Thursday, March 30, 2017

Five Waves Up

Here is the update of the very short term chart, as we counted it in the live chat room this morning up until about 12:40 pm ET.

SP500 5-minute Chart

As you can see a very clear five waves up was made to today's high. Wave ((v)) of 5 ended on a very slight truncation of -0.06, and on a clear divergence with the Elliott Wave Oscillator, but several times through-out the day I had said, "now I don't care if wave five of five truncates", and it did! It wasn't possible to call the truncation that until there was downward overlap of wave ((i)), which did occur, but at least we were on the lookout for it.

As an aside the NQ futures made another new all-time-high today.

So we now have "five waves up" and it sure looks like a larger degree minute ((a)) wave. The truncation sure makes it suspicious, and the retraces are not very deep at all - lucky to see 38%.

Here is what the waves look like from the high on the SP500 2-hour chart. I'll discuss the alternate and invalidation after the chart.

SP500 2-Hour Chart

Price did break the channel on the two-hourly chart with five-waves up. However, the up wave has some of those characteristics of an "A" wave that I mentioned.

So, the two best options are that a 4 ended at 2322 on 27 Mar, and we are either in minute ((a)) up, in what could be a triangle or an ending diagonal wave. Or, that we made a minute ((i)) wave up today, and we are going straight to the high to finish that wave 5, up, in an impulse fashion.

Unfortunately, the invalidation level for both of those scenarios now drops all the way back down to the 2322 low. Only if the 2322 low is exceeded to the downside first (before a new all-time high) would it be possible to put an expanding diagonal downward back on the table. That is because we currently have "five waves up", and that must be respected until we can no longer count that way.

The daily EMA-34 is at 2350, and price finished over that, so the daily trend remains up on the until it does no longer.

After we counted the likely ((v))th wave truncation to end wave 5, today, we got a small-degree three-waves down, and then a rebound in which price only returned to about 92% of the high and failed to make a high over the truncation level or over the prior high. But, it did exceed the key 90% level for the possible (b) wave of a flat correction. So, it wouldn't surprise if tomorrow had some down movement in it, although (b) waves can be quite wily, and this one might not be done. Even though the (b) wave up did appear to finish in the cash market, and a possible (c) wave begin in the downward direction, the after-hours market may have it's own ideas.

Here is just a reminder than tomorrow is the last trading day of the month and the quarter, and so there might be some "window dressing", which tends to create some volatility, and then Monday would be the first day of a new month and a new quarter that has the possibility of the usual inflows from pension funds, 401k's, dividend reinvestment plans, and company bonuses.

Until then, have a very good night.
TraderJoe

Wednesday, March 29, 2017

Short Term - The Eight Fold Path Method

So, for a large part I'm going to show you the SP500 5-min cash chart from the live chat room today and just let you look it over with a few exceptions. Right now The Eight Fold Path Method says to look for a first "five waves up", and so that is what I am doing. This "first five waves up" to 5, if it completes properly, would either be a minute ((i)) wave, or a minute ((a)) wave on intermediate term charts.

SP500 5-Minute Cash Chart to Minute ((i)) or Minute ((a))

Wave 1 of this chart was counted as a contracting leading diagonal, and it was a "good call". There was a short wave 2, and then a significant wave 3 occurred on a steeper angle - the trend line of which was not broken. Wave (iii) of ((iii)) of 3 occurs on the maximum of the Elliott Wave Oscillator, and wave ((v)) of 3 occurs on a divergence and on either the 100% x 1 wave or 127% x 1 wave depending on exactly which peak of 1 is used for the measurement. In either case, it is exactly on a Fibonacci relationship, exactly as The Eight Fold Path Method suggests.

Today I called for a triangle wave 4 which ended precisely on schedule - to the five minute bar. Since then the high of ((b)) wave was broken to the upside, and the first wave of 5 labeled as ((i)) is a contracting leading diagonal. Here's one part of the count that I really want to cover.

Since wave 1 is a contracting diagonal, then wave 5 should not be a diagonal in it's entirety. This is a wave guideline, not a rule. It derives from the principle of alternation. I have already counted wave ((i)) within wave 5 as a contracting leading diagonal. This is OK. It is still just a sub-wave of 5, not all of wave 5. The day may have ended with wave ((ii)) of 5 complete or near complete. If so, there should be a gap up for tomorrow as wave ((iii)) of 5.

Part of the rationale for suggesting a gap up for tomorrow is that wave 5 would be quite short relative to the other waves in the sequence if it were to end here (let alone constitute a truncation).

Further, if for some reason there should not be a gap up tomorrow, then based on where the prior fourth waves are located, I have clearly delineated a Market Reversal Warning at 2348 - 50. This is because there is an ever-so-slight probability of a truncation at the high - since the Dow did not make a new high either. Let's see if we get that gap up. If so, and wave 5 completes properly, then we would expect at least three-waves down in the form of ((b)) wave, or a ((ii)) wave since that is the usual expectation after five-waves up.

In this example wave ((iii)) is a lower degree than ((iii)) and both are lower degree than ((iii)). If we complete a "first five-waves-up" tomorrow I will update the intermediate term charts then. The daily trend is still up until proven differently.

Have a great night!
TraderJoe

Tuesday, March 28, 2017

Three Equal Alternates - 33% Each

When the probability is roughly 50:50, I will tell you that. At this point in time, even though upward price movement has started, the probability is roughly 33% each of three equal alternates. Going all the way back to my weekend video, I have been considering the very strong possibility of an ending contracting diagonal for the Primary V wave. I showed this DOW chart, below.

DJIA - 2 Day - A,B,C of Intermediate (1) Up of Primary V

The completion of an A,B,C up for Intermediate (1) would mean that we are now in Intermediate (2) down which would need to form as Minor A, B, C, downward. That is one clear alternate. The chart below of the Hourly S&P500 Index shows the current partial count for a Minor A wave down as an expanding leading diagonal.

SP500 Hourly Count for a Potential Minor A Wave Down of Intermediate (2)

For this count, there are five minuet waves, (i) through (v) to the minute ((i)) wave of Minor A. Then, there are three minuet waves, (a) through (c) up to minute ((ii)) at just about a 78.6% retrace. And then, there are five minuet waves, (i) through (v), down to minute ((iii)) in a wave than is longer than minute ((i)).

Today's up wave may have completed or been part of the minute ((iv)) wave of such a diagonal, and it is already longer than minute ((ii)), as required by the rules in a potential expanding diagonal. If minute ((iv)) ended here, it would technically be ok, but it wouldn't have the right look, and it could easily go on to form another 78.6% retrace upward.

Then minute ((v)) would also need to form as five waves, and be longer in price than the minute ((iii)) wave.

But, diagonals are somewhat rare structures and we must keep that in mind.

So, countering the downward diagonal idea is the upward idea that wave C of the Dow's 2-day chart above has not completed yet. There are two ways that can happen.

In the first of these two, minute ((i)), ((ii)) and ((iii)) in the above chart are just minuet (a), (b) and (c) of minute ((a)) of a larger triangle, for a fourth wave.

SP500 4-hour Chart - Wave 4 of C As a Triangle with Wave 5 Yet To Come

Such a triangle could help equalize the net distances traveled by waves 2 and 4, because in a triangle the distance measured as "net" is from 3 to ((e)), not from 3 to ((a)), and a triangle could put wave ((e)) back inside the blue box.

While this is possible, it, relies on a triangle, and triangles are a bit more rare, too. But, also there would be two very sideways looking structures. Still, there would be a "clear indication" from a triangle that a "last wave up is dead ahead". This is the second alternate.

Finally, it would be possible just to assume that the March 27 low is the low of wave 4, as a-b-c. And while that would break some wave guidelines, it would not break any wave rules. All it would mean would be that wave 4 would be deeper than expected, and outside of the usuall guidelines for the Elliott Wave Oscillator in an impulse. Well, given how high up we are in the wave structure, such a case is not impossible. The simple zigzag downward for wave 4 would provide good alternation for the sideways wave 2, but, then, it would be shorter in time, than wave 2. Not impossible, but odd. And that is the third alternative.

So there are two of three alternates that spell higher prices, and one that spells lower prices first. At this point in time each alternate has it's advantages and it's disadvantages. But as I said, speaking for me only, I do not wish to get caught up on The Slope of Hope, waiting for a fourth wave that doesn't materialize properly, so I am letting the market tell me - day by day - which count is correct. I am personally neither bullish or bearish : just neutral, patient, observing and counting until the alternates fall by the wayside.

This is a clear example of The Fourth Wave Conundrum, as I have termed it, and is probably the single-most reason why most people dislike Elliott Wave work. Many people (me included) would probably just rather have the correct answer to the puzzle be apparent, rather than work for it. But the market has a different idea. That's just the nature of Elliott Wave work.

For now, have a good evening, and as alternates get killed by various invalidations, we will let you know here.

Cheers!
TraderJoe






Monday, March 27, 2017

Ending or Leading ?

With this morning's new lower daily low in the Russell 2000 Index, there are a clear "five waves down" in the shape of an hourly diagonal, with good form, as shown in the chart, below.

Russell 2000 Index Hourly - Diagonal

Now the question becomes is this diagonal a Leading Diagonal? Or is it an Ending Diagonal? If it is an Ending Diagonal it would be a "C" wave of a fourth wave in the Russell.

If it is a Leading Diagonal, it would be A or 1, of a larger downward wave.

Strictly from the chart at this time, it is impossible to tell which it is. And while there is no reason to go screaming from the roof tops at this time (or ever, actually), it is clear today in the S&P500 was a lower-low, and lower-high day. There is no clear turn around in the S&P. And until there is, a fifth wave count will not be started.

Now is a time for me to evaluate how to avoid getting caught on The Slope Of Hope. The S&P500 breached the 2335 level this morning, and the only way now to continue to form a fourth wave from this location is to form a triangle to equalize the net travel between this as a wave four, and the prior wave two shown in the Wednesday 22 March post. The Slope of Hope in this case means waiting and waiting for a fourth wave that just doesn't develop.

On the S&P500 4-hr cash chart, the Elliott Wave Oscillator has now traveled lower than The Eight Fold Path guidelines, and this is a significant warning signal.

There remains nothing wrong with this two-day Dow chart & count that was shown in my weekend video.

DJIA - 2 Day - Three Waves Up to Intermediate (1)

We're not going to know for sure for a while yet, but if the downward wave gets much longer, then it becomes more and more difficult to give credence to a fourth wave.

For this reason, I will remain patient and flexible until there is a bit more clarity, but I am not looking for support levels in the market. Rather, I am looking for the market to clarify the count.

Cheers and enjoy the evening.
TraderJoe

Saturday, March 25, 2017

Health Care & It's Alternate


I follow stock market wave counts because like most of you I am sometimes interested in things economic, and how they effect us - until they get boring. With that .. here is ..

A Brief History of Health Care

During the 1920s, individual hospitals began offering pre-paid services to individuals, leading to the development of Blue Cross organizations in the 1930s. The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929.

There weren't even insurance companies until the 1920's. Good health care then was largely for the well-to-do, and middle-class. Somehow, sadly, we actually survived several thousand years without insurance companies, and now, of course, some politicians and corporate types couldn't possibly do without them. And, if there is any factual basis for the TV Drama, The Knick, minority populations and immigrants were ill-treated in such a pay-your-way system. Ill-treated is probably kind; I am sure deep in my bones it was actually much worse for the poor than anyone can describe or picture.

Then in July 1965, Congress enacted Medicare and Medicaid under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. And, the United States of America became an insurance company for people of age. And, under Medicaid a certain portion of the poor were then covered, also reducing discrimination in health care.

Later, in 1980 President Ronald Regan defeated then President Jimmy Carter and discarded the proposed Mental Health Systems Act which would have continued funding to local mental health treatment.

And in 2010, President Barrack Obama signed into the law the Affordable Care Act to expand the number of people who could be covered under an insurance plan of some type, and provide a basic suite of essential services, including some level of mental health care.

State of the Art

So, now we find ourselves with a health care system which is largely centered in hospitals and doctors offices, using miraculous imaging technology, advanced surgical tools, and medicines developed by large drug companies - many of whom support candidates friendly to their industry with very large donations to their various campaigns and causes. We still have private insurance companies and we have the federal government also insuring health care for some.

The Result
No matter your opinion, the facts are that somehow this invented-on-the-fly system of health care and health care insurance, along with improvements in food sanitation & disease prevention, has resulted in dramatically reduced infant mortality and increased life expectancy in the United States - from roughly 47 years in 1900 to roughly 79 years today in 2017. It's hard to argue with the result. We're doing pretty well, and now the issue seems to be, "do we want to continue as is or change things?"

Change Imperative
If we're going to change, as a group, we should have pretty good reasons for doing so. And this is where things can get sticky - because then our oughts & shoulds will likely become involved.

Economic Lesson
From a purely economic perspective, the Medicare experiment has taught us that the Federal Government can indeed run a health care system and do so quite well for a select group of people. Whether we as a nation can afford to do that remains to be seen. But, we know this works.

Experience

There are many people who's economic experience it is that, "getting a good job with good benefits" was one reason to try to grow up well, learn, follow-the-rules, and become a good citizen and employee. Health care coverage was an incentive to undertake socially acceptable conduct. It is also within our experience, that, over time, there has been some reduction in discrimination against minorities and immigrants. But, we must admit some people prefer to still show this behavior. It's their choice. No one requires them to do it, and yet the law of the land is one of non-discrimination.

Still, for numerous reasons, just as some health care was getting better, one of the major providers of health care benefits began slowly and insidiously to pull a switch on us. We might work for a corporation for benefits, but then they began charging us for the health benefit, too! At one point, many employers stated, "We don't want to be in the health insurance business. That's not our main mission and we are mission focused." The employers paid us, but then they told us to pay them back!

We also can not deny, that for all the money we might put into a child's health care, it can almost all be literally wasted if - one day on the streets of Chicago or literally any other city - that child's life is ended in a gang murder. What's the point of a vaccination for that victim?

And, there has been another recent trend that shows up in the data. For some reason, with the best health care in the nation in 2014, "Adult Obesity rates exceeded 35 percent in four states, 30 percent in 25 states and are above 20 percent in all states. The lowest rate was 20.2 percent in Colorado. [Behavioral Risk Factor Surveillance Survey, 2015]. While in 1985, no state had an adult obesity rate higher than 15 percent; in 1991, no state was over 20 percent; in 2000, no state was over 25 percent; and, in 2006, only Mississippi and West Virginia were above 31 percent."

So for all this health care, we were getting heavier and heavier, though the trend has leveled off to some degree and is declining in some cases.

And, we also now know that in the U.S. it is an objective fact that we are paying more for health care per person than in Canada or the U.K. at least.

Reasons To Change

Clearly, with a generally rising trend in life expectancy, from the perspective of a lay person, the only reason to change is to make things better. There are three reasons I can see why we might want to change the system.
  1. To reduce inefficiency, and therefore allow us to better afford health care
  2. To reduce the non-medical trauma to a patient dealing with the bills
  3. To further promote wellness in the population, in general, and in each person in particular
An Alternate 

Part 1 - Insurance

It would be hard to argue that separate insurance companies must introduce some inefficiencies by fact of sheer duplication, different billing codes, even just different addresses or phone numbers that patients or care-givers have to memorize, deal with, etc. let alone that there is an entire industry that makes a profit providing the insurance. Somehow that profit must come at the expense of the patient in their cost of insurance, cost of care provided, governmental rebate, or some other method. Where else would the profit come from? With single-payer, an industry (that has served us well in the past) would be wiped out.

The people in this industry would likely be greatly opposed to losing their jobs. But what if they were intentionally re-deployed into health care - to further reduce the cost of providing care. They don't have to be doctors. But what about nurses, therapists, home care givers, health educators, etc? They would actually do a function - and not just shuffle paper and answer irate patient calls as to why their benefits were denied.

This answer, or an answer like this, in some form goes a long way to addressing the first two reasons for change. What if a health care bill recognized this shift in industry? Folks, the leather tanning industry just isn't around to the same degree it was before. Industries change. Can we recognize that? Is that "excessive government interference" or is it "forward-thinking"? Does it have to be single-payer? No, but a massive streamlining must occur - for our sake.

No one really wants choice of insurance, per se - what they likely want is choice of doctor, and choice of quality, affordable care.

Part 2 - Wellness

Regarding the third reason, most people are not going to like this difficult discussion. Given that life expectancy has increased. The question now is what is our quality of life during those years. Clearly, for the child gunned down in a city, that child wishes his attacker had better mental health and did not use the gun in the first place.

(When I watch Congress and the President, I can only dream of what could be different if mental health levels were substantially improved. I do not say that jokingly.)

We must create a new mental health care system in the United States. We must do it together, and we must do it for a reason. Law enforcement can not stop a murderous act before it happens. Only mental health care can do that. Who needs mental health care? I contend everyone does! From the time a child is verbal and can enter school, there should be mental health check-ups just as certain as there is physical education or vaccinations. Think of the societal problems that might be alleviated if people were more rational and their emotions were more in control.

We need to further switch from spending money on insurance to mental health care. If a child needs physical support, he or she also needs mental and / or emotional support. How can we just assume, that everything going on in a child's heart or brain is serving that child well? How we monitor, and how we intervene is a great discussion this nation should have. But we need to get something done here, and we need to get it done quickly.

By substantially improving mental health, we may eventually be able to reduce the cost of incarceration, and law enforcement over a longer period of time.

Part 3 - We can all become Physician's Assistants

Physicians are talented, well-educated, and they deserve to be well compensated for that education and skill. But who says that doctors, nurses and the hospital staffs are the one's who are primarily responsible for our wellness?

Who said that a person in 8th grade should not be taught how to care for themselves? When I was in 8th grade, they sure taught me about the Jain Temple in Kuala Lumpur. But did they ever teach me the importance of, or ways to control, the insulin level in the temple that is my body? No. Both of these are facts. Which would be more valuable to me? I don't think the contest would even be close.

We must get much more and better information and practical experience with satisfying nutrition, stress reduction, avoiding the ravage of tobacco smoke, dealing with addiction as a disease, ways to limit alcohol consumption, and the need for exercise. And we must get it from the time we are young.

In this category if we are going to be the physician's little helpers, then since health workers are paid, we must find a way to incentivize healthy behavior. It would be our payment. We do it partially now - non-smokers enjoy lower insurance rates. But is there some non-insurance way to incentivize lower risk individuals? How can we find a way to actually reward and reinforce the better behavior so that it continues? We must find such a way, and discuss it, until we implement a program in which we decide WE are going to reduce health care costs, not necessarily by haggling for drug prices, but simply by being healthier.

I hope you understand what I am trying to say, here. I would be very interested in your thoughts and contributions.

Thanks for listening.
TraderJoe








Friday, March 24, 2017

Three Waves Down from the ATH

As best I can tell, there are - at this point in time - only three waves down from the all-time high at 2401. They are 2354.54, 2390.01, and today's low of 2335.74, as shown on this chart below.

SP500 - Hourly - Three Waves Down So Far

Wave ((C)) is slightly longer than Wave ((A)). Within wave ((A)), wave (5) is an expanding ending diagonal - which has a much better look and feel than the prior w-x-y count, and it does count properly.

Note that this count puts wave (3) of a third wave, which is only a ((C)) wave as shown above, on the low point of the Elliott Wave Oscillator. (So far, this wave in it's entirety does not follow The Eight Fold Path Methodology - but there was no expectation that it would have to). Since the wave does not yet follow the method, a bearish 1, 2, 3 from the high must only be an alternate at this time.

So far, the 2335 level is holding, but there is no firm evidence to conclude downward movement is over. Trading above wave (4) of ((C)) would go a long way to providing that evidence, as it would also again overlap the ((A)) wave down.

We showed in our last blog update how this could form a fourth wave, 4, and that option still remains open for a bull count. For a bear count, more waves would be needed with either a longer decline below 2330, and then an upward wave that does not overlap the ((A)) wave, OR, a few more waves that will make a diagonal in one of two fashions. But there is not good evidence for a bear count of this type, yet.

From the standpoint of the daily chart, below, price is for the first time touching the EMA-34, and so there is some rationale for that fourth wave here.

SP500 - Daily - Contact with EMA-34

But at this rare height in stock prices, the market will have to demonstrate whether there is or is not support at this level.

My opinion is neutral and remains flexible and patient.

Have a good weekend!
TraderJoe

Wednesday, March 22, 2017

Last Chance 4th Wave

In yesterday's post, I noted that trading below 2,335 in the S&P cash would start to signal a problem, and the count of a diagonal in the major indexes. Today, I'd like to show you where that calculation comes from.

The S&P500 4-hour chart below, now has the needed 120 - 160 candles to be indicative of The Eight Fold Path methodology. It actually has 185, but any lower time frame results in too many candles, and any higher time frame results in too few. The count below is one that was established as an alternate on the ES E-mini S&P 500 futures. This is just the extension of that count to the future.

At this exact point in time, it should be seen as an "equal alternate" to the counts shown yesterday.

SP500 4-hr Chart : Last Chance Fourth Wave?

The rationale for this potential count is that usually, most-often, fourth waves and second waves can travel a similar net amount. The black rectangle shows the total number of points traveled in wave 2, from low to high. And, the blue rectangle is just a copy of the black rectangle and shows a near exact measurement for a wave 4 at this level. This morning cash hit 2336.45, narrowly missing that 2335 level.

This count would provide the needed alternation for an impulse, as wave 2 would be the sideways holiday trading, counted as a double combination w-x-y, with the y wave as a triangle, and wave 4 would be a sharp - and simpler - (zigzag) correction.

At a level of -16, the Elliott Wave Oscillator is just  barely hanging on to a -40% of the peak of +40-2 on this chart.  A UBS strategist said it well this afternoon (paraphrase), "the market has decided to make this vote on health care the decider as to whether a further correction begins here or not".

In this count wave 3 is shorter than wave 1, so a wave 5 would have to remain shorter than wave 3. And, by way of invalidation, in no case, could a wave 4 overlap wave 1 (in this count).

As I said in my weekend video having clear alternates - and clear rationale for them - is an item that helps keep an Elliott analyst's ego in check. Breathe. Enjoy. Stay patient and flexible.

Have a good evening.
TraderJoe