Relatively Simple

At this writing there is still no deal on whether the government will be open over the weekend or not. This is an important issue and may have an influence on whether prices go over the high again or not. Still, from a chart perspective our task is relatively simplified. We were able to count five-wave-up today with an extended first wave. So, the task now is to use The Principle of Equivalence to simply determine if we get three-waves up or five-waves up.

SPY Cash - 15 Minute - The Principle of Equivalence

I recommend using the SPY cash 15-min chart for this purpose, as above. The first item up for grabs is to see where the b/ii wave winds up on Monday morning. If price gets above and stays above the EMA-34, then it likely has more of a positive bias, temporarily.

The concern for a simple a,b,c wave, up, is that it would likely be shorter in time than the down wave. Not impossible, but then not the best corrective wave. One way to extend the time of the correction is to see if the c wave would become a diagonal, alternating with an a wave impulse. Another way to extend the time & frustration of a correction would be to make a double-zigzag. None of that is in evidence, yet.

If, on the other hand, this up wave in a channel becomes a five-wave sequence instead of remaining as a three then we need to question whether price will go over the high again as part of a larger diagonal that we showed at this LINK, before (see alternate red line). The down wave is just over 62%, and there is one way to count it as a-b-c down, but it is very non-proportional and is quite quick to be a larger diagonal second wave. Still, it might fit in a larger diagonal as a second wave.

So, just take it step-by-by step and see if we get a clear five-waves-up, Or, if this up wave remains a three or even a double zigzag. That's enough work to do over the holidays!

Have a good start to the evening and the weekend,

TraderJoe

Just a thought ...

It has been vexing over the last few hours to determine what the wave count is primarily because the ES futures gives a longer wave up from the 2022 high, while the cash provides still a shorter wave up. Clearly, this could be rectified if cash turned up and made a higher high. This is still possible by-the-way with an extended form of the contracting ending diagonal that I posted at this LINK as an alternate. See the red count. 

But what if the situation does not rectify itself? Is there a count that could explain both of these phenomena at this time? I submit there is. That count is below as the Extended Fifth Count (x5). Right now, this count is an alternate, but a viable one.

The reason this count is an alternate is that there is no conclusive evidence - such as an unquestioned overlap - that requires this count. 

Still, the Fibonacci ratios are intriguing: wave (3) is 1.272 x wave (1). Wave (4) is a very deep retrace on wave (3), and it does overlap wave (2) in this configuration, but not wave (1). And then the magic happens in this last wave up from Sep/Oct 2022. The wave x5 is 1.618 x wave (3), a very common relationship when the fifth wave is the extended wave. Note, too, there is good alternation between the second and the fourth waves, both in shape and in time.

If this is an extended fifth wave, as the top of a major sentiment peak, it could well represent the end of the Cycle, and the end of the SuperCycle. And such a wave can be retraced 62%, or fully, or more! However, the way wave patterns are best developed is by using the hard evidence that compels the pattern. There are still ways the downward waves could fail to form overlaps with consequence. And if they do not, we will use that evidence.

Note one other item, the above count preserves the move from March 2020 to Jan 2022 as a three-wave sequence, as we have in either the contracting or expanding diagonal count. All it does is raise the degree one level of the first wave sequence (1), up. I have not seen this count anywhere else. As far as I can tell, it is original with the author.

Have an excellent rest of the day,

TraderJoe

Gap Filler

Today's down wave in the ES March contract filled a number of gaps in the SPY cash index and the ES roll-over contract. The roll-over contract is shown in the chart below, unadjusted. The lengths of the waves remained valid for the count below, even with the roll-over considered. If there was a 'true' ending diagonal at the all-time-high (which does have fairly significant odds), then the entire diagonal from the wave iv location should be retraced in less time than the diagonal took to build.

Today's down wave was too long to consider it 'by the rules' to still be inside of the contracting diagonal. So, it may be a first wave down, ① or i. For the moment the degrees are being left relative and there will be more to say about the degree labels on the weekend.

Retraces of this wave can occur at any time. The next targets lower include wave ② and wave iv. We need to see if the market has the downward strength to delineate a trend change. This is a process called "post-pattern confirmation". The first step of that occurred today in that the wave ② to ④ trend line was exceeded lower in 'less time' than wave ⑤ took to build. The next step requires a solid close under the wave ii to iv trend line which we touched today.

Have an excellent rest of the evening,

TraderJoe

Yukkie, awful, stinkeroo!

This is what is in front of our eyes when one considers the ES rollover contract as an extension of the current December contract.

This is not the same as cash, but one has to wonder if there isn't a way (such as the triangle under consideration) by which the counts will synch up. 

In the roll-over contract, by passing through the 6,136.25 level, this wave up is now 'longer' in futures than the wave up from 2020 to 2021. This wavelength is also sufficient to activate the expanding diagonal count shown in the second chart in this November post. Again, IN FUTURES. Cash needs to be verified.

Elliott_Trader: Whether or Not ...

Have an excellent start to the day.

TraderJoe

Chart Only

ES Futures - Daily - EW Count

Have an excellent rest of the weekend,

TraderJoe

To Keep Us Guessing...

Today's down wave in the SPY cash 30-min chart, along with last night's stub of a down wave reached just over the 62.8% retrace level of yesterday's up wave as the Fibonacci ruler on the chart shows.

With this information and knowledge of the likely FOMC meeting next week these are the scenarios that one has to evaluate.

1. Down wave goes beyond wave a to make wave c of the larger ④th wave zigzag. 35%
2. A much larger in time b wave triangle forms waiting on the FOMC output. 35%
3. A new higher high immediately forms on fearless Friday. 15%
4. The down wave collapses to invalidate wave ④. 15%

I'd personally rate the probabilities of the first two options as slightly better than the last two options. Some suggested probabilities follow the bullet items. For the triangle, it would likely best form if the downward retrace stopped around the 78 - 85% level.

Between yesterday and today, there do look like five waves down in cash. So, that means five - or more - waves could easily follow lower. What complicates the analysis is the speed of these five waves is quite slow and did not themselves result in the new low below wave a. So, like a bad murder mystery, the market will have its way with our curiosity for the time being.

Have an excellent start to the evening,

TraderJoe

Overlap

The overlap needed to make the ES 8-hr chart below more intriguing as a contracting diagonal occurred today. We were finally able to count five-waves-down today with the new low and it appears to be just an a wave. 

On this time scale the MACD is still pointed lower after a divergence with the higher high. Today's wave stopped - at least temporarily - at the dotted iv-to-② trend line shown. This trend line should be adjusted within reason to become the ②-to-④ trend line, once the end of the wave ④ is known. Note that the invalidation of wave ④ in a contracting diagonal would occur below 5,913. Price is not close yet.

If a fourth wave forms successfully, then a fifth wave up must remain shorter than wave ③ in price length. While wave ③ was required to go over the high again, wave ⑤ is not required to, but is very likely to.

Have an excellent start to the evening,

TraderJoe