Absurd Futures Rollovers

As a sanity check, I went back through several years of on-line historical data to look at the differences in the futures roll-overs from the lead contract to the next contract using the ES E-mini futures. The sample of data is listed in the table below. To conduct this study, I used the closing prices on the date which was the fifth day prior to the expiration of the lead contract and compared it to the roll-over contract on the same date. The differences are shown in the right-hand column.

Having followed futures trading for most of the 2000's, it was my observation that the futures roll-overs being a premium of -6 points to +6 points just wasn't much of a problem. It was seemingly pretty much at random, and it was a fairly small percentage of the price level. For example, at 6 points of 1,770 points it was about 0.33% of the price level at the time.

But, after the Covid years, the futures premiums have absolutely exploded. Not only are the numerical levels much larger in absolute value, but in terms of the price level the premiums are now 0.85% to 1.20% of the notional price.

This situation is absurd. First, why does it cost one much, much more to roll a contract now than it did before? As shown above, this is not just a function of the price level. Second, one now needs to consider how this extremely absurd amount of roll-over will affect chart structures (triangles or diagonals in progress, for example) when using the roll-over contracts (typically /ES in ThinkorSwim, or ES1! in TradingView).

I have highlighted this matter before. The point is that the roll-over used to be largely a non-event. And now it has become a major event that has to be managed for some reason. And that reason simply is not clear.

This is the second post since Thursday. Have an excellent rest of the weekend. 

TraderJoe

Simplest Is Best - Right Now

On the intraday chart of the ES 30-min (March 2026) futures, simplest is best right now. As the chart shows, two parallels can be drawn around current price action. They should be respected until they should break, if either does.

The overnight pounding action from above on the 6,820 level tends to indicate a triangle, but that is not locked in stone. If it is a triangle, the up wave can be an a / b sequence as shown. But, if the structure is some kind of quasi-structure, or a w-x-y, then the up wave could evolve as an impulse sequence shown as the alternate i / ii. The Principle of Equivalence still tells us to mind our p's and q's until we get some waves with more definitive lengths to the upside or the downside and potential channel breaks.

The daily count options have not changed. To the upside is perhaps the potential daily expanding triangle. And to the downside is still the potential daily expanded flat.

Yes, one could bring in a lot of other considerations: the Santa Rally, the 'holiday effect', ending the year and the quarter on a high for both political gains and capital gains purposes, the typical holiday low volume, etc. But in an Elliott Wave blog, the main consideration is whether the price pattern is an impulse or not. So far, there are three-waves-up. The Smart Money can do a lot of things: gap up, grind up, gap down, etc. Try to use the parallels to check what path best fits and accept the results.

Keep it simple. Have an excellent start to the evening and the weekend.

TraderJoe

Trend Day

Today's lower low and lower close below the 18-day SMA has firmly set a down trending wave in motion as per the March 2026 ES Daily chart, below. This occurred after prices initially rose overnight to the underside of the line-in-the-sand before falling off.

The next target on the chart would be the combination of the lower Bollinger Band and the 100-day SMA. The daily slow stochastic has quickly moved from embedded higher, to over-sold. The hourly count looks like this at present.

It's a bit too early to say whether an impulse is forming or not.

Have an excellent start to the evening,

TraderJoe

Back to the Line-In-The-Sand

US equity prices, as measured by ES futures had an inside day today. This temporarily (at least) turns the swingline indicator up. With prices not making a new daily low today, the 18-day SMA rose up enough to cause prices to contact it as shown in the chart, below.

Meanwhile, a new up (green) fractal formed at the prior high, and the regular calculation of the daily slow stochastic lost its embedded status. The only day it can get it back is the next day (tomorrow) without going through the whole rebuilding process again. Because of the prior day's lower low and potential lower high, IF a follow-through down bar occurs tomorrow and there is a close below the 18-day SMA, it could start a trend lower. It hasn't happened yet, but we'll be on the lookout for it. 

For the moment things are dead-neutral. From a wave count perspective, the downward count remains the expanded flat, while the upward count remains a potential expanded triangle.  Again, keep an eye on the local technicals until the situation clears. 

Have an excellent rest of the evening,

TraderJoe

Some Clarity in the Dow Futures - The Benefit of the Doubt

As most readers here know, the Dow and its futures have been making two new highs (along with the Russell 2000) while the ES and NQ futures have made only one new high. When the first new Dow high was made, we commented on the likely presence of the triangle also seen below between the blue lines in the middle left of the chart.

Based on actual measurements of all waves, and where there are five-wave-sequences, and where there are not, this is the only way we can legitimately count the Dow futures and still follow the rules and guidelines of Elliott Wave, along with the degree definitions.

So, after the running triangle - which is still bullish because of the higher 'b' wave - a thrust out of the triangle occurs. This should end a wave, and we think it does end the Minor A wave at the tail end of October. But anything upward is likely not a diagonal, as the low of wave (iv) has not been undercut yet.

Then, there appears to be three waves down to minuette (a) of minute ⓐ, and a minuette (b) wave, up, followed by a minuette (c) wave, down to make a minute ⓐ wave down in three waves as an expanded flat. Then, a similar three-waves-up occurs to make a minute ⓑ wave, up.

Again, based on measurement, and how high typical 'b' waves go, this is about the only way we can read the chart. The suggestion from this chart is that there will be, or should be, a strong minute ⓒ wave down in five waves to below the level of (iv), and even possibly below the level of the prior wave iv. This should make the Minor B wave down. And yes, there might be more of the minute ⓑ wave to go, but it looks nearly completed.

In any event, the Fibonacci ruler shows some downside targets in the event a slide begins before the holiday. The 2.618 target - which is very common - is below the chart border. Readers of this blog should replicate the measurement if they are interested.

We also ask you to carefully review the degree labeling. Note that (a) of ⓐ is larger than 'e' of (iv). Also note that (c) of ⓐ is also longer than 'c' of (iv). Note, too, on the way up, that (a) of ⓑ is about the same size as (v) of ⓥ of Minor A. Then, ⓐ down, is longer than all of (iv), down. So, the degree definitions appear to work well, too.

Then why do we call this labeling 'The Benefit of the Doubt' count? Because it is possible that this last wave up in the Dow is the last wave up as a C wave. But we simply will not label that option until and unless the minute ⓐ wave down is exceeded lower. Right now, the degrees of the waves don't require it.

Meanwhile one item of confusion to check out this weekend is whether the SPY (cash) made a new high this week. TradingView says, "No, on the daily. Yes, on the 4-hr." How does this figure? But Barchart says, "No, on both the daily and the 4 hour". I do understand there are some after-hours considerations here which is why I tend to use the futures a bit more.

This is the second post since Thursday. Have an excellent rest of the weekend,

TraderJoe

Discount Double Deceit

Wednesday in the ES daily futures was an outside day up. The low of an outside day up should not be taken out within the next two sessions, or it can be a trap for the bulls. The next day took out the low, potentially setting the trap, but on that Thursday bar the high of the prior bar was also taken out, creating another outside day higher. The first outside day up on Wednesday just plain lied. Then, the low of that Thursday bar should not be taken out within the next two sessions, or it can create a trap for the bulls. The low of Friday's bar took out the low of Thursday's bar - again potentially springing the trap. The Thursday bar lied, too.

ES Futures - Daily - High Made 90% Level

In the process, price left a gap at the local daily high and got down to within about ten points of the 18-day SMA but didn't quite hit it. At the end of the session, the daily slow stochastic remained embedded.

The Fibonacci ruler is shown so that you can see that the highest high, so far in December has reached the 90% level which, by rule, can define a flat wave.

Meanwhile the Dow did make a new higher high over both the late October and early November high. Again - for the intermediate term - the count remains indeterminate for a bit. For the shorter term, yesterday we showed the chart at this LINK and said a larger flat wave certainly could result in the whippiness. So far, it appears to have although we would like to see a finish to this down wave on Monday or Tuesday to more firmly conclude that.

I know most readers would like more clarity than I am providing here: so would I. Still, we have said the risks are high and to expect a whippy, volatile market and that's what we are getting, so far. 

Hopefully, there will be some additional thoughts over the weekend. Have an excellent start to the evening.

TraderJoe

Local Count

Yesterday we said much of the current wave count was indeterminate and we needed to wait for some clarity. Today's movements offered a bit of a look into the local count, particularly if we use the ES 4hr chart, and the zigzag indicator - which we have often used to mimic the method Glenn Neely uses to examine wave points.

So, in the above chart, the terminals of the waves are accurate (right up until the last one which may still be under development).  But at least it shows part or all of the up movement in the after-hours session to the new higher high.

So, we have the five-waves-up ending with the expanding diagonal which is by The Principle of Equivalence can be an a/i wave. Then, we have a flat 3-3-5 sequence with only the marginal new highs. The substructure of the :3 on the FED meeting rise is not observable here, but I could not count it as a 'five' of any type on the OHLC chart down to the 15-minute level. So, now the question is, "is that b/ii done and over, or will it make a larger Flat wave?". I don't know the answer to that question, as that is where more uncertainty comes in. I'm showing you what I do know about the current count. I'm not guessing what comes next. Yes, it could be that even a larger b wave is in the offing. This is where topping structures get nasty.

Again, in the bigger picture, the expanding triangle is still on the table. IF so, this would be part of the ⓓ wave, up. Or we could still be making a much more complex flat with this as some kind of ⓧ wave. That remains to be seen.

So, let's take it step-by-step and observe how things develop. Clearly, this remains a time for caution, calm and flexibility. Throw in a good mixture of developing holiday spirit and patience as well.

For now, have an excellent rest of the evening,

TraderJoe