Daily Swing-Line & Bias Flip

Over the weekend, regardless of what you heard about tariffs, the President made demands to spend billions on a Golden Dome (see this LINK), and when the markets heard the words, "Billions more in government spending - and possibly space based" they went bonkers, gapped up, and kept on going into the close. From the chart, below, you can see price is closing over the 18-day SMA, and the daily swing-line has flipped to positive.

This suggests the odds of the continued down move have flipped temporarily in favor of the up move with the overhead resistance possibly shown by the brown 200-day SMA, the upper Bollinger Band and the 100-day SMA (the green crosses).

So, even though we were expecting upward movement since the Mar 13th low, it may have gotten out of the range of a fourth wave. It's unfortunate, but it places the wave-counter in the position of having to wait for a new lower low, or even a newer all-time higher high, before deciding on the best wave labels. 

Literally, and I mean this sincerely, one could try placing an ⓐ or a ⓘ at that low. And that is all well and good. But it is still of minimal help. In other words, supposing one is thinking a diagonal down is forming. OK. But will it be a contracting diagonal or an expanding diagonal? And is this upward retracement even over? Try to keep in mind, the algo's just got a typical buy-signal based on the Bollinger Band methodology.

Rather this is one of those times when one simply needs more waves, or more overlaps to try to gauge what is going on. Yes, the current up wave is in a channel. If it should break lower tomorrow, more power to it. But, if it doesn't?

So rather than propose multiple wave labels at this time, it is probably best to stand back for a bit and just observe whether the power continues to the upside or a break lower immediately occurs. There are other markets that seem to be counting a bit better at the moment (like Gold), and so maybe that is where some attention should go.

Have an excellent start to the evening,

TraderJoe

Neely Style Chart

I have written before how the zigzag indicator, properly configured, can be used to emulate a Neely-style wave chart which can offer some clarifying information on the current wave situation. The ES 4-hr chart is shown below, again using this technique.

With 132 bars on the chart, the current count looks pretty straight-forward. First, there is no overlap of wave (iv) with wave (i) to be a cause for concern. Second, the Elliott Wave Oscillator (EWO or AO) is still within the range of a fourth wave, and the wave (iv) price, itself is still within the 38 - 50% retrace of wave (iii) that would be expected of a fourth wave. This is shown by the Fibonacci ruler on the middle-right. Third, there is alternation between the forms of wave (ii) and wave (iv) at present. This would still be the case if wave four decides to triangle - which is does not need to do. It is optional. Fourth, the third wave down, (iii), is greater than a 1.618 extension of wave (i) so we are supposed to err on the side of a third wave rather than a (c) wave. And fifth, the third wave, (iii), is in a channel with an impulse count visible. 

All of this is only to say that the probability of a downside continued move is slightly greater than that of the alternate three-wave-count shown in red below the price bars. But I'd still only rate the probabilities as about 65-35%, but 35% odds events are not prevented from occurring in any manner.

The beauty of the zigzag chart is that it connects the actual price vertices when used properly to show the real wave terminal points, but it still eliminates a lot of the noise while confirming some or most of the interior wave structures. Further, the actual price bars can be hidden as above to allow the study of the movement without other distractions.

As a completely sidenote one can also observe that some of the sentiment indicators are dead neutral. These include the advance/decline statistics, the McClellan Oscillator, overall bull-bear ratios (not just the AAII sentiment) etc. So, the chart provides what it does, and the alternate structure is clearly indicated.

Have an excellent rest of the evening and the weekend,

TraderJoe

Lower Low, Higher Close (LLHC)

The ES daily futures made a lower low day, along with a lower high, but swung around at near the end of the session to make a higher close. The daily chart is below. P.S. I'm not sure how this chart will look when Monday reflects the settlement, as the settlement might show a lower close as of 4 PM ET.

In any event, the lower low and lower high were enough to extend the swing-line indicator to today's bar. Price still closed below the 18-day SMA, so the bias remains down, and the 18-day SMA is still declining. The daily slow stochastic has recovered from an over-sold condition with both the %K & %D lines closing over the 30 level.

Again, note the upper Bollinger Band has dropped to join the 100-day SMA (green crosses), and this might provide resistance levels for the next rise.

The wave count is very overlapping since the low of 13 Mar, and it might suggest either a triangle or a diagonal in form. More waves are needed, either as additional lower low days to continue the down trend, or higher high days to make a turn upward.

Have an excellent start to the evening and the weekend,

TraderJoe

Lower High, Higher Low (LHHL)

The ES daily futures so far have had a lower high day, and a higher low day (the futures are still trading after the cash close). This has the effect of again changing the direction of the swing-line indicator lower, when it was previously higher as in the ES daily chart below. The local swing-line is shown on the chart below as the blue line between the bars.

Currently, all of these gyrations are taking place below a declining 18-day SMA. Yesterday's temporary up trend indication in the swing-line indicator is negated by the filter of taking place below the 18-day SMA. Still an overall lower low than 5,559.75 is likely needed to claim a clean five-waves-down.

We have counted the up wave since that low as w-x-y with a possible Ⓒ-of-y failure today that resulted in the lower high. If that is the case, it could indicate the weakness that might suggest that the minuet (v) wave of the minute ⓘ wave is getting underway.

Regular readers of this blog should also note that the upper daily Bollinger Band and the 100-day SMA (green crosses) might join together soon. If they do, it might provide the upward resistance to an upward wave when it gets underway and closes above the 18-day SMA.

Have an excellent start to the evening,

TraderJoe

Marginal New High

ES futures made a marginal new high today on the FOMC report out and press conference. The ES 4-hr chart is below.

Price is still in the vicinity of the 38.2% retrace. It might again pop higher tomorrow, but if it starts to get over 50% around 5,808 - 5,810, then it would put the fourth wave in more jeopardy, and we would then be left with only (a), (b), (c) down as per the Monday 17 March post shown earlier. The EWO is still within range of a fourth wave, also.

Have a good start to the evening,

TraderJoe

Cash in a Coma

If you look at the recent move up in the SPY cash index - because of the missing overnight waves - it is very difficult to count. Yet, the ES hourly chart (front month only) counts like a simple zigzag, formerly in a parallel, with downward overlap on the A wave already.

Yes, either a zigzag (iv) or a triangle (iv) will alternate well with the flat (ii) on the ES 4-hr chart, shown previously.

Still tomorrow is FED Day, and we will wait while they hold us hostage to their dots and their pronouncements. 

Have an excellent start to the evening,

TraderJoe

Rubber Meets the Road

My understanding of Elliott's second parallel technique is that once a fourth wave location in an impulse is identified, then a line is drawn from wave two to wave four and a parallel is placed on the end of wave three, as below in the ES 4-hr chart.

So far, the ES is back to the 38% retrace level or thereabouts. The EWO has turned green with about 108 candles on the chart, and it is still in the range of -40% of the maximum negative reading (i.e. two negatives make a positive reading).  And there is alternation with wave (ii)/(b) at this point. At minimum a lower low is needed for an impulse wave. And, often, a fifth wave, should it occur can equal wave (i) in price, with a secondary target of (v) = 0.618 x [net ( (i) through (iii) )].

Please keep in mind, if the Smart Money wants, this is the most likely location that they will try to bust the wave sequence from.

Have an excellent start to the evening,

TraderJoe