Thursday, August 7, 2025

Market-suggested trend lines

As of today, the market has suggested slightly contracting trend lines shown in the daily SPY cash index, as below. At this time, they are tentative only.

SPY Cash - Daily - Suggestions

While we were able to count an impulse down, and then either a full or partial (we think the latter) retrace today, the market path is pretty unclear just now. As the daily ES chart below shows, price settled just above the 18-day SMA in a Doji candle.

ES Futures - Daily - Neutral

The slow stochastic is stuck in the middle, so this summertime chart is about as neutral as it can get. Still, taking out yesterday's low - tomorrow - would be more bearish than it would be bullish as it would take out the low of an outside-day-up in less than two sessions (IF it does).

This is a great time for patience, flexibility and small commitments, if any. We're doing our best to count locally, but the number of choppy diagonals on the chart is astounding (see last comments in prior post).

Have an excellent start to the evening,

TraderJoe

Tuesday, August 5, 2025

Close below 18-day SMA

The ES daily futures today had a close below the "line in the sand", the 18-day simple moving average of closes, as shown on the daily chart below.

ES Futures - Daily - Close Below 18-SMA

This is the second such close and follows a "battle for the line in the sand". The daily slow stochastic is not yet in oversold territory.

With the overnight lower low, the swing line indicator is currently pointed down but needs to undercut Friday's low to firmly establish a downward trend.

From an Elliott Wave perspective, we are watching two consecutive rejections of the 62% Fibonacci level. The first one occurred at the ES 6,377 - 80 level in the overnight session, and the second one occurred after the morning downdraft at the 6,350 level. And the lower low in the overnight may be a bit of a clue.

So, this is a good time to watch the developments carefully and see if a better-defined wave sequence takes place or if price will just bounce around between the Bollinger Bands. We have made the case for the former, but it's up to the market to decide.

Have an excellent rest of the evening,

TraderJoe

Saturday, August 2, 2025

The Dog Didn't Bark

In the short story The Adventure of Silver Blaze by Sir Arthur Conan Doyle, Sherlock Holmes helps solve the mystery of the stolen racehorse by noticing for Scotland Yard, that "the dog did nothing in the nighttime." When one would have expected the dog to be barking - with the theft of a horse underway - it didn't. And one had to wonder why. Here in the markets, on the long-term count, we are faced with a similar clue. Ask yourself the following question as you look over this 2-weekly chart of the S&P500 cash index, "Is there anywhere on the chart that even remotely looks like a properly formed sideways triangle?

SP500 Cash Index - 2 Weekly - Potential Diagonal

If you answer the question honestly, you'll likely arrive at the same answer I have. A curt, "No". At this scale, there is no grinding sideways pattern that can clearly form an overlapping a,b,c,d,e which has the characteristic 62 - 78% wave retraces. So, since triangles often (not always) precede the last move in a trend, could it be that - for some period of time - this potential Minor B wave down will form as a triangle prior to the last move up? Maybe. It does not have to, but it is one of the good possibilities.

Degree Labeling

Notice in this count that within Intermediate (3) then Minor A is shorter in price and time than all of Intermediate (1), the previous higher degree wave in the same (up) direction, so that that this wave can qualify as a true subwave. Also, the notice the same is true of Minor C within Intermediate (3). Next, we also note within the potential Intermediate wave (5), then this Minor A is also shorter in price and time than all of Intermediate (3), the previous higher degree wave in the same (up) direction, so that this wave, too, can qualify as a true subwave.

So, what does this mean for potential Minor B? Well, within this wave there is a choice of two prior degree waves in the same (down) direction. So, in terms of price Minor B must be shorter in price than Intermediate (4) down. But, in terms of time, not having been in this situation before at such a high degree, it may be that a triangle for Minor B might have the option of being as long in time as Intermediate (2). Maybe longer because of the nature of triangles to move price sideways, but that remains to be seen.

One's wave counts should try to respect degree labeling to the extent possible. If the degrees are unclear, then it is likely that something hasn't meshed properly in the count.

Have an excellent rest of the weekend,

TraderJoe

Thursday, July 31, 2025

Outside Key-Reversal Day Down

From the highest high in the trend count, probably the high of the Minor A wave, up, today made an outside key reversal day down, as shown in the ES daily chart, below at the cash close.


Although Amazon and Apple earnings are not out yet, this is also accompanied by the loss of the embedded status of the slow stochastic and a close approach to the 18-day SMA at this time. The only day the embedded status can be regained is the next day (tomorrow's close).

The high of an outside day down should not be taken out within the following two trading days or it can constitute a trap for the bears. With this in mind, it bears watching the impact AMZN and/or APPL may have on the count. Further, the tomorrow is the first of the new month with possible inflows from the usual passive sources, so some sort of correction may result.

If price starts significantly trading down through the 18-day SMA, and closing there, then the Minor B wave is more likely underway.

Have an excellent rest of the evening,

TraderJoe

Wednesday, July 30, 2025

Copper Tariffs and Earnings

One more trip over the high is possible yet not required. The black and the red count below are equivalent until they are not by The Principle of Equivalence. This is the SPY 4-hr CFD. Prices today were whipped about by the FOMC results, the imposition of 50% tariffs on copper, and by mega earnings after the close.


It is possible that Minor B started today, but we must watch into tomorrow as the institutions might want to bite on the mega earnings news. The red count allows another trip over the high. But the wave counting remains ugly with few good true impulse waves. So, we will learn what we can from wave invalidations or resistance points.

Have an excellent start to the evening,

TraderJoe


Monday, July 28, 2025

Three

After three daily closes above the upper daily Bollinger Band, price today made a higher high, a higher low and a lower close. The three closes higher than the upper band dropped the odds to about 3 - 5% of today's close being outside the upper band, and it was not. (While the futures are still trading as this is being written, we think it likely represents the 4 PM EDT settlement time of the futures.)


Note that the daily swing-line indicator is still up with higher highs and a higher low over the 18-day SMA. The daily slow stochastic is still embedded. And until the red line of the slow stochastic closes under the 79 level it is possible there are some pros (or Smart Money machines) that might still try for a higher high against the upper band again.

From an EW perspective today we counted a possible non-overlapping fourth wave down, (iv), as an Expanded Flat. So, a fifth wave up, (v) is possible tomorrow. But, being Tuesday it could also be a turn day, as well.

It is likely that the prior swing-line low of 6318.75 would be of interest as it might indicate the end of an uptrend, and, if broken, would likely be below the 18-day SMA.

Have an excellent rest of the evening,

TraderJoe

Saturday, July 26, 2025

Waiting Patiently

We promised in our last video that if additional waves higher were made this week, it would require a reconfiguration of the Minor A wave higher. Here is that reconfiguration, Essentially, we dropped the degree of the contracting leading diagonal one degree to minuet degree, symbol (i), composed of the five sub-minuette degree waves, symbols i-to-v. Then minute  is composed of the five minuet degree waves symbols (i)-to-(v). This count has the additional benefit that minuet (b) is shorter in price and time than minute , the previous higher degree wave in the same direction, preserving degree labeling definitions.

ES Futures - Daily - Minor A Reconfiguration

In this configuration, Minute wave and Minor A now has a new limit shown on the chart of 6,633 because again the third wave in the futures is shorter than the first wave. 

Critical note: since minute  is now an impulse, and the leading diagonal is only a minuet degree sub-wave, it is possible for this minute  wave to be an ending diagonal because it is at a different degree. So, it can either be an impulse or an ending diagonal wave. So, first we will show the current SPY 1 Hr chart in the impulse configuration as another extended first wave, at minuet degree, 

SPY Cash - Hourly - Minute  Impulse Configuration

We are showing this configuration as the extended wave (i), symbol x(i), because minuet (ii) is only a 38% retrace on the first up wave as shown by the Fibonacci ruler on the right. As you know by now, this is highly characteristic of extended first waves. We note that for the SPY, the lower wedge trend line has not even been broken yet!

As an alternate, we can drop the degree one level for the diagonal configuration as below.

SPY Cash - Hourly - Minute  Alternate Diagonal Configuration

If a diagonal does form, then we would expect a 50 - 78% retracement of the entire up wave for minuet (ii). In that case, the attack on the lower trend line would fail rather dramatically. Although the preferred case is the impulse, because it is simpler, the diagonal alternate is noted for completeness and as another way to extend the Minor A wave in time as the diagonal would have to extend and further cycle through waves (i)-to-(v) yet again.

Have an excellent rest of the weekend,

TraderJoe