Redux

Trade all day, short and choppy lower, and then get this kind of move at the end of the session on the ES/SPY (CFD) 30-min chart, importantly, importantly after the close of the cash session.

Once again, someone is really working the thin volume, and if it weren't for me adhering to Ira's guidelines, they'd be working my last nerve, too. It's too bizarre that in five minutes someone gets to move the market almost half as much as it moved in the entire day. The day session has the volume, and this?

Avoiding this kind of scenario is what a recognition of chop will do for you.

Have an excellent rest of the evening,

TraderJoe

Goldman Told 'Em ?

The link between Goldman Sachs and Washington, D.C. is well-known. So many ex-Goldman employees have become Treasury Secretaries, NY FED Bank Presidents, etc. that the "circle" in infused with its culture. Goldman knows how to trade bear markets. Mere mortals don't. So, all that had to happen was to suggest that a well-timed story could create one of those truly stellar bear-market rallies, and it doesn't matter if the news is true or not, or if the news is confirmed or not, it simply doesn't matter. The machines take the input and mechanically provide the output. Pure & simple. So, here on today's intraday wave-counting screen, one can see the 7 am - 8 am bar which was based solely on a news comment - which may have been nonsensical or not. Mere mortals - without access to the inner circle - can't know.

The bar popped out of the intraday Bollinger Band (where statistics suggest new longs should not be initiated) and then ground sideways for the rest of the session.

The purpose of those prior up (green) fractals is to suggest points at which shorts might be stopped out, especially if prices exceed the 18-period intraday "line-in-the-sand", which they hadn't all night but did in short order. Prices went on to exceed the daily Pivot Point (PP), the daily R1 Resistance level, and to stall at the daily R2 Resistance level after banging on the daily S1 support level for most of the night.

The intraday slow stochastic went from over-sold, to over-bought, and back to over-sold near the end of the session. Price tended to find support around the daily pivot point and the 100-period intraday SMA.

It sounds like a lot of technical analysis here. What does this have to do with Elliott Wave? Well, the current keepers of the wave principle proclaim that the news has little to do with wave movement. That it is only or mostly investor sentiment that drives wave formation. 

From a more objective perspective than that of trying to sell monthly newsletters, which is itself a very old market paradigm, it is clear to me that a day like today simply disproves that hypothesis. I once learned that if your principle or law can be shown not to be true in certain circumstances, then it cannot be the complete story.

Here there are different constructions at work: 1) the cash market was not even open, yet, when the comment was made, 2) this is an exceptionally good way to let the thin volume force prices to spike higher as the machines trade and people don't, except perhaps stops get hit. 3) This insanity of "is it true, is it not true" is a great way to let one's friends get out of their long positions on the spike if they have been dying to do so in the market decline. 4) This is also a great way for the institutions (like Goldman?) to implement new shorts near the 18-day SMA, on the daily chart, if they wish to do so with less risk.  5) The market mechanics are as transparent as distilled water. Yet the meaning is insidious. The retail trader is disadvantaged not to have the bully pulpit operating for them, or the mega-millions required to co-locate servers at the exchanges and outfit them with news-reading algorithms that can operate faster than a person can even absorb or understand the news and its implications, let alone push a button. We have covered that aspect of trading several times on this blog.

Yet this is the game that the current SEC allows. It doesn't have to, but it does. Market manipulation has been going on since the dawn of time. How can one say that a news story is definitely market manipulation? Well, if the story comes out in a DM, e-message, or tweet without prior warning that there will be a story coming out at a certain time so people can prepare, one can almost guarantee it. FOMC announcements are a good case in point. People know when these occur, and they can sit out of a position and wait if they chose to. On the other hand, if one is subject to some newsmaker's' instantaneous outburst, without prior warning, this seems completely possible to be nothing other than manipulative. 

As quarterly company reports demonstrate, timing-is-everything. If major public officials are not constrained, the result is sheer bedlam in the markets - and without other tools to judge - investors will take the famed any port in the storm to find locations for operations. These might be Bollinger Bands, or Pivot Points, or a Fibonacci ratio, or a moving average or a price pattern. If bedlam can occur, why don't people care enough to create change with their lawmakers? Well, as long as the bedlam is to the upside and favors the bull case, the vast majority of investors will say, "whew, prices came back up a bit; nothing to complain about there". Again, that is a "majority" and that means most and in a democracy that often rules. 

It won't be until the bedlam is to the downside that there will be the cry & hew that, "something must be done and must be done now" as the long-term players bemoan their reduced holdings. Everything is great in a bull market. Everything is horrible in a bear market. And - eventually - bull markets turn into bear markets ... sure as the night follows day.

Have an excellent start to the evening,

TraderJoe

Three Years in a Channel

First, here is an update of the monthly count in the S&P500 Index. I am just reposting this from the prior comments in case some did not check them. In short, nothing has changed yet, except we can show the level that would have to be reached to invalidate the Minor B wave down. Price is nowhere near close. So, the five-plus year contracting diagonal remains intact to this date. Let's see if it continues.

But a chart I really wanted to show was this one of HYG (High-Yield Debt) on the 2-week time frame which shows prices in a three-year (+plus) "best-fit" channel that has not broken out to the upside.

It certainly looks as if prices have a failure at the mid-channel line, and as if the MACD has crossed lower, though it is not under the zero line just yet. The count would be a contracting leading diagonal for Intermediate wave (A), Flat for Intermediate (B), followed by an Impulse for Intermediate (C) which would show excellent alternation in a corrective wave. This suggests a path for high-yield-debt is lower, and possibly to retreat to the prior low, or more.

Note that HYG has a multiple divergence on a long-term chart with the S&P500's recent all-time high. This is because the HYG all-time-high was back in 2013 at the level of 96.

Have an excellent rest of the weekend.

TraderJoe

A Long Slog ..

The daily SPY cash chart now has about 108 candles since the Minor A wave top. It's been a very, very long slog but there are enough waves to claim that the Minor B wave formed as an expanding triangle, currently meeting all wave rules and guidelines.

SPY Cash - Daily - Expanding Triangle option for Minor B

Can this current wave go lower? It can. It has not yet reached the 150% length given as a 'rule' for each of the waves of the expanding triangle.

Just a couple of quick notes. Each wave of the triangle is longer-in-time than its prior wave in the same direction. The up waves never exceeded 150% of their prior waves, following the 'rules' for an expanding triangle.

Neely says he has never seen an expanding triangle for a fourth wave. Well, this one would be a B wave, concurring with his observations.

Further, we can only state that it is possible for the same waves that make up an expanding triangle to make up an expanded flat if price pressure really gives way.  But, so far, it hasn't so we need to see what upward retraces there are, and how far they go.

Lastly, this structure took place on the daily chart which carries some overall weight. It's not like this is a five-minute, or hourly chart. It's made up of lot & lots of individual and collective votes from around the world. So, if this structure holds up, it may play its part as occurring before the last wave in the sequence. In fact, Neely indicates that often the final wave after an expanded triangle fails to make a new high. This will likely be a good test of that observation.

Have an excellent start to the evening,

TraderJoe

Odds Get a Little Better

Today's seeming failure wave, and outside candle lower, increases the odds a bit for the completion of either the daily expanding triangle lower or the daily expanded flat lower. The ES daily chart (roll-over contract) is below.

IFF the diagonal that we sketched out in the overnight waves completed a c wave, up, of the minuet (b) wave, up, then the count, should it break the low, might go back down to complete the minute ⓔ wave of the Minor B wave lower. So far, the price structure keeps failing at the 18-day SMA, so this increases the odds as well.

Again, the prior daily low must be exceeded lower as must the 25 Nov 2025 low be exceeded lower for a valid expanding triangle to be claimed. And, if price keeps heading lower than certain levels, it is possible the expanded flat version of the wave will take over. We will sketch that out in days ahead, if it is needed.

As with all outside days lower (ODL), the high of the ODL should not be exceeded higher in the next two trading sessions or it might form a trap for the bears.

Have an excellent start to the evening,

TraderJoe

Back in the Bands

After a lower open overnight in the March 2026 ES futures contract, price turned around and tried to head for the high of the prior daily bar, as in the ES daily chart below (for the March contract). The lower open continued the swing-line downtrend, but that could change with a higher high bar.

ES Futures - Daily - Close Back in the Band

As we noted, Friday's close was the second consecutive close below the daily Bollinger Band. This diminished the odds of the next close being below the band, and today price did close back inside the band resetting the number of consecutive closes. But the day's action is a good illustration of why one should not (according to my paraphrase of Ira Epstein's trading guidelines) take new naked short positions in futures against the lower band. That is because price only stays outside of the band only about 5% of the time, and the Smart Money is likely at least taking profits on some previously established short positions at or below the bands.

Note, too, that the daily slow stochastic is only down in over-sold territory which often does not yet attract a lot of new money on the short side. It is not embedded. Also, the two most recent fractal locations have moved down to the bars shown.

We have in mind a count that could allow price to get back near/above the prior up (green) fractal. And we also have one that allows one to go lower and exceeded the prior down (red) fractal.

From an Elliott Wave perspective, we counted one way to get a 'five-up' today. We'll simply have to see if a retrace wave hold off of the lows or not, or whether that five wave continues into the overnight to make a larger wave.

Have an excellent rest of the evening,

TraderJoe

Friday was Fast

...but Tuesday through Friday overall was slow and overlapping in a channel. Therefore, it appears with the waves we have there is most or all of an a, b, c down. It may be a corrective wave with the basic form shown in the ES hourly chart, below. And, if it is a corrective wave, the structure would be diagonal for a, then impulse for c - which would be good alternation in a corrective wave.

But I caution, this is definitely not the only way to read the chart. The current b wave could be only part of a larger corrective flat, before making a larger wave down. Still, we'll count what is before us and, if the market says differently, we'll accept it and fit it into the larger picture. Remember - at minimum - on the daily chart we are still looking for a minute ⓔ wave that breaks the prior minute ⓒ wave low, for the expanding triangle, and maybe more if the expanded flat is to occur for the Minor B wave.

Interestingly, this count started out with a diagonal for the (A) wave, down, of wave ①, and it is a good illustration of a fractal-in-a-fractal, or a smaller degree wave being self-similar to the larger degree wave a which was also a diagonal, overall. And, wave-counters-beware, while it is tempting to count everything including Ⓑ down as part of the diagonal, there is a Flat in the futures (which makes a lower low) that prevents such a count as wave four in a diagonal cannot be a flat wave.

So, that's what we have at present. Could the wave go down to 90% of the prior up wave and make the larger b wave of a larger flat since 8th March? It could. Could the wave break the low again? It certainly could. Again, nothing to the downside will surprise us. If anything is surprising us at present it is the lack of upside. Even though short-term wave patterns like a double zigzag are being invalidated, the daily bias is still to the downside, and, as of Friday, the intraday bias is still to the downside as well.

Still, daily prices have made two consecutive closes below the lower daily Bollinger Band, dropping the odds to about 5 - 7% of the next close being lower than the band (not impossible - just lower odds). And the daily slow stochastic is in over-sold territory and not embedded. So, one should tread cautiously and patiently in the interim.

Have an excellent rest of the weekend.

TraderJoe