Wednesday, June 21, 2017

Overlap and Gap Fills

Over the last several days, I have been "neutral" and just counting waves. Today, a good example of why, opened with a tiny gap up that was quickly filled when the API petroleum report came out and Crude Oil sank again. After the opening gap filled, the downward waves were sufficient to fill the gaps shown with the black circles in the chart below. Crude Oil got as low at $42.05 before ticking up towards the end of the day.

SP500 2-Hr Chart Potential Diagonal

We had warned to start being on the look out for the gap fills. Today's downward wave slightly extended the length of wave ((iv)) of the diagonal, and clearly overlapped the prior wave (a) wave up, just like we indicated the futures had the previous day.

So, today, we slightly modified the trend line up from the lows, and it now intersects wave ((ii)) and wave ((iv)) very well. Wave ((iv)) played with this trend line all day, falsely breaking it lower, then recapturing it by the close.

If the diagonal is to complete properly, then we should see three clear waves up as (a), (b), (c)  to make wave ((v)) of C - possibly where (b) is a triangle. Since wave ((iv)) has a slight throw-under of the trend line, this often gives the fifth wave a sufficient sling-shot action to slightly get it over the upper trend line. But, again, we want to emphasize, that since this is overall a very flaky (b) wave, it is not even necessary to make a higher high. The fifth wave of an ending diagonal is allowed to fail. Just keep in mind it is 'more usual' for there to be a throw-over of the upper trend line on somewhat increased volume.

By way of invalidation, we have still indicated the prior B wave as that location. However, wave ((iv)), down, may not go below 2425 and maintain the contracting diagonal shape, and that is because wave ((iv)) would become longer than wave ((ii)) - which is not allowed, by rule, in a contracting diagonal. So, technically that is new invalidation for a diagonal pattern.

If a diagonal should not complete with good form, we would then have to suggest the pattern ended at the location shown as ((iii)) with a slightly modified count. We remain open and flexible at this point in time.

And we hope you have a good start to your evening.
TraderJoe

Tuesday, June 20, 2017

Downward Wave Began - And More

Per the S&P500 Cash Chart below, and yesterday's blog post, we were expecting a fourth wave down ((iv)) today. We got that, and a tad more. Here is the S&P500 Index 2-Hr cash chart with the triangle count. The same one we showed yesterday.

SP500 2-Hr Chart : Triangle Count

By a hair's whisker wave ((iv)) down today did not overlap wave ((i)) down in the cash market within this C wave upward. So, this count is still valid, and with some heavy lifting tomorrow, it is possible to complete a wave ((v)), upward either as a higher high, or as a truncated top.

But, the same is not true in the ES E-Mini S&P futures. Today, a wave ((iv)) did overlap a wave ((i)) up. So, whether we want to or not, that forces us to ask what might be going on. You'll notice that all along, we've been showing in bold brown letters Triangle / Diagonal Invalidation on the chart.

So, given that the futures have downward overlap in the last wave, already, while the cash does not, and given that we have two marginal higher highs, we must also consider our diagonal variety count of a top. It would look like this.

SP500 Cash 2-Hr Chart : Diagonal Alternate

Such a diagonal would really put a lid on things, and is a completely acceptable way to the end the (b) wave up. And we want to indicate, there was enough damage done to the market internals today that wave ((v)) in such a diagonal could easily truncate. But, as usual it does not have to.

This is once again a time for patience and flexibility, not ego or emotion. Let's let the market suggest what it is doing in the short term here. It seems to us that either way, the pattern is about to become very clear.

By, the way, within the triangle count, there is no way that a ((v)) = ((i)) wave will now get prices over the top. It would take a ((v)) = 0.618 x net of [((i)) through ((iii))].

In any event, we can see two sides to this same coin. Again, we are not bullish here - just neutral and counting waves until the situation clears.

I hope you have a good start to your evening.
TraderJoe

Monday, June 19, 2017

Thrust From Triangle

Based on the intraday counting I did in the live chat room today, today looks like the very typical thrust from a triangle.

SP500 2-Hr Chart : Thrust from Triangle

That was anticipated, and, today, I also added some of the more significant gaps (in red circles) that could fill should there be a turn-around. The count at the present time allows for a wave four ((iv)) and then a wave ((v)) higher. That would finish this (b) wave up in the S&P500 with a structure - a triangle - which is common before the last wave in a sequence. And, while wave ((v)) of C can certainly make a higher high, it does not have to. It could truncate.

Although today was a nice pop higher, I remain completely neutral and am primarily "counting waves" until a top is in. Folks, I know some people are already counting the end of the bull market. And while I do expect a significant correction shortly, what did we just have? We had a "running triangle", didn't we? With a higher ((b)) wave, right? The problem for the outright bears is that a "running triangle" usually points to higher prices overall in the market. And, given the recent highs in the advance-decline line, it is more likely pointing to the overall diagonal scenario we suggested in the YouTube video: there is higher to go, but it will be a fight for marginal highs.

Today, the ES touched the upper Bollinger Band, but on a divergence from the slow stochastic. It is possible that tomorrow will exceed the band higher, and lead to a "turn-around Tuesday".

Daily ES E-Mini S&P500 Futures Touch Upper Bollinger Band

No one can say for sure, but it certainly a good possibility given the count as we show it.

Have nice night!
TraderJoe

Saturday, June 17, 2017

The U.S. Dollar Index

I wanted to take a few moments to review the Elliott Wave count on the U.S. Dollar Index, and, using The Eight Fold Path methodology show you where there may be a 'trap' that others may not suspect. First, I want to show you what 'timing' says might not be a correct count. What Elliottician shows you incorrect counts?!! Then, we'll review with you the why's and wherefore's.

Monthly U.S. Dollar Index Futures

Yes, like many Elliott analysts you will note that prices are in a channel, and the latest large upward wave numbered 1 - through - 5 has stopped precisely at the 1.618 Fibonacci level. But, if your Elliott analyst has labeled the U.S. Dollar Index in this way, there are a few things they may be missing.

First, notice that there are only 110 candles in this entire up wave. Next, notice that the Elliott Wave Oscillator is not yet even within +10% of the zero line - where it might be for a fourth wave. It's getting there, but it is not there yet. Now notice that the movement from 5, at the top, is still quite choppy. If wave 5 were the Intermediate (C) wave of an up movement that is now completed, shouldn't dollar prices be absolutely crashing quickly? But, in the choppiness, they haven't even gotten below minor 4, yet, in the span of several months.

Now here is a first critical point. Do you notice that wave 2 is a FLAT wave, with a higher ((b)) wave, and, as shown, this wave, wave 4 would also be a FLAT, because the first wave down is a three-wave sequence, and then there is at least a 90% retrace on the downward wave. There is no alternation in this impulse wave, as this wave is constructed.

Then, here is a second critical point. How long in time is wave 4 compared to wave 2? Why, it is shorter isn't it? Is that the usual situation in Elliott Wave work? No, usually, most-often, wave 4's are longer in time than their wave 2's. One of the biggest errors many beginning wave analysts make is not giving their wave four's enough time to complete.

________________________________________________________________________________

So, we don't know for sure, but what if wave 4 is just taking more time. Since, there hasn't been a complete crash of  the U.S. Dollar, yet, could the pundits calling for that crash be incorrect? Here is a chart, with wave 1 they way we called it for you on YouTube, as a leading contracting diagonal, and this makes even a longer wave 2, in time! Yikes!

Monthly U.S. Dollar Index with Better Alternation in the Impulse

At this point, a running triangle is the only way I could see to provide alternation for the flat second wave. A triangle in wave 4 always provides alternation for any wave 2 structure (and that's why wave 2 can never be a triangle in it's entirety). And, a triangle is the only way I can see to make wave 4 longer in time than wave 2. This might also provide the opportunity for the Elliott Wave Oscillator to bob and weave around the zero line a bit.

Of course, the larger significance of this is, if wave 5 is effectively able to break the 1.618 Fib ratio, then a full-on upward impulse in the Dollar might be possible. People opposed to this line of logic can have a point. There could just be from 2008, an (A), (B), (C) upward wave in which the (C) wave doesn't follow The Eight Fold Path Methodology - because, well, it is part of a corrective wave, and not part of an impulse wave.

To that line of thinking I would just add one item, although there are ways in the first chart to force a five count up for wave 5 - it does have a very "three-wave" look to it, and might still be part of a triangle. In any event, there still has been no downward overlap on the upward wave in 2009, and so we must be patient until the situation clarifies a bit. And clearly, this being a monthly chart, it could indeed take months.

But, along the same line, if the dollar bears don't quickly begin to see the downside they are expecting, they might just like to consider the line of reasoning above. Clearly, the Dollar had the ability to make big impulsive bars upward in 2008. Why not (so far) impulse downward in 2017?

And, we too, will also consider that any downward overlap for the U.S. Dollar Index on the 2009 levels would likely spell the end of the dollar boom.

Have a good weekend.
TraderJoe

Friday, June 16, 2017

No Change to Short Term

The S&P500 Index 2-Hr Chart below is unchanged from that we showed you yesterday. There is still a potential of a triangle to help finish the upward wave in this index. Remember: if a triangle forms it often precedes the last wave in a sequence.

SP500 Cash 2-Hr Chart Potential Triangle already Validated

In very slow and quiet trading, the S&P 500 Index closed up by 0.69 at the end of the day, and the Dow was up +24.38, almost to a new all-time high. It is possible to count the waves since ((e)) and B as a 1, up, 2, down. But, we simply will not be able to substantiate that until there is a higher high wave -- we don't quite have that yet. And neither has Thursday's gap filled either. Still, the now slower trading may be indicative of a triangle.

The ES daily futures again closed above their 18-day SMA, and still have a positive bias, although the daily slow stochastic again closed under the 80 mark. So, something is going on, and it may be a sign of internal weakness. The invalidation level remain the same.

The Dow still remains well within the parameters of an expanding ending diagonal, and, as we noted the fifth waves can get quite aggressive - hence the near new all-time-highs again today.

GOLD has closed for the second day now under the parallel trend channel, we showed in a previous post (LINK) and has two full daily candles sticks underneath that channel, with gaps on the way down. It may be more clearly defining the C wave down.

Well, that's enough for today. Have a good start to the weekend!
TraderJoe

Thursday, June 15, 2017

GAP down then higher

The Dow and the S&P500 both gapped down strongly at the open, and then ground higher for the remainder of the day. Because of the level where the gap stopped, from a measurement perspective yesterday's potential ending diagonal for the S&P500 did not invalidate. That count is still on the table as a way to gracefully count the end of the (b) wave higher in that index.

But, also because of exactly where that measurement stopped, we were also able to validate that another alternate for the S&P500 Index is now this triangle - also shown on the SP500 2 Hr Chart which was also published in the live chat room.

SP500 2 Hr Chart - B Wave Triangle Alternate

Because the ((e)) wave down overlapped the A wave, the potential triangle has the right requirements to follow the rules for a running triangle. And, at the end of the day, price just barely latched back on to the lower channel boundary. Interesting, is it not?

Today's down gap was not filled, yet, on either the Dow or the S&P. If it is, it would lend more weight to a potential triangle, but, still the potential triangle must prove itself by getting up over the ((d)) wave - and that still leaves open the possibility of yesterday's contracting diagonal, as well. Just tilt the upper green dotted trend line higher instead of lower.

We don't know if a slight higher high will be made. We can just see the potential for how it could, in two different ways. We can also see the possibility of a truncation, where shown, but not the reality of it yet. The blue B wave would be where the green ((c)) wave is now in that case.

In terms of invalidation, any movement below wave ((a)) would invalidate both the triangle and diagonal possibilities. The third and last possibility would be that if the ((a)) wave is violated that somehow the blue B wave would become a flat wave to extend the correction on A in time. But, there is no evidence for that, yet. So, it is only worth noting at the present time.

Because of making the C = 1.618 x A Fibonacci ratio as we pointed out yesterday, I am not bullish. Right now I am neutral and just counting waves to see if this overall (b) wave, up, can come to a nice clean end. Maybe yes. Maybe no.

And since there is the potential of a triangle or a diagonal involved, and thus far, has been little follow through except from the NQ's (see daily chart below), the market must set the tone. Not me. I just try to count what I see according to the rules and guidelines as I understand them.

Daily NQ (NASDAQ 100) September Futures

Today, the NQ's hit the lower Bollinger Band, and then rebounded off it quite strongly. This tends to emphasize one of Ira Epstein's key guidelines for trading, that "one does not sell new against a lower Bollinger Band, because that is where the Smart Money is likely taking some profits on their short positions". And that is because the probability of being outside the bands on any one day - on the down side in this case - is only about 5% of the time. I only am again paraphrasing Ira's guidelines as I do not offer trading or investment advice.

The NQ price is still below the 18-day SMA so the bias is still down. That is not the case with the ES, so there is a bit of a mixed picture still at this juncture.

Bottom line is: (b), up, is done, or has just a bit farther to go. Have a nice evening.
TraderJoe

Wednesday, June 14, 2017

DOW New High - 2

Today, being FED day, the powers that be raised interest rates again, and began to tell us detailed plans for balance sheet run-off - all dependent on incoming economic data, of course. The Dow Jones Industrial Average made two new higher highs today and closed at 21,374. Where have you heard that number before? Well, it's the projection of C = 1.618 x A that appears in my February 26, 2017 YouTube video on a plausible Dow count that incorporates the fact that the NYSE advance / decline line was recently still at an all-time high. See the second chart below for an update.

Yesterday, we showed you a potential ending expanding diagonal on the Dow. The measurements there have already provided that an ending pattern is possible: the dreaded megaphone measures precisely in every detail following the standard rules and guidelines of Elliott Wave. Yesterday, we stated during live chat, "watch out here because these can get quite aggressive to the upside". And what do we have today? Higher highs on the Dow.

And, how about that S&P500 cash index? Whoops. The devil you say? No higher high today? Well, we showed you a possible ending pattern on the S&P500 2-hr chart, yesterday, and it appears to be getting better defined today. Here is the chart updated from yesterday.

SP500 2-Hr Chart : Potential Contracting Diagonal

Yes, price is still in the channel, but it is trading in the lower half of the channel. That is a signal that prices have currently lost some momentum, and a diagonal may be forming in this index.

Because the exact Fibonacci level has been hit today, it is important to show you the continuing count on the longer term Dow to this point in time, using the two-day chart.

DJIA 2-Day Chart with C = 1.618 x A

I know a lot of people are getting hyper about the length of the (b) wave in the S&P500 Index. One has to remember that index has a lot of representation from the once high-flying NASDAQ 100 stocks. (I say once because today the NQ could not even trade above it's 18-day SMA). Yet, the (b) wave absolutely does not look out of proportion on the Dow.

I reserve the right to say two things. First, the (b) wave up may not be over yet. We know that because there is nothing that says the Dow has already completed it's expanding diagonal. And there is nothing to say the S&P500 Index has completed a diagonal at all.

But, wherever this upward wave ends, I also reserve the right to say that Minor C of Intermediate (1) has ended here (as an alternate) in a wave that simply did not follow The Eight Fold Path Method upward. This would be exactly the same count as in the weekend video on YouTube.

But, it would be best if minute wave ((iv)), circle-iv, ended back on the lower channel line, in the area of prior minuet wave (iv) in terms of following The Eight Fold Path Method. So we will allow for that - especially since the waves would have a better look.

From the perspective of The Eight Fold Path, we have wave (iii) of minute ((iii)) on the peak of the Elliott Wave Oscillator, and wave (v) of minute ((iii)) on a divergence. We also have minuet wave (a) down on a wave in which the EWO goes below the zero line, and this would place wave minuet (b), up, on a divergence.

We'll see how this goes, and whether the Dow wishes to attain the lower channel line. Regardless, now is the time to remain alert and flexible. It is certainly possible that a gap up could help make the blue C wave shown on the S&P500 chart, and help make wave (3) have that higher high needed for a diagonal. Please note the labels on the S&P chart are for ease of illustration only. The Dow chart has the correct degree labels.

Have a good evening.
TraderJoe