Thursday, February 23, 2017

Best Hourly Count

So, even though the potential wave three of a diagonal shown on Tuesday's post did, in fact, remain less than the 2368.50 needed to be shorter than potential first wave of such a diagonal, the wave traveled far enough (as per the comments section yesterday) that a fourth wave could not downwardly overlap and remain shorter than the second wave, as required in a contracting diagonal. And even though I suggested one more higher high could be made, "rules are rules" and they will be followed.

None-the-less, the potential wave count did serve as an excellent "tell" precisely because we can now know for sure that we are not in a diagonal. (See post William Tell).

That being said, there are about 115 candles on this chart of the hourly S&P500 Index, and so that tends to indicate with today's sharp downward movement and lack of a new all-time-high in the afternoon, that a triangle might be in progress instead of a diagonal.

The rationale is below the chart.

SP500 Index Hourly - Potential Running Triangle

Examing the chart, we see that wave (iii) of ((iii)) is on the maximum of the Elliott Wave Oscillator, at a 2.618 Fibonacci extension, and wave (v) of ((iii)) is on the first divergence. If we look at the lengths of the corrections - just in terms of time, not price - we see that no correction, so far, has been remotely long enough to correct the strong minute ((iii)) wave in terms of the time taken by the advance.

And, if we look solely at alternation, we see that wave (iv) alternates with wave (ii) since wave (iv) is a short sharp, and wave (ii) is a long flat. But, then we see that wave (a) down of the potential triangle would not alternate well with minute wave ((ii)) lower at the bottom of the chart. In fact, they are the same shape! So, this suggests that we need a wave that is long enough in time to provide a decent length of a correction for minute wave ((iii)), and one that will alternate with minute wave ((ii)). A decent triangle would do that at this point in time. I have sketched in the potential triangle.

Tonight and tomorrow, I would watch to see if 2359.50 is exceeded lower in the futures, as that is the low of the B wave that was counted in this afternoon's upward waves. If that is exceeded lower, then most likely, a downward wave is in progress. Of course, a low below 2353.00 futures would solidify the correction in progress, and the invalidation point is the high of today's cash C wave upward at 2366.40 (cash), as a running triangle like this one must contract.

And, there is a reason I have not suggested a flat wave for the type of correction, even though a flat might provide the needed alternation. The (b) wave of this triangle is just inside a 2.618 extension on the (a) wave. That most likely means a "running correction" is in progress, and, again, a "running" triangle would fit that bill.

Such a correction might get us to the end of the month until the new month begins with the possibility of inflows from pension funds, bonuses, 401k's, etc.

This weekend I will address the "most likely" alternates as price moves forward - even though we have been correct, so far, that price is finding some resistance at the channels shown yesterday on the linear and log charts. Is it perfect? It seldom is.

A word for those following Gold. It can now be counted that Gold can have "five waves up" in the form of a contracting diagonal, with today's higher highs. Nothing rules out a B wave as a triple zigzag - since every contracting diagonal must be comprised of three zigzags. But, I wanted to at least confirm that "five waves up" can be counted (although there may be one or two more slight new highs to go.) The chart is below.

GOLD Futures - 4 Hours - Five Waves Up Can Now Be Counted

One point being, in order to even make this count, one needs to learn how to be able to count diagonals (leading and ending, expanding and contracting), and triangles, because they are all legitimately there, and shown in near real-time.

In the overall count, at the present time, wave 5 is shorter than wave 3, wave 3 is shorter than wave 1. Wave 4 is shorter than wave 2, wave 4 overlaps wave 1, and they are all zigzag sequences. So, a contracting diagonal is currently valid, provided that wave 5 remains shorter than wave 3. Wave 3 was 0.618 the length of wave 1, so there may be a similar relationship between wave 5 and wave 3. Then, if it really is a contracting diagonal, the low of 0 must hold. If the whole structure is a triple zigzag B wave, the low of 0 might break.

Truth be told, I do not like diagonals and triangles very much: they are murder on the nerves. But, it is not possible to follow the rules of Elliott Waves unless one learns to manage them. That's some food for thought.

Cheers! And have a good night!
TraderJoe



Wednesday, February 22, 2017

Nothing Changed from Yesterday

Nothing has changed from yesterday. An overlap downward of 2051.50 on the ES March futures would help confirm the fourth wave of a diagonal to possibly end minute ((iii)) of Minor 3 of Intermediate (3). But, a minor new high can occur first without invalidating the opportunity - but not beyond the levels we provided yesterday.

In the meanwhile, here are two longer term monthly views - one linear scale and one semi-log scale.

SP500 Monthly Linear Scale

Nothing in this chart is to be construed yet that upward movement has ended.  But, there may be some resistance at this original monthly channel line.

SP500 Monthly Semi-Log Scale

Once again, nothing says upward movement has ended. Price is nicking above the mid-channel here and may find some resistance here, as well.

Enjoy the evening.
TraderJoe

Tuesday, February 21, 2017

William Tell

The market as measured by the ES E-Mini S&P Futures may be about to give us a big "tell" as to where the overall Elliott Wave Count resides, William (.. or Wilma). Many major market indexes made new highs today, some of them, twice. With that in mind, and momentum still strong, it does suggest we may still be in the minute wave ((iii)) of Minor wave 3, higher.

But, there is a significant caution because of overlaps at the end of the day. If we look at the ES two-hour chart, there is one location (the 2320 level) from which I can count only three-wave sequences.

ES E-Mini S&P Futures Two-Hour Chart

The chart above shows the three-wave sequences (connected with blue swing lines) to show the internal a, b, and c sequences of a potential diagonal upward. The Fibonacci ruler, also shown, shows that minuet wave (iii) is currently shorter than minuet wave (i).

And at the close price acted much differently that it usually does. Instead of breaking the stops at today's high and following through to the upside, there was a bit of a sell-off instead.

So here is the "tell". If price in wave (iii) remains shorter that 2368.50 and a fourth wave downward begins and overlaps wave (i) at the 2351.50 level, first, then there is the possibility of a diagonal forming to end minute wave ((iii)) on the larger ES 12-hour chart, shown on Thursday February 16th, post at this LINK.

Again, diagonals must form properly, and wave (iv) would need to remain shorter than wave (ii), and wave (v) would need to remain shorter than wave (iii) overall, if and when we get there.

So, the upward invalidation is 2368.50, if that occurs before wave (iv) forms, and the downward invalidation for a contracting diagonal is that wave (iv) may not travel below the low of wave (ii), or be longer than wave (ii).

The market is getting increasingly choppy. All of today's upward movement after the sell-off to the 11:30 am low, was both hesitant and overlapping. If the upside invalidation level of 2368.50 is broken upward first, before wave (iv) forms properly, then the market is sub-dividing further higher, but it is hard to see that with all the three-wave sequences.

Hope this helps.
TraderJoe

Friday, February 17, 2017

Some New Lows, Some New Highs

The Dow cash, and the ES E-Mini S&P500 futures, along with the NQ futures made new lows today. The S&P cash did not make new lows today. The Dow and the S&P then rallied but did not make new all time highs. The NQ futures did rally to new all time highs, so now it becomes a question of which index you want to count and follow.

Pretty much regardless of which one you pick, the correction does not look quite over yet, because, particularly in the Dow, S&P and ES, price has not interacted yet with an internal lower channel line.  As just one example, the DJIA 30-minute chart currently has about 120 - 160 candles for the wave of interest at present (with 145 on this chart), as according to The Eight Fold Path Methodology.

DJIA Half-Hour With 145 Candles

The chart shows the clear gap - with the red circle - for wave (iii) of minute ((iii)), and it's located on a peak of the Elliott Wave Wave Oscillator, with wave (v) of minute ((iii)) on a divergence and just beyond a 1.618 extension of wave ((i)).

It also nicely shows that the Elliott Wave Oscillator has come back to within the required +10% to -40% as would indicate the minute ((iv))th wave (black circle on the indicator). The only thing that hasn't occurred is price touching the lower channel line.

With today's lower low, its clear the Dow made three waves down to the (a) wave, and likely three waves up to the minuet (b) wave which may not be finished yet. It could, of course, exceed the high in a flat wave. Then, the (c) wave down would be expected to touch the trend line in some manner. In the S&P500, this (b) wave has already met the 90% requirement of the retrace on the (a) wave. And, of course the NQ has already made the new high.

In this count, a flat or triangle wave ((iv)) would provide excellent alternation for the sharp minute ((ii)) wave. The importance of this trend line touch can not be understated. What happens if it doesn't touch? Well, let's say there were some big news announcement this weekend, like a new tax plan (we don't know there will be - just providing an example), and the futures spike 15 or 20 points Sunday night. Then, in that case, there would acceleration away from the trend line, and a larger third wave. Just keep in mind, at this time, the weekly ES trend line is providing some resistance here, as expected, so the fourth wave currently seems more likely.

Some new highs, and some new lows. So, let's see how it goes!

Have a nice weekend.
TraderJoe

Thursday, February 16, 2017

Either Way Minute Wave ((iii)), Now Possibly Minute Wave ((iv))

Some of you have asked what happens if the EWO should invalidate the count provided yesterday on the cash market, and how best to preserve the rule promulgated by Glenn Neely, of Mastering Elliott Wave fame, that no portion of a third wave should fall below the zero-to-two trend line. That count is in the chart below, using the ES futures (12 hr chart), only, so there can be no 'hidden waves', gaps, or other tricks to play with.

To avoid confusion you may wish to review yesterday's cash count to see how it is different before studying the chart below. To accept the chart below, one needs to seriously be on board with the concept of alternation. Second and fourth waves, according to Neely, should vary in amount of price, structure (i.e. sharp versus sideways), and / or complexity. The way Neely sees it, if any one varies, that is sufficient, but often times the waves alternate in two or all three characteristics.

ES E-Mini S&P 12-Hr Futures

So, starting at the left side of the chart on the night of the election, we see a first candle up, wave (i), and it has a red body, down, so that red body down is wave (ii), the next candle up is wave (iii), and then there is a long - relatively - running triangle which crosses it's 'e' wave back over the top of wave (iii), and it is wave (iv), and then the break out of the triangle is minuet (v), of the minute ((i)) wave in blue. This sequence, interestingly follows the rules for an extended first wave, as five is shorter than three, which is shorter than one.

Then, this would be the hard-to-swallow-part. All of minute ((ii)), in blue, is a sideways (w), (x), (y) flat that crosses down over wave minute ((i)) to be corrective to it. Next we have minute ((iii)), up, and no part of the zero-to-minute ((ii)) trend line is broken by minute ((iii)). Then there is a very short zigzag for minute ((iv)) that alternates in the extreme with the long minute ((ii)), and finally minute ((v)), up, of Minor 1. And interestingly, this sequence, too, follows the rules for an extended first wave, as five is shorter than three, which is shorter than one.

Then, as incredulous as it might seem, all of the sideways movement from 12-Dec to 02-Feb would be a sideways Minor wave 2. Since, wave 2 must cross back down over wave 1 to be corrective to it, and since a wave 2 can never be a triangle in it's entirety, then that means the structure of wave 2 is a flat-x-triangle or ((w))-((x))-((y)) where ((y)) is the triangle. This is the only valid structure I can find, and it was suggested in part by a reader here, mblcta, although the implementation was faulty.

And, by this count on futures, or yesterday's count on cash, we are in a minute ((iii)) wave, then, and possibly started a minute ((iv))th wave today.

Now the futures count would put the wave count in Minor 3, with the chance for the EWO to go higher. But one of the concerns with this count is the extremely shallow retrace of Minor 2. At it's deepest portion there would be only a 23.6% retrace on the cash market, and only about a 20% retrace in the futures. Once again, that is supposed to mean that wave 1 is the extended wave in the sequence.

For this reason, and with deference to the weekly ES chart, where we are finding some resistance at the upper edge of the weekly trend channel, I am again showing a wedge shape to the impulse (not a diagonal: a wedge-shaped impulse) as Minor 3 should be shorter than Minor 1. Also, with Minor 2 so long in time and sideways in the futures, then one would look for relatively short and quick fourth waves. Since this count does result in no part of Minor 3 being below the zero-to-Minor 2 trend line, I will monitor this count for a while and see how it does.

Thanks & with kudos to mblcta for the suggestion. This time around, it would work,
TraderJoe



Wednesday, February 15, 2017

Trend Line Touch

Today's movement was sufficient in the ES E-Mini S&P Futures to create an upper trend line touch on the weekly chart. Here is the chart, as a reminder below.

ES E-Mini S&P 500 Futures Trend Line Touch

Price still remains in Intermediate Wave (3). It can go higher. There was nothing at the close today to indicate a reversal was imminent or occurring (as far as I could tell).  It's possible for the upper trend line of the channel to provide some resistance here : that remains to be seen. Persons who follow the futures will now note that in this count, Intermediate (3) is now longer in points than Intermediate (1). Some had raised a concern in labeling Intermediate (2) as a flat earlier on that then Intermediate (3) wouldn't be a longer wave. Well, there it is (in the futures anyway).

Notice that a chart like this would now not envision a final top until at least the autumn because there is no ending signature such as a diagonal or a triangle (shown) at this time. Perhaps a triangle like that would be coincident with another "sell May - go away" scenario, this year.

While the internal count of Intermediate (3) is still a bit of speculation - because there is nothing conclusive to say waves have ended yet - this is the count that best fits The Eight Fold Path Methodolgy and the signals from the Elliott Wave Oscillator on the cash chart of the S&P500, using 120 - 160 candles. As I noted yesterday, if 2347 was exceeded - which it was today - then Minor wave 1 would be moved down to the post-election high, which is, interestingly, where I had it originally.

SP500 4-Hour Chart and The Eight Fold Path Methodology

Wave minute ((iii)) within Minor 5 has now exceeded 1.618 times minute ((i)). It should be noted on the cash chart today - with the fresh new highs - there are no gaps above the market, and all of the gaps are below the market. Novel, huh? It's going to be fun when the algorithms go "gap hunting".

Well, have a good night and stay patient and flexible.
TraderJoe

Tuesday, February 14, 2017

Two Items to Note

First, the easy part. With today's upward movement, the alternate diagonal we showed on Saturday with the intention to monitor and measure it did, in fact, invalidate today.

Now, for the slightly harder part. As of yesterday, we said we were still in the minute ((iii)) wave upward. As of tonight, we simply want to show the measurement that wave ((iii)) = 1.618 x ((i)). Here is the chart.

SP500 Half-Hour Minute ((iii)) = 1.618 x ((i))

As of the end of the day, there was nothing to say that price movement upward had necessarily ended. In fact, in the after hours, the futures were slightly higher.

If upward price movement ends in this neighborhood, then it's possible for a wave minute ((iv)) to form downward and not overlap. Further, the internal count on this wave is not certain. It is simply one that results in alternation.

If price exceeds 2347.12, then the count would likely result in Minor 1 being placed at the Nov 8 - 9 high, so that wave Minor 5 is not longer than Minor 3.

So, let's see how things go.  In the weekly ES chart, below, wave Intermediate (3) is getting very close to the upper parallel trend line. So, that is something to keep in mind.

Weekly ES E-Mini S&P Futures Contract Trend Channel

From a social perspective, today the President said, (paraphrase) "the market likes what we are doing and so it is setting records." Gulp. And  T.V. commentators are getting increasingly confident of no reversals. From a technical perspective, price, while the daily slow stochastic is embedded, is over the daily Bollinger Bands for consecutive days. And advancers and decliners were about even on this 'rally day'. Odd.

Cheers, and have a great evening!
TraderJoe