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

Outside Day - Up

Today's FOMC meeting provided the impetus for an outside day up, candle, in the ES daily futures shown below. This was not so much for the expected one-quarter percent interest rate cut, but also for the $40 billion surprise announcement of cash-management T-bills to be purchased ahead of schedule. Of course, the banks can figure out a way to use that money, and stock prices rose. This was not much of a surprise as prices were still over the 18-day SMA and the daily slow stochastic was still embedded.

ES Futures - Daily - Outside Day Up

In the process, the prior up (green) fractal was exceeded higher. As with all outside day ups, the low of the day should not be taken out lower within two days or it would be a trap for the bulls.

The wave count is almost entirely indeterminate at this point. A new all-time high is needed for the expanding triangle option we presented which can be seen at this LINK, and it is still a valid possibility. But a compound Flat is also possible - whether the high is exceeded or not. And, that count, too, can make a lot of sense. There are just times in a wave count when one has to be patient until the count clears. This is one of them, and so we need to pay attention to the local technicals.

IF the market continues higher, then the upper Bollinger Band becomes the next target. Still, stiff retraces are possible at any time.

Have an excellent start to the evening,

TraderJoe

Candle Confirmation

Friday's "spinning top" or "doji" candle was given a candle confirmation today as shown by the daily chart of the SPY cash ETF, below. In the process, the latest "three-touch" trend line was broken to the downside.

This could mean that the 'c' wave of an expanded flat correction since 18 Nov is complete, but the evidence is only preliminary in the fact that Friday's higher high occurred on a divergence with the EWO as shown. Also, the swing line has a lower low but is still above the 18-day SMA, so the two cancel each other out. Again, price is still above the 18-day SMA, and the daily slow stochastic is still embedded. As a brief reminder, we showed the expanded flat potential in the post at this LINK.

So, IF the expanded flat count is correct, the market should start down in a really substantial way over the next couple of days. And, if it is not correct, the alternate count is that an expanding diagonal ended at the low on 21 Nov.

There should be lots of news to ponder over in the course of the next week, including an FOMC decision and press conference on Wednesday. Because of the conflict in the local technicals (they are all not in gear) calm, patience, and a high degree of flexibility are still required - both in wave counting and in trading.

Have an excellent start to the evening,

TraderJoe

Spinning Top Candle - Of Course, Requires Confirmation

U.S. equity prices early on as measured by the ES daily futures made a higher high day and then faded somewhat by the close. We are showing the OHLC version of the chart below, but the bar translates into a weak spinning-top candle formation as the body would still be green.

The swing-line indicator indicates there is a higher high after a lower low above the 18-day SMA and the daily slow stochastic obtained embedded status for a second day. So, the bias is up until prices again close below the 'line-in-the-sand'.

Today's higher high exceeded the second up (green) fractal back from 12 Nov. And although we have shown a way to count a completed wave, candle confirmation is needed in the form of a substantial closing-lower candle. Absent that, there is not much on the chart yet.

The wave action is whippy intraday (as shown by today's 30-min candles) and this is interesting given a $VIX which is down in the 15 - 16 level. We should note today that the $VIX closed a cash gap from way back on 26 SEP 2025. Interesting, but nothing dispositive yet.

There are lots of ways to see that a minimum of a pullback is due, even just considering the waves since the late November low. And, although nothing to the downside will surprise us, we must be patient until the market decides the time is right. As we all know, next week is an FOMC meeting week. Perhaps the market will decide that time is the right time.

Have an excellent start to the weekend.

TraderJoe

Grinding, Stalling & Swinging

The wave counts are really getting strained. One almost has to look at the structures with one eye closed and the other one squinting to see what the machines are doing to the market - grinding for hours and swinging leisurely at other times to make waves that waste a lot of time and make little progress. For our part, it looks like we called the internal structure properly in the prior post.

We had no idea that such a lengthy diagonal would form in the wave structure. But, it apparently has. I say apparently for three reasons, 1) we don't know upward movement is over yet, though the odds are getting better and better, 2) we do not have diagonal confirmation yet, in the form the of the start of the diagonal being exceeded lower in less time, and 3) one could put the label iii at the high close on Friday 28 Dec, and label all but today's breakout as a triangle. I have no qualms with doing that. It would be in line with The Principle of Equivalence. However, because wave iii was not on the exterior of the parallel it would not have been as predictive as this original labeling. 

Further, we said the diagonal could still extend until or unless 6,812 were exceeded lower. It hasn't been yet. That statement is still operative, and it explains the timing of some of the retracement waves. There was not much interesting in the wave structure until about 3 pm today when a very, very modest decline began. However, we do now have the SPY cash and the ES futures making new highs on the same day - today. That was not the case yesterday.

Should the market start downward in earnest (which it is not obliged to do, given the internal machinery) the next questions for a wave count are 1) whether either of the cash gaps fills, and/or 2) whether a low under the start of wave i is made or not.

Have an excellent rest of the evening,

TraderJoe