Only Two of Us?

Here's a short Elliott Wave video, by a person who also disagreed with Prechter at the tail end of last year, too.

Are there only two of us? Regardless, The Principle of Equivalence says that a trend change hasn't occurred until new highs are no longer made. And Ira's work suggests there is no trend change until there is a lower low and lower high under the 18-day SMA. As of this writing, there was a new higher high at 23:00 in the overnight futures session. Further, there is progress on China tariffs & there are earnings for AMZN and AAPL after the close tonight.

One thing I will add is the equity-only put-call ratio for yesterday ($CPCE on stockcharts.com) was 0.44 which is back well into the Zone of Speculation and lower than the Sep-Oct lows, but not lower than the May lows.

So, patience, calm and flexibility remain the order of the day, and local technical indications will have to provide short-term guidance.

Have an excellent rest of the day.

TJ

Just Thinking Out Loud - 2

In the last post (seen at this LINK), the option of an expanding triangle option was explored. And it is a viable option. Still, there are some contraindications of a triangle that should be talked about. The first and foremost of these is that we don't know that upward movement is over. A certain amount of upward movement could still fit within the range of the expanding triangle, but if it goes too far up, then the expanded flat - or even a further upward wave - should be considered. The second consideration is the time of the Ⓒ wave down. It is quite short in time and looks very sharp compared even to the Ⓐ wave down. So, it might just be the initiation wave of the expanded flat, the (a) wave, with the Minor A wave location moved forward to the location shown in the SPY/ES (CFD) 4-hr chart shown below.

If so, then the current up wave can be counted as w,x,y as part or all of the upward (b) wave of the expanded flat. The time scale shows that the y wave is 2x the time of the current w wave, upward, and the EWO/AO shows it is currently on a 4-hr divergence which is not yet confirmed by red bars.

One implication of the expanded flat is that it could travel significantly lower than just the Ⓔ wave of the expanding triangle. The (c) wave of an expanded flat could travel 1.618 x (a) or even 2.618 x (a) without batting an eyelash. Meanwhile. the Ⓔ wave of the expanding triangle is limited to 1.5 x by rule.

But, even more than that, the expanded flat can start a more complicated series of waves - such as a double-three (double Flat), or a Flat-X-Zigzag to waste more time or create more downward movement if it wants.

So, bottom line, we don't know upward movement is over. Price is still over the 18-day SMA. And IFF downward movement should begin earnest, we should keep two things in mind at the same time. Those are the expanding triangle, and the expanded flat, with its potential extensions.

This is all part of The Principle of Equivalence I have developed which requires some disqualifying information to rule out certain wave segments before proposing that one wave count is more certain, or has better odds, than other.

Until we learn more perspective, patience, calm and flexibility are still the order of the day.

Have an excellent rest of the weekend,

TraderJoe

Just Thinking Out Loud

In the prior post I sketched in some tentative trend lines, labeled them as such, and said they could likely be modified. Part of the reason I did that for the pattern people is to show some of the silliness of trying to call waves in either The Fourth Wave Conundrum, or the (very similar) B wave position. Mostly all of those who have read up on their Elliott Wave know that triangles mostly occur in 4th, B or X wave positions, see more below the chart. So here are the modified trend lines the market suggested today on the SPY 4-hr chart, below.

SPY Cash - 4 Hr - Possible Expanding Triangle

Still in the category of thinking out loud, this pattern is one of the rarest triangles, it is the expanding form of the triangle. I have suggested it because The Elliott Wave Principle suggests that the legs (by rule) should not be more than 150% extensions. So far, they are not in the cash SPY market.

But the pattern is still a suggestion. If price proceeds too far, it may be the Expanded Flat we are dealing with or perhaps a last impulse. 

This may seem a little "loosey-goosey" but recall that I did suggest a contracting triangle was not likely because of the 90% legs. Those just aren't common in contracting triangles. Still, the bottom line is that price is above the 18-day SMA, and it is until it isn't. So, it has been saying the bias is up, and it has been.

Further, with today's action there just isn't a downside trend established yet - even though prices can pull back at any moment.

Two of the key observations Neely has made about expanding triangles - if this is one - are that 1) they are very rarely in the fourth wave position. He has never seen one there. OK. This one would be in the B wave position, adhering to that observation, and 2) the up wave after a corrective expanding triangle can, and often does, fail.

So, let's see how it goes. It's Friday. Fridays often - not always - end on a high note that carries over into Monday and then follow with a Tuesday reversal. It's just a pattern. It may play out or not this time. But many here felt the whippy action is reminiscent of a triangle. Yet we couldn't find the proper way to count such. This may explain the feeling. It may not. Regardless, the whippy and gappy action is downright silly, and often does reflect what happens in a true triangle. So, don't be discouraged. Reversals may come, have come, and though it doesn't seem like it on certain days, they can be sharp. So, use the regular technical-analysis until the count comes along that makes sense. Keep this one in one back-pocket, and the expanded flat in another back pocket.

Stay calm, patient and flexible. And have a good start to the evening and the weekend.

TraderJoe

P.S. The other places triangles show up in an Elliott Wave count is in the Y wave position of W-X-Y and in the Z wave position in a W-X-Y-X-Z, if the triangles are not in the any of the X waves.

Scamper Back to 18-day SMA

Sort-of as promised, the algo's are having their way with this wave as U.S. equity prices, as measured by the daily ES E-mini futures failed to make a new high today and, in fact, headed back to the 18-day SMA, often the neutral point on the chart, to figure out what to do next. The daily chart is below. Note that intraday, the highs of each of the possible upward first waves were overlapped downward today. Also observe the daily slow stochastic is only in over-bought territory and is not embedded.

The new blue trend lines are tentative only and I think they will be adjusted later. There 'might' be a triangle in the making but with lower odds. Why? See the chart below which is the 4-hr chart.

Notice that twice in the last two days, price bumped up against the 90% level. And, while possible, it is not common for triangles to do. So, a triangle bucks the odds a bit even though the trading is whippy as all get-out.

Rather the better odds at the moment are for a Flat wave if prices keep heading lower. For now let's see what prices do at the 18-day SMA. If they close below it again, it would likely tilt the daily bias to down. Then we'll go from there.

Have an excellent start to the evening,

TraderJoe

The Next Parallel in Gold

The likely next parallel in GOLD is shown below on the daily chart. The prior (KCT-style) channel was shown on the 4-hour timeframe.

Given the position of the EWO, one should probably give room for another Flat, or a possible triangle so the EWO has time to come back down towards the zero line.

Have an excellent start to the day.

TraderJoe

An Oddity

I was examining some alternative counts, and I ran into this anomaly or oddity. The Neely 0 - ii guideline has been able to be used for nearly all prior waves. It certainly even works in the initial wave sequence in this series. So, I thought I'd check in what might be the continuing Minor A wave as an alternate to the Minor B wave down. Clearly, one can see that the guideline is broken. And it would break at several of the lower troughs on the close-only chart. So, something is odd.

We appear to be in a fourth wave or B based on the Awesome Oscillator (AO or EWO). I'm going to be noodling this situation a bit. Again. Something seems odd. Ideas are welcome.

Have an excellent rest of the weekend.

TraderJoe

Hitch - 2

Tentative steps were made today to close the gap we wrote about in the prior post on the ES daily chart, below. Today made a lower high and a lower low as shown.

Also of interest, there have now been four consecutive closes below the 18-day SMA, and the daily bias is said to have shifted to downward.

Markets have a funny way of getting to their Bollinger Band or moving average targets, particularly in an environment like this where a news story or a bad key earnings report or a worried hedge fund manager gets the heebie-geebies and decides to unload can quickly and significantly affect the price level, and the algos keep trying to pull things back to make it look like nothing actually happened.

So, in the above chart is there a way to be in a triangle? I think so, but a triangle is atypical with a gap at the low (not impossible, just atypical - or lower odds).

Are there ways that the market could get back down to the lower daily Bollinger Band, to close the gap, and or get down to to the 100-day moving average of closes? I think so, because large gaps in the futures typically fill a bit faster than those in cash, and it is very common for prices to find the lower daily band or their key moving averages.

We'll try to count it internally as best as possible, but we still need some key levels to break to have an understandable count. And, keep in mind, failures can occur. We're pretty sure we caught one this morning, and there may be more to come. They are a sign that the opposite movement wants to happen with some dispatch and length.

That said, you don't need me to tell you that when you put in an order than you think has momentum behind it, the algos go haywire - like you violated a commandment or something - and instantly yank on it back & forth until it almost drives you crazy. And the only way I know to even try to mitigate that is to watch positioning. Trying to initiate late in a move can have serious adverse consequences. We're likely all feeling that as the market seems to be making three-wave Elliott Wave structures. It might continue to do that until certain Smart Money players (and their algo-bots) are more convinced there really is a down trend under way.

That's why Ira invented the swing line indicator - to help determine if there is a real trend over or under the 18-day SMA.

Have an excellent start to the evening,

TraderJoe