Dow - One Million!

This is no joke. In today's issue of Barron's Magazine, famed investor Warren Buffet began talking about Dow 1,000,000. Granted he is referring to one-hundred year's hence in 2117. This is happening, of course, as our weekly bullish sentiment indicator is stuck at the level of 60.4 - a second week in a row over that level. While, we offer no opinion on Buffet's price level, it sure seems a bit frivolous to me to try to be making a prediction one-hundred years in the future. A lot of things could happen between now and then.

For our part, we would rather address serious Elliott Wave counters, and ask from the chart below, "why is it that an expanding triangle can be counted perfectly at this level?" You've seen part of the chart in several near-real time posts before. Here is the rest of the chart.

DJIA Cash - 15 Minutes - Expanding Triangle

Why is it that this pattern was able to be counted out for you in such detail, including the complex double-zigzag of the triangle, before the rebound began, and importantly, the predicted 'throw-under' of the (a) to (c) trend line, just as we said Neely penned was most usual?

Why did this all occur - and with you having notice on this web-site in advance of the last moves? Is the market trying to tell us - just as many web-sites and pundits are still projecting much higher highs - that the last high in five-waves may be dead ahead (even if it fails)?

The answer is that I don't know for sure. I do know that expanding triangles are exceptionally rare birds. So few of them have been seen that there are very few samples to study to have high reliability in their predictions when they occur at the end of impulses versus the end of corrective waves.

So, while we are grateful to have discovered this pattern and counted it out, this will certainly be a moment for me to learn and to be flexible as to result. As we have showed before, there is one way to count the entire bull market as complete with this next move up. There are other ways for it to continue, but we will be in better position to judge over the next several days. The one thing that is usually true is that a triangle usually precedes the last wave up in a sequence.

We will also point your attention at this time to the 4-hour cash chart of the NDX, and this potential wedge count - which could easily turn into a diagonal.

NDX Cash - 4 Hr Chart - Potential Wedge

We do not necessarily go around looking for wedges, diagonals, and/or triangles. But sometimes we need to find them because that's what the market is actually doing, instead of using arbitrary or pre-ordained methods of wave counting - especially when the Elliott Wave Oscillator shows a declining level of momentum on each peak. You will note that with a tighter wedge line, there is a way to count the pattern as over. But, we will give this one some time, yet, and see if it wishes to make that classic 'throw-over' of the upper trend line.

So, again, either way, patience and flexibility are the key.

Have a very good rest of the weekend.
TraderJoe

Mid-Day Update

See yesterday's post. This may be updated later tonight.

DJIA Cash - 15 Minute Chart - Expanding Triangle

The potential expanding triangle seems to be developing well, with a new low below the prior c wave, suggesting an a wave down in the 'complex' leg of the triangle. Neely suggests that 'usually' the lower trend line of an expanding triangle is exceeded lower. Let's see if that occurs. And don't forget there is a gap to the left of the chart.

And here is what the hourly looks like. The attack of the lower channel boundary is definitely under way - just as predicted.

DJIA - Hourly - Attach of the Lower Channel Boundary

The S&P500 has not decided yet if it is in a larger triangle or the flat we outlined yesterday. A flat might have the edge, but either would be acceptable.

If you're starting your weekend early, have a nice one!
TraderJoe

Inside Day

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Major U.S. Equity Indexes were lower
Today's Candle: Inside Day, Lower
FED Environment: Quantitative Tightening

With today's inside day, the S&P500 Index still best counts as a potential triangle. It may break down to a FLAT, as an alternate, but that is not certain, yet. I will show the last SP500 15-minute chart for this wave at the end of the posting. Instead, I said yesterday that I wanted to have a look at the Dow Jones Industrial Average. So I did that this morning in the live chat room, and I want to show you the first chart posted.

DJIA Cash 15-Minute Chart : Potential Expanding Triangle

So, it appeared to me that we were having a contracting triangle in the S&P500, or possibly a FLAT wave there, while we are having the potential expanding triangle in the DJIA. Here's how the chart of the Dow developed as of the end of the day.

DJIA Cash 15-Minute Chart: Development as of the Close

The first three waves down were the first three waves down of a very grinding Leading Diagonal a wave down. And, from there, in a perfectly timed call, the b wave up, or part of a b wave up began.

So, with five-waves down from the (d) wave high, confidence in expanding triangle went up to about 80%. So, how would this expanding triangle fit into the overall hourly wave count on the DOW? To help answer that question, we generated this hourly chart of the DOW early in the day.

DJIA Cash - Hourly Potential Channel

So, that if an expanding triangle, and it's (e) wave can attack the lower channel boundary, then a last wave up may follow the lower channel boundary attack.

Now, Neely indicates that a fifth wave following a limiting expanding triangle does not have to make a new all-time high. That would be a fooler, wouldn't it?

We are still labeling the overall up move as (w), (x), (y), (x), and (z), the triple zigzag B wave OR as the same expanding ending diagonal. So, in short, nothing has changed. Here is the S&P500 Index cash chart on the 15-minute time frame, as we promised, above.

S&P500 Cash 15-Minute Chart : Potential Triangle or FLAT

For the triangle, an (e) wave should cross under 2098.50, or so, but stay above the (c) wave. For the FLAT wave, it would be acceptable to trade under the (c) wave.

Other than noting that gap above the market at the (d) wave, we'd like to wish you all a good start to your evening. (The Dow does not currently have such a gap).

Best regards,
TraderJoe

Quantitative Tightening (QT) Begins

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Mixed with SP500, DJIA and RUT higher; NDX Lower

The Federal Reserve announcement today, that the Fed will being to roll off the balance sheet beginning in October to the eventual (data dependent) tune of $600 Billion per year, put a little kink in the original potential ending diagonal - if you follow the rules.

If you did not read the prior post - posted this morning - you are encouraged to do so. First, there was one higher high this morning, as anticipated. But additional higher highs did not occur by the close. They could happen tomorrow. Instead an awful lot of three-wave sequences occurred instead - both lower and then higher.

Here is the S&P500 short term chart. It is getting messy as all get out. But that's OK with me. I'll just follow the rules until we get an understandable pattern. Because of the the depth of the correction made on the FED's announcement, it did change the overall pattern to that of either a barrier triangle or a larger diagonal - perhaps one that will play out on the hourly chart, instead of the fifteen minute chart.

S&P500 15-Minute Chart

Without higher highs, we are now counting the potential triangle (in green). With additional higher highs, we can consider a larger diagonal, and only with a lower low than green (c) can we consider a very ugly flat wave.

Again, the market is taking it's time to figure it out. That's OK. We will too! I also want to take some time to see how the DOW compares to this S&P chart. It may tell a little different story. Stay tuned.

Have a good start to your evening.
TraderJoe

Before the Bell - Sep 20

I thought it might help to have a healthy dose of objectivity with the morning coffee this morning, so this chart might prove instructive. The point of this exercise was to look for elements of the wave count that it would be hard to argue with. So, here is the daily chart of the S&P500 Index.

S&P500 Cash Daily

The very first element that seems hard to argue with is that, when measured in this manner, wave minute ((iii)) would be at the 1.618 Fibonacci extension from wave minute ((i)). Besides just being a measurement, one can count how many daily closes there are on the 1.618 level providing temporary resistance at that level, which makes it more difficult to argue against it.

The second point that seems very hard to argue with is that there is overlap at the 2405.77 price flag. And that's just because, there is! From an interpretation standpoint, then, looked at in the cold light of day, that wave fits 'best' as a second wave because wave fours should not have overlap.

The third element that seems hard to argue with is that if you draw a line from 0 to ((ii)), then a wave ((iv)), as drawn, sits on that line and had a slight break of it.

And, the last element that seems hard to argue with is that the DOW made a lower low at 0, than the S&P500 did. That's because, it did! So, that seems like where the bottom is, in a slight truncation for the S&P500.

From that, one could interpret that this wave count provides FLAT and SHARP alternation for waves ((ii)) and ((iv)). That is the interpretation that seems most straight-forward to me. That leaves only a fifth wave up - no matter how it is counted. Even if it is the expanding diagonal fifth wave.

But, you don't have to agree with that interpretation. You could also possibly still have a FLAT for wave ((ii)). Then, you could have a very ugly TRIANGLE for wave ((iv)), ending in the beginning of September to provide alternation. This possibility was suggested by reader mblcta, and I want to give him credit for it. There is only one issue with that interpretation as I see it. And that is the fact that such a triangle would have awful proportions - just like a similar one in the DOW would. But then, from there, one expects a more simple impulse as the last wave from the triangle.

The major point is that, in either interpretation, a fifth wave at minute degree is most likely. Not some cascading series of third waves. And, particularly, in the second interpretation, the triangle would likely mean that "the last wave in the series in dead ahead".

This likely means one should at least be planning on the market returning to the fourth wave of the previous degree at a minimum after this up wave completes. It could go much lower than that, depending on what wave label one has placed at the March 2017, high. Either way, one comes out with a similar answer.

Have a good start to your day.
TraderJoe

Supplement: Added this chart after the bell. The a wave occurred on schedule and with a minor new high. We now have two smaller fractal diagonals most likely inside a larger diagonal. The upper trend line has now been tilted up.

S&P500 Index - 15 Minute Chart

Some Clarity Today

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Mixed to higher

I am posting this one just a bit early today to get some things done and ahead of the FED meeting tomorrow. This is being posted slightly before the close.

The market as measured by the S&P500 Index opened with a small gap up that was quickly and completely filled. About mid-morning, the potential failure wave high from yesterday's five-minute chart was exceeded marginally, then prices reversed a bit, and reversed again - all for small point loss or gains.

Based on that I decided to back off to the 15-minute chart to review the wave internals. The chart of that review is below.

S&P500 Cash - 15-Minute Chart

So, the above count is predicated on the most recent bar or bars making a new high above the brown (iii) wave. If that happens in any form then we may have the a wave of a wave (iii) of yet another diagonal. And, yes, it would likely be yet another Leading Diagonal within a larger diagonal.

Over on the left-hand-side of the chart, you can see the original diagonal I had counted out on the 5-minute chart. It turned out to be an a wave, itself, the a wave of the first wave, (i), of this diagonal. Remember, there was a retrace wave within that 5-minute b wave - even though that has disappeared on this larger time scale.

The fifth wave of a leading diagonal for this a wave may not fail. It must make a higher high than the wave (iii). If it does, we're good and it will give us a measuring tool, because wave (iii), up, may not exceed the length of of wave (i), up, of the larger potential diagonal. It could do this today or early tomorrow, but it must happen - or something else is occurring - like a regular triangle. But, so far, all the waves are counting properly, and it looks like this potential diagonal would then last into the FED meeting.

Remember, within (iii), there would first need to be a b wave down, then a c wave up, for (iii) that must cross the high. That would likely happen between now and tomorrow.

For students of Elliott Wave, it is very interesting to note how many "flat" b waves there are within the zigzags of these diagonals. They are waves which can literally cause a wave counter to scratch their head, and say, "whuh?" over & over & over. Further, if this happens properly, it is amazing to see how the smaller diagonals would be smaller fractals of the larger diagonal. To an Elliott analyst, that is a market almost screaming for reversal. But, it all has to play out properly first ...

For now though. Have a good start to your evening.
TraderJoe

Failure?

Market Outlook: Minor 5 Complete versus Minor 3 Continuing (60 : 40)
Market Indexes: Most major U.S. equity futures closed higher after all-time highs in DJIA, SPX

Not me. The market may have failed. It was quite clear to me from the overnight prices that the diagonal sketched out for you on Friday was, in fact, a diagonal. It turned out to be a smaller leading diagonal, not an ending one. Thus, we opened with a small gap up. Not every diagonal is an ending one. (The alternative is that it was a triangle).

A continuation of the five-minute chart is shown below - just as shown in the real time chat room.

SP500 5-Minute Chart

You can see the end of Friday's diagonal on the left. But, then, when you start looking for the companion wave iv, for the gap wave iii, you are left with really only two choices. Either we have had a triangle, and a failure at the high, as shown by wave v? or everything since the high of iii is a very large wave iv, that missed downward overlap by 0.25 points!

If there was a failure at v? then that is the location of the z wave or of wave (v) of the hourly ending expanding diagonal shown over the weekend. In that case, wave v would have had a higher closing high, but not a higher intraday high.

And if it is wave four at the 14:30, low, then there should only be one more wave up.

The market can't have it both ways. It must pick a path. If there is a downward count started, it can only be counted as an expanding diagonal as shown in the above chart. But, then, lower lows are needed. And, if lower lows are obtained, then a wave iv becomes invalidated!

A worse situation occurred in the hourly NQ futures where a downward overlap of a previous first wave did occur.

The charts are getting quite messy and quite ugly. Even the Dow had a "double top" for some reason today. This does not seem like "standard impulsive" wave formation. Something quite different seems to be going on. And keep in mind, even though an upward gap opened up this morning, all of the gaps are to the down side. With today's movement in almost all indexes, there are no gaps above the market! That is some food for thought.

Have a good start to your evening!
TraderJoe