A 'Possible' Leading Indicator

I'll just post the daily chart of SPY (cash) versus HYG - the Corporate High Yield Bond fund, and pretty much let it speak for itself.

The recent data is one of the larger divergences we've seen in a while, and one can note how it 'generally' has been tracking the index. So maybe what we are getting now is a 'leading' indicator of the risk appetite of the smartest money - and we'll see this week whether the huge divergence gets repaired (and HYG rises), or whether it is acting as a valid warning for SPY to begin at least a retrace sometime this week to react to account for the potential mood change among the whales.

Market technical oscillators (such as MACD, slow stochastic, etc.) tend to be a bit lagging. This is a search to find a slightly better true 'leading' signal; meaning that - to be useful - its turn should come slightly before that of the equity market without being too premature.

Have an excellent rest of the weekend.

TraderJoe

Friday of Distrust

Unlike so many Fridays before - when the market was saying it was supremely confident - and the machines would literally jam the market to a Friday closing high - this Friday was different. The market was confident enough to make a new intraday high of 7,300 on the ES futures, primarily from the 'first-of-the-month' passive inflows, as we had clearly suggested, but it could not hold on to that level. And when word got around that a new truce proposal was advanced to the U.S., but was disliked, price actually sold off into the close. What? Price actually sold off on some mild profit-taking on a Friday?! Well, kiss my grits. The daily chart of the SPY cash index is below, reflecting the close.

As shown in the prior day's comments, we think we are counting a fourth wave very high up in the wave count until proven differently. Clearly, there is no outside reversal bar, yet, nor is there a lower low confirming candle yet. We outlined the options from The Fourth Wave Conundrum and cited that after only three-waves down there were a lot of options. But then the news broke making the upside less tenable than the downside.

So, in the chart above there is a trend line of interest that should be watched closely to provide more information. Are higher highs possible? They are. Can the price structure fall apart if some really adverse news is announced? It can.

Once again, I am taking things very gingerly. As of about 4:30 pm the ES futures are still well-above the 18-day SMA with an embedded daily slow stochastic. So, the price bias is still up along with one of the strongest technical market signals, the embedded slow stochastic. Until these situations change one must respect where the market is, but clearly with a skeptical eye.

I may have some further information on EW counting options later in the weekend.

Have an excellent start to the evening.

TraderJoe

Count So Far - 2

Phasers on Stun! The whippy after-hours trading caused by galactically stellar earnings beats & misses appears to have created a sub-wave as follows on the 4 Hr chart of the ES/SPY (CFD) below.

On the prior post I didn't draw the parallel in for nothing. This count was possible by reducing the degree of the diagonal by one degree and suggesting that it might be a leading diagonal. Notice that ii is smaller than (iv) in price and time, so the degree labeling still works.

We don't 'know' that this parallel is the case yet but a clear invalidation level for the count exists. Remember, tomorrow is the last day of the month which often, not always, sees end-of-the-month window dressing before the potential first-of-the-month passive inflows from the usual sources.

Have an excellent rest of the evening. Be cautious, patient, calm and flexible this evening as traders around the world - in all time zones - give Chairman Powell his Intermezzo Curtain Call.

TraderJoe

Count So Far

The ES/SPY (CFD) futures have declined in the overnight sufficiently to overlap the first wave, i, in a diagonal sequence. Therefore, the appearance is that the diagonal five waves in the futures resulted in five waves in the cash market. The diagonal is shown below in the ES/SPY (CFD) 2-hr chart below.

In the diagonal wave v < iii < i, and wave iv is shorter than ii, with wave iv overlapping wave i. Cash can be counted without overlap.

Now the only questions are 1) the degree of the waves, and 2) is the diagonal leading or ending? With regard to the second question first, it seems atrocious to suggest a leading diagonal this high in the wave count, but the simple fact is that major earnings are still due this week, along with a FOMC meeting. So, I am just keeping an open - but skeptical - mind. Further, there is no announced complete resolution to what is occurring in the middle east.

With regard to the degree of the waves, the question is whether this is a minute degree wave, minute ⓘ, or whether the whole wave constitutes the alternate Minor C which is shown in red. The only way to tell would be if certain levels were exceeded, including the start of the entire wave on 31 March 2026.

Have an excellent start of the day,

TraderJoe

fire danger? !

When you see this sign in the woods, it's not a good idea to light new campfires. A similar situation exists now on the ES 4-hr futures. Yesterday we suggested counting upwards, and we did that today. The market went a bit higher and hit ES 7,200. But our equivalent count on this contract indicates that with 110 candles on the chart, The Eight-Fold-Path Method suggests a five-count is best on this wave largely in a channel.

The wave includes a completely acceptable fourth wave retrace in this timeframe that we called the end of.

Yes, there can be more upside. The (v)th up wave could become as long as wave (iii) since the first wave is the extended wave in the sequence. Maybe the wave goes on into Monday or Tuesday, pending news. But when the wave turns down, there could be a steep correction, and possibly, but not certainly, a complete retrace depending on whether the degree labels are the correct size. In other words, this wave could be all of Minor C, or it could just be minute ⓘ of Minor C. It's a very difficult call, but I've gone with the most conservative view until we know more. Either way the risks are pretty high.

Just thought I'd share the count. Have an excellent start to the evening and the weekend.

TraderJoe

Possible Set Up for v of (c).

Today's wave structure was difficult unless you were possibly expecting a crazy (meaning multiple segment) fourth wave. These can sometimes happen in the market. Those of you that followed the market intraday know that a bout of selling hit that drove the market to a small outside reversal day down. Readers of this blog should confirm that on the ES daily chart. The SPY cash market got to within -0.03 of a new high, shown below, but couldn't do it today. At 712.35 the SPY could not get over the prior high of 712.38 and then headed lower in five waves. So, the ivth wave looks to be a compound flat. That's fine, nothing wrong with it at these length dimensions. The reason we think it's a Flat is that the highs are well within the 90% level of the prior highs required by the 'rule' for a flat wave.

Then, after the decline on the SPY 10-min chart, there was a quick retrace followed by sideways action as shown above. So, until we know more, this can be a setup for a vth wave higher in the minuet (c) wave of Minute ⓘ. I would watch something like the parallel shown - which should be adjusted when the second wave, ②, is known. Then a third wave of v might take us over the prior high.

As far as I can tell, today's low should hold or the downward wave would likely overlap and cause complications to have to deal with. So far, it hasn't but it is marked as invalidation for that reason.

If the vth wave can hold its length dimensions, then it might be possible to call minuet (c) and minute ⓘ done and over. If not, we'll look to the alternate impulse count of Minor C, not the diagonal count.

The trading is whippy and choppy and still calling for much patience and flexibility. For example, anyone that thought we were going directly over the high today had a big surprise handed to them until about 14:00 hrs. That shouldn't be us. We know the character of fourth waves to be 1) complicated, 2) mis-leading, and 3) do everything but overlap their prior first waves. It certainly feels like that is the wave personality we are dealing with. So, take it slow & comfortable. The market will let you know.

Have an excellent rest of the evening.

TraderJoe

Bias Still Up

Today in the ES futures was another inside day, still with the price bias up and the close over the 18-day SMA. The day opened on a gap up, chopped around for much of the day, tried to head higher towards the futures close but could not yet break out of the prior range. The daily chart is below.

ES Futures - Daily - Bias Up

The daily slow stochastic is still embedded over the 80 level, and until its red line closes back under 79 it remains embedded.

The wave count remains intact, so far - as per the prior post. One can see that the nearby up (green) fractal might be the first to break higher. One can also see just how far back the market has placed the prior down (red) fractal - all the way back at the 200-day SMA.

The market feels somewhat shredded by or similarly ruled by the news cycle but so be it. Those are the market conditions at the moment, and they are what they are.

Have a good start to the evening,

TraderJoe