Into the Real Mess - 6

Today marks the 5th consecutive day that the ES June futures have closed below the lower daily Bollinger Band as per the chart below. The close today was 5,049.00 compared to the lower band at 5,050.67 and this drops the odds to 1-to-3 percent that the next close will be below the band. In Ira's public videos he claims the most he has ever seen is seven-in-a-row.

However, of interest, the ordinary calculation of the daily slow stochastic has now attained embedded status on the downside.

Also of note, in any one of a couple of fashions, there are enough waves down to claim the Minor A wave has been made. And, yes, price could still attain the 100-day SMA and not ruin the count.

Another item is for certain. This decline since 01 April is already longer in price & time than the December 2023/January 2024 decline, and therefore it is of a higher degree. Remember we labeled that decline as minute ⓑ, and so labeling this decline as Minor A agrees that this degree label is larger than that one.

One also notes that the 18-day SMA is pointed downward and will likely act as resistance on the way up. With the embedded status, it is possible that Smart Money will continue to sell rallies until the embedded status is lost (and the %K red line of the daily slow stochastic crosses back up over the 21 level).

As we stated in the comments for the prior post, it is possible we completed the Minor A wave and are now into a messy B wave as a flat or combination. We'll see how tomorrow proceeds.

Have an excellent rest of the evening,

TraderJoe

Into the Real Mess - 5

We were expecting a messy wave downward. We're getting one. So far, in the ES futures, we may be getting a diagonal - as previously expressed. By far, the count that 1) is most proportional, 2) flows the best, and 3) does not involve degree violations is this expanding diagonal which a couple of us are counting. As well, this count follows the Elliott Wave Oscillator profile at the moment and can be clearly seen in the closing only chart below.

There are other ways to see the Minor A wave at today's low, but it does not quite look as proportional as this count. So, I'll hang on to that alternate for the time-being.

The above chart does provide a clean invalidation and it also suggests quite a wild snap-back from the current price lows. That is in agreement with today being the fourth consecutive close of price below the lower daily Bollinger Band, and the daily slow stochastic still in over-sold territory. And A waves can often be diagonals, particularly in corrections. So, we have to go with what looks best at present.

We'll keep you updated as best we can. The wave structures are very testy.

Have an excellent start to the evening,

TraderJoe

Into the Real Mess - 4

Just a word of caution for tomorrow. Today marked the third consecutive day of the ES futures closing below the lower daily Bollinger Band with the daily slow stochastic in over-sold territory as per the ES daily chart, below.

This means the odds of another close below the band is only about 2 - 5%. Some of the Smart Money is likely taking profits at the lower band. Yes, price could go down to fill the gap or hit the 100-day SMA. But, even as today showed (because of the profit-taking) whippy behavior could immediately follow. Price could certainly close back inside the band at any time.

From an Elliott-Wave perspective we are counting the Minor A wave down. We can see one way it could have completed, and another way for it to continue. See the comments from the prior post if you have the interest. So, we are patient until the length of price movement becomes more convincing.

Have an excellent start to the evening.

TraderJoe

Into the Real Mess - 3

A lot of people are expecting a wave three to "cut-loose" to the downside now (when some - not necessarily the same ones - were screaming for higher prices before). On the way up. I just urged caution, patience and flexibility, and on the way down - the same. Today ES futures prices DID complete the contracting diagonal from yesterday, and - so far - prices have not invalidated either lower or higher. So, let's give some credit where it was due. We saw whippy behavior, called it, and got it.

But what IF prices do cut loose tomorrow - say with an overnight gap and follow-through lower. This could happen. I am agnostic. But how would one count it? I can see two ways - which still makes this down wave part of the real mess.  Here is the first way: The Truncated Top.

In cash SPY, a contracting diagonal count does not work as well as it does in futures. This suggests the above option of a truncated top, followed by a minute-degree wave ⓘ, lower. Elliott himself, Prechter following him, and Neely following him all suggested major turns might see a truncation at the top. Then, following minute ⓘ, there would be a minuet (w), (x) and (y) wave up to the second minute wave, circle-ii, where minuet (y) is a failure wave. It is very important to pay attention to degree labels here, and not think every down wave is a "1" wave when it goes nowhere. 

The problem with the above scenario is that minuet (x) and minuet (i) - which are supposed to be smaller degree waves than minute ⓘ are actually longer in time than minute ⓘ is with the truncated top. This is not supposed to happen. This is why degree labels are important.

So, if this solution doesn't work, is there one that does? Well, first keep in mind we do have the valid contracting diagonal in the ES futures still on the table, which meets all guidelines in both price & time. And we simply do not know what the overnight and morning will bring yet. But here I think is the better alternate for cash.

As several of us discussed earlier, it is possible to get an expanding diagonal where wave minute-iii, circle-iii, is not completed yet. Notice the following attributes of this count:

1. The prior wave ends at the prior all-time high, where Minor C, and Intermediate (3) is shown. Then there are "three-wave" sequences downward as zigzags.
2. Following minute ⓘ, down, the minuet (a) wave diagonal, down, would be shorter in price & time than all of the minute ⓘ wave. Minuet (a) is supposed to be a smaller degree wave than minute ⓘ, and here it is in both price and time.
3. Next, notice the minuet (b) wave up. It is shorter than all of minute-ii, circle-ii in price and time. Fantastic, it follows degree definitions, too!
4. Then, notice sub-minuette i, down. It is shown looking slightly longer than (a), down, right? But that would violate degree label definitions, wouldn't it? YES! That's because the i portion of that wave actually ended at 512.00, and everything else after it in the correction is an expanded flat for sub-minuette ii! So, then degree definitions are not violated.
5. And so-on goes the minute-iii, circle-iii, wave until it maybe reaches the 1.618 Fibonacci extension - the level of which is shown on the chart.

Folks I simply can not do this every night, wave after wave, adjusting charts which do not consider wave degrees and Fibonacci ratios, so I simply will not. There are too many errors that others can make for me to suggest fixes. I have clearly outlined the problems with degree labeling that most ignore. (Refer to Neely interview if you haven't already at this LINK: Avoid the Top Five Mistakes Counting Elliott Waves.)

I am looking for people who put as much thought into a chart as went into the one above.  Notice "one thing" about the chart immediately above: it gives a clear & specific invalidation level to the count. If your charts do not do that because you don't consider Fibonacci levels or degree definitions then it could seriously hurt your trading also: because a bad wave-count can lead to a bad trade. And the second chart is just an alternate, too. It does not have to be the real deal. But it uses sound rationale and follows the rules, guidelines & degree definitions. So, if it busts it would likely not be because of something we did, but more likely because the Smart Money saw something we did not have access to.

Anyway, have an excellent rest of the evening,

TraderJoe

Into the Real Mess - 2

Due to overlaps, we have been suggesting that the wave down off the recent all-time high might be in the form of a diagonal in the ES futures. We showed one view of an expanding diagonal but the criticism of it (rightly so) is that the third wave would be shorter in time than the first - which runs afoul of a guideline for an expanding diagonal but not a rule. So, for the sake of following the rules and guidelines in the best spirit possible, a couple of us also suggested the contracting variety of diagonal, as below, on the ES 4-hour chart.

In this case - as the Fibonacci ruler on the left shows - wave (iii) would be less in price that wave (i). It is also less in time which follows the guideline for contracting diagonal. 

Now the question is whether there will be another whippy zigzag wave (iv) that is less in price than wave (ii). That means wave (iv) has 5,249 as a practical maximum before invalidating. Again, wave (iv) must be in the zigzag class of waves and may not be a flat for a diagonal to form properly. If wave (iv) remains valid in price, then the next question would be does it follow the contracting diagonal guideline for being shorter in time, too? If it does, then it is on to wave (v) which must be shorter in price than wave (iii) and might be shorter in time than wave (iii), too.

Again, the personality of the diagonal is that the bull forces are not convinced that the prior rally is done yet, and they are committing large amounts of capital but with the effect of not making higher highs. The swing-line trend is lower highs and lower lows, and the bias is lower as long as price remains below the 18-day SMA.

Again, the five minuet down waves (i) to (v) likely compose the minute ⓘ wave of the Minor A wave of the decline within Intermediate wave (4), if the waves finish properly.

Have an excellent rest of the weekend.

TraderJoe

Into the Real Mess

With the prior post (Get Ready for a Real Mess at this LINK) I have tried everything possible to prepare you for the current whippy market behavior. I have written before about The Fourth Wave Conundrum that this is the time when "everyone wants to know what the count is because they are likely getting whipped badly". I have also tried to teach readers about diagonal structure. So, let me preface that I do not know if the count below is correct. But I do know that the count provides a precise invalidation point. This is the chart of the ES 4-Hr futures.

The count would be of the 5-3-5-3-5 Diagonal. It is a speculative count. But the count was taken because wave (iii) is longer than wave (i) in price, and wave (iv) is longer in price and time than wave (ii). This means a wave (v) should become longer than wave (iii).

Notice than within wave (ii), wave 'a' is also an expanding diagonal. And now, in wave (iv), we may have a zigzag within a channel shown (dotted parallel). If that price pattern holds, then it is possible that the fifth wave will form properly.

But the second reason the count is taken is that it allows us to drop the previously listed "wave-counting-stop" from the prior all-time high to the new location shown. This is the only precise wave-counting-stop I see because wave (iv) is not allowed over the high of wave (ii).

The diagonal personality is that the bullish market participants are simply not convinced the game is up, and they are fighting back tooth-and-nail. Hence, the "battle at the 18-day SMA", the "line in the sand".

I cautioned against getting gung-ho on this wave. I'm sure some are listening, but not all. The whipping is brutal. But, if a minute ⓘ wave does form properly, then if a retrace holds below the high, perhaps five minute-degree waves will form to make the Minor A wave down. It could take a while, and some might not have the patience for it.

I encourage you to take this time to learn the wave principle in full detail, rather than go on YouTube and learn it incorrectly, or ask people to tell you what their counts are. You simply will not learn until you struggle yourself with counts on markets which I do not show. But, if you do, then - after a while - the light bulb might just come on.

Again, nothing says the above count will come to pass. But it's the best I can do in my struggle to understand the current market.

Have an excellent start to your evening,

TraderJoe

Battle at the 18-day SMA

In line with our theme for this wave of getting ready for a real mess, ES price action today was eclipsed by, well, The Eclipse. For those who could see totality, it was spectacular and looked like the "real deal". For those who couldn't, they will have to wonder for another twenty years to get the chance to satisfy their curiosity (2044). For those who watched price action, it was whippy, back-and-forth algo trade on both sides of the 18-day moving average, the "line in the sand", as the daily chart of the ES futures shows, below.

Another way to describe price action today, however, is that it was the second inside day following the double-close key reversal two days ago. By not closing above the high of that bar today, a continuation lower at least has even odds - a trap for the bears was not sprung today, but there is no guarantee.

Price still has not touched the lower daily band and over the last two days gave the impression of coiling and coiling and coiling. So, a breakout in either direction might last a bit. Until we see such, it is likely to be sloppy - even though downside counts remain possible.

Have a good start to the evening,

TraderJoe