Thursday, April 9, 2020

The Wedge Count

Today's higher highs came on the additional actions by the U.S. Federal Reserve. However, on the ES 2-Hr chart, below, they are diverging (currently on the Elliott Wave Oscillator), and the majority of the day's volume is classified as down volume, not up volume.

ES Futures - 2 Hr - Wedge?

So far, if this is a Minor C wave up, then it has taken more time than the Minor A wave, up, as well. Wave minute ((v)) of C can be classified as over in one count we posted today, or it could have one more spike higher.

Bottom line, today, was that 'significant' down movement really didn't start today yet. If this is truly an ending diagonal C wave, then it would be expected to retrace all of Minor B in less time than the C wave took to form.

Have a good start to your evening, and to your long weekend.
TraderJoe

Wednesday, April 8, 2020

Marginal Higher High

Today made a marginally higher high wave, and then fell off a bit. In order to count the wave degrees properly, this hourly pattern on the ES futures would appear to be best described as three-wave sequences.

ES Futures - 1 Hr - Potential E-D for C

Wave minute ((ii)) was a 38% retrace. The up wave on the 5th to the 7th is likely not a five-wave-sequence because the middle leg - shown above as iv to v of (a) - would be "too short" for a third-of-a-third in comparison to the waves immediately preceding it, and after it. It is worth mentioning that two of us arrived at similar conclusions independently.

Have an excellent start to the evening.
TraderJoe

ES Futures - 5 Min - FED Induced Impulse



Here is the alternate count that might finish the diagonal.





Adding the chart with the FLAT possibility. But, as a diagonal, it was exceeded in less time than it took to build




Tuesday, April 7, 2020

Whippy Day

The easiest way to explain what happened today is with reference to the daily chart of the ES futures below. Price gapped up overnight - as was expected in a continuing C wave higher (from yesterday's chart). But, the gap up actually "gapped up and over" a previous price gap shown on the price portion of the chart in the black circle.

ES Futures - Daily - Whip around

Price continued to head higher until it ran into the upper daily Bollinger Band shown on the chart, and then, because a gap-over-a-gap would not have filled that gap, then, with the daily slow stochastic in over-bought condition, the "Smart Money" at least took some profits into the upper daily band. (They may have sold more aggressively, but they at least took some profits.)

Is the up wave enough for a C wave higher? It is. Is there any conclusive proof that price has started lower in a meaningful way. No. There likely isn't. Although today is a Tuesday reversal, and has the look of another weak gravestone doji, there is no confirmation. Even from the daily chart, such a candle should be followed by a significant closing lower candle to better confirm the doji. Secondly, a close again below the 18-day SMA  and below 2424.75 would still be needed to even negate the current uptrending SwingLine.

If, on the other hand, price catches a meaningful bid on the 18-day SMA, then it is possible to make a more complex correction upward. Let's see how it goes.

P.S. I sent a copy of the potential large ending diagonal structure that may have ended in February to Todd Gordon at Ascent Wealth Management. That count, which none of their team has contemplated yet, is at this LINK.

Have a good start to the evening.
TraderJoe

Monday, April 6, 2020

FED Wins Half the Battle

In an earlier blog post we discussed a minimum configuration for the end of "five waves down". (You can see that post at this LINK). We continued to count for an impulse wave, as that is what Elliott theory tells us to expect, first. With last night's overnight gap up, and today's higher high the case for an impulse wave, lower, got severely less probable. Could one still happen? Yes, but the odds are much, much, lower. Please review the chart below, and I will explain.

ES Futures - 4 Hr - Diagonal

Taking as many factors as possible into consideration, it appears a diagonal count lower fits best for an Intermediate wave, lower. The factors are these: a) Minor 5 is shorter than Minor 3 in time and in price, b) Minor 3 is shorter than Minor 1 in time and in price, c) wave 4 is shorter in price than wave 2 and overlaps wave 1 without exceeding the end of wave 2, d) each of Minor wave 5 and 3 have divergence on the Elliott Wave Oscillator, and e) any reasonable parallel has now been broken to the upside. 

So, the only factor that did not work out in a pristine manner is that wave Minor 4 is slightly longer in time than Minor 2. Well, that is typically viewed as OK in Elliott wave work. But, one of the key considerations is that Minor wave 2 is the largest upward wave on the board. Unless it were part of a triangle - a solution we tried - it would be a degree violation. And, the fact is that the wave is now part of the triangle's cousin - the diagonal. We explained in a previous post how the patterns are cousins because the three-wave sequences can fit into either - given the right circumstances.

Thus, the potential degree violation for this wave 2 is worked out. I fully admit I did not catch the exact the diagonal at the time it formed. But I was looking for upward waves to A, as the minute ((c)) waves of Minor wave 4, and they occurred. Last night, the impulse count said there should have been a downward wave. There wasn't. That results in the diagonal count.

Don't think it's a diagonal? Put yourself in the shoes of a pure bull who is sure we are going over the top again. Nothing would better fit that bill than to have ended a Intermediate (C) wave down as a diagonal.

But, you know diagonals, They could be ending or leading. In a Leading Diagonal wave 5 can not fail. It didn't in this case. That makes the odds about 50:50 from here - purely on the basis of a wave count - as to whether we go over the high again or not. 

For now, though, we need to see how this retrace wave progresses. It could have surprises. If there become only three waves up, it could easily go under the lows again. Remember, this whole FED Intervention process with the threat of QE Unlimited is specifically to do their best to fool the wave counters. 

So, get some sleep and have a good night.
TraderJoe

Friday, April 3, 2020

Battle at the 18-Day SMA - 2

It should be abundantly clear from the partial daily chart of the ES E-Mini S&P Futures, below, that, for the last six-out-of-seven days, price has contacted the 18-day simple moving average (SMA) shown as the red curve. Today was one of those days.

ES Futures - Daily - Battle at 18-day SMA

Prices today initially traded higher overnight, then lower, but ended the session closing just under the 18-day SMA. With the close under the 18-day SMA, the local price bias remains lower.

Also on the chart, I have also shown the current SwingLine function since the Minor wave 3, low. This is the black line. Of interest is the portion to the right of the (b) wave. This portion of the chart has both a "higher high" and a "lower low". These are shown at  the arrows. This is a neutral pattern and not a trending pattern. A trending pattern would be higher highs and higher lows, or lower highs and lower lows.

However, with today's slight higher pattern the SwingLine has briefly turned up. This has a significant implication.  IFF (If and only if), there is a new low below 2424,50, before there is a new high over the previous wave 4 high, then this would turn the SwingLine into "Trending Down". Why? That is because there would be lower lows and lower highs and they would be under the 18-day SMA.

If this occurs, it would likely indicate with a much higher degree of confidence that wave Minor 5 was underway. Note that even if the current Minor 4 was exceeded higher, it could not start a trending SwingLine pattern higher, because then there would just be the current lower low, and then the new higher high - which is not a trend in the SwingLine.

Sunday-night to Monday-morning may help resolve the current neutral state of this indicator. Let's see how it goes.

Have a good start to your evening and to your weekend.
TraderJoe


Thursday, April 2, 2020

Lower Low Day - 2

The futures made another lower low day today based on the latest unemployment claims filed. That lower low made five-waves down in the futures - which is currently seen as the minute ((i)) wave of Minor 5, lower. This is shown in the half-hourly chart of the futures below, and wave minuet (v) of minute ((i)) occurred on a divergence with the Elliott Wave Oscillator.

ES Futures - 30 min - Minute ((i)) Completed

At that point, a rally began but it occurred in only three waves, with c = 1.618 x a to the pip.  We waited for a clear fourth wave, and a higher high to happen without overlap. It did not.

There was then a three wave down move in a channel, which was a zigzag, and in which the b wave of the a-b-c move was a Flat. The c wave proceeded in an unmistakable non-overlapping five waves lower. At that point, there was another rally that broke out of the channel and may be counted as a five-wave sequence. You are free to check the counts from the short-term 5-minute chart below.

ES Futures - 5 Min - Structure From Minute ((i)) low


Thus, it would seem that a structure like this is trying to form a double zigzag, upward, or perhaps a larger flat wave for the minute second wave of wave Minor 5, down.

As you can see from the first chart, minute ((ii)) - if it ended here - would be 'very' short in time compared to minute ((i)), so we don't think it has ended here, both because of the length of time, and the current upward count. And, so far, the upward wave has retraced less than 50% of the downward wave.

Well, it's a correction, and the market is doing its level best to confuse. 

Have a good start to the evening, and let's see what tomorrow's payroll employment report entails. Rest up.

TraderJoe

Wednesday, April 1, 2020

Lower Low Day

Yesterday, we looked at the possibility of concluding the fourth wave up with a diagonal. But, we specifically said,

"We suppose something like this might be occurring with the Minor 4th wave, but it remains to be proven."

We even drew dashed lines on the chart to indicate that their positions (especially the lower one) was flexible. With today's lower low day, the diagonal possibility was both disproved and formally invalidated. We let readers know in the comments when it did invalidate. The lower low day showed virtually no 'inflows' into the market on the first day of the month. It turned the Swing Line lower, and again set price below the 18-day SMA, or 'the-line-in-the-sand", thus setting the daily bias to negative as well.

ES Futures - Daily - Swing Line and Bias Down

What set the market on edge overnight was the revised expectations for the virus. Buyers pulled their bids on the news.

For those wishing to know how the fourth wave ended, as I noted in the comments, I could only conclude that price finished the upside five-wave move with this ugly, but legal, triangle.

ES Futures - 2 Hr - Ugly Triangle

Price is now below the e wave of that triangle, and also traveled below the c wave. And, hopefully, this example will serve to show another reason why triangles and diagonals are "cousin" patterns. The three-wave sequences in each can be interpreted for either, until one or the other is proven.

Well, let's see how tomorrow goes. Have a good start to your evening.
TraderJoe