO are saying. There may be a significant decline ahead soon. Sentiment is still fairly overheated. And, for example, if Minor B should turn out to be a triangle, a three-wave ⓐ wave lower could be the most dramatic of the lot. It's just that this up wave count may not be the final one of the bunch. Perhaps a Minor B wave will provide the necessary $NYAD deterioration to create a significant divergence.

So, we remain flexible, calm and patient going into the New Year. We remain on notice for significant declines, and nothing to the downside will surprise us. If a triangle does occur, it might turn out to be a great range-trading opportunity. We shall see.

This is the second post since Wednesday. Have an excellent rest of the weekend and start to the New Year.

TraderJoe

They Don't Like It

I'm talking about two indicators. I'm not a real big fan of indicators but do use the Elliott Wave Oscillator as a guide in wave counting. In this post, I'm primarily referring to two indicators - the RSI or Relative Strength Index, and the PPO or Percentage Price Oscillator, although the price is shown using the Zigzag indicator just for clarity and accurate terminal points.  The first chart clearly shows that the RSI does not like this up wave. It is currently diverging.

The second chart below shows what the same chart provides in terms of the PPO oscillator.  It is also diverging at this time.

Both charts seem to be sending the same message. In terms of these indicators, "it's time". The contracting diagonal, if it is one, should end soon. It is hard to ignore such a message. But keep in mind these are log scale charts. They 'just barely' work on the ES/SPX, although they work better on the Dow.

Looking at the recent action, we must still be incredibly flexible and allow two possibilities for a Minor C wave. The first one is shown in the ES 8-hr chart, and the trend lines tend to indicate a diagonal may be in progress.

We note this chart can be interpreted as three-wave sequences. There is now overlap. Price is along the lower trend line. It could break it a tad but must not go beyond 6,835 in order to keep a diagonal going. Yes, it is also possible to get a nested wave sequence up, if price does not go below 6,385.

But this second ES 8-hr chart shows another alternate for an upward diagonal. This one would have truly wild swings with at least a 62% retrace for the second wave.

The Principle of Equivalence requires that we cool our jets, try not to be over-reactive, and look at reasonable potential alternates provided that degree labeling definitions are not compromised. 

Still, one of the problems with an impending bear market, where the majority of the shorts have thrown in the towel is not to get caught on the "Slope of Hope", playing for up waves when they don't arrive.

So, we are still just patient calm and flexible. We see clear alternatives. We will watch for them. But the risks are piling up (in terms of what the RSI and PPO are saying), and we don't want to ignore them.

Have an excellent start to the New Year.

TraderJoe

Range Expansion

As the last trading day of the month, quarter and year a number of milestones were hit on the daily chart of the ES (Mar 26 only) futures, as below. The key points are summarized below the chart.

ES (Mar) Futures - Daily - Close Lower

The key points observable are these:

1. A trend lower was established. Whether it continues or not will be a critical observation. There are lower highs and lower lows on the swing-line indicator.
2. A close below the 18-day SMA occurred as of the cash close, with a larger bar than yesterday. So the daily bias has - at least temporarily - switched to lower.
3. A close of the daily gap from 19 Dec occurred today,
4. The embedded slow stochastic reading was lost today.
5. A critical level for daily overlap was established.

Friday (Jan 2) is the only day the slow stochastic can re-embed. It would take quite a significant rally for that to occur. Not impossible, just lower odds.

In Elliott Wave terms, the up wave can still be counted as a minute ⓑ wave or minute ⓧ wave. The objective is still to see if we get a deeper Minor B wave.

If all goes well, I hope to have more on the weekend. Have a good start to the evening and the New Year!

TraderJoe

Immaculate Compression

With every possible Christmas pun intended (hopefully L'Enfant has a birthday sense of humor), today swung back & forth, wildly at times but going nowhere at other times. This gives the appearance on the SPY cash 30-minute chart of a quasi-triangle.

SPY Cash - 30 min - Quasi Triangle or w-x-y

Not even the FOMC minutes could get things headed in the direction of a breakout. Towards the close, it looks like it wanted to break down but that needs to be watched yet. It could be that people are just backing away in front of the New Year's Eve holiday.

Of course, compression is one of the surest ways for the algos to create losses, so it may just be that Optimal Prime just needed his fill from our piggybanks. Oh, wait, we don't have those anymore - pennies not losses - because there aren't any more pennies being printed (er, or something). Yet, they still have the sense to bill us in hundredths. In case you're wondering, I actually didn't have any losses today as I saw the sideways bands early, pointed it out, and went into 'range mode' rather than 'trend' mode. But the monotony was still annoying.

Along with the great saving-grace of penny elimination, I sure hope the New Year doesn't see too many more needless inventions like the electrified roadway in FL for charging EV's, when no commercial EV's have induction coils for charging yet. Or another type of vehicle other than high-speed intercity trains that actually connect people to places they want to be. Or, like another needless social media platform - like Tic-Tock that keeps time during the market day and metronomes endlessly until the close. Or yet another outlet for someone to spout their half-baked political views.

One can only hope, as the mind turns to mush on days like today - perhaps indicating a stiff pre-NYE cocktail is needed! Indeed. Lol!

Have fun,

TraderJoe

GOLD - Weekly & Daily

In the prior post (LINK here), I said that it was very difficult on the long-term chart to keep degree labels making sense and to get reasonable Fibonacci ratios unless a triangle was considered for the Cycle IVth wave, after the 2012 top. I also said for that reason I was still counting "by parallels" until that was no longer possible. But where are (is) that parallel, and what is the count? The chart below shows the likely parallel at present.

GOLD (GC) Futures - Weekly - Degree Analysis

The parallel is based on the fact that the largest and longest correction should be the larger degree correction by degree labeling. So, it is given the label of Primary ②. And it is much less than a 38% correction, so that means that the prior wave was highly likely an extended first wave, x①. So far, that is holding true as Primary ③ is shorter than Primary ①. Further, the Elliott Wave Oscillator is near a high, so this agrees with a large third wave at this position. As another sign of this count, there are no significant overlaps at this point, and the most likely overlap warning level is shown. So, IF a Primary ④th wave can hold the parallel, then the wave has a good chance of finishing like an impulse. Remember that a ④th wave can be one of several types of triangles if it wishes. This may make trading very tricky & whippy. Keep in mind the ④ and ⑤ shown on the chart are placeholders only - just to keep track of the count, not to indicate the levels price should reach or when it should reach them.

And what about wave Intermediate (5) of Primary ③, how is that finishing? The daily chart shows that wave below.

GOLD (GC) Futures - Daily - Local Count

So far, from the Intermediate (4)th wave on the daily chart, with its EWO signature at or below the zero line, there appears to be an expanded diagonal fifth wave which has already made a new high. So, if there is to be a Primary ④th wave, then it might come back down to the level of the prior fourth wave, which would be the Intermediate (4)th in this case. So far, this wave is on a daily divergence with the EWO, which is often the case for fifth waves. So, the indications are that the technicals are working at this point, and there is still some wiggle room at the high.

Again, while this is not trading or investment advice, be prepared for highly whippy and volatile price movement, or very tough compression or whippy action if a triangle forms.

This is the second post since Thursday. Have an excellent rest of the day and weekend.

TraderJoe

Long-Term GOLD

When Gold is reviewed on a long-term-basis, problems arise with degree labeling, especially in the most recent weekly waves, unless the center section is seen as a long-in-time fourth-wave triangle as seen in the 3-monthly log chart, below.

Notice that after the 2012 peak in Cycle III, the Elliott Wave Oscillator, EWO, did take on fourth wave characteristics by traveling under the zero line again. Also note three items.

• The triangle would be in a 'typical' fourth wave position. It 'may be' a non-limiting triangle, and it would alternate with the sharp Cycle II wave.
• The recent extremely impulsive action looks like the 'thrust from a triangle'.
• The typical technical analysis measurement of the "widest-width-of-the-triangle added to the breakout point" is coming up ahead.

This measurement is one of the few measurements that make sense, whereas other Fibonacci ratios in the recent rise would be extremely out of proportion. For this reason, we are counting the current impulse up in parallels until we can no longer.

Have an excellent rest of the day and start to the weekend,

TraderJoe