Saturday, January 25, 2020

A Fibonacci Time Relationship?

This is the second post this weekend. If you have not seen the first one, yet, you may wish to review it now.

Many readers of this blog followed the last time relationship we posted in that 2018 was a Fibonacci 89 years from 1929 since (1929 + 89 = 2018). The Fibonacci number 89 is the next number following 55 in the sequence 1,1,2,3,5,8,13,21,34,55,89... and is calculated by adding 34 + 55 = 89. The largest correction in the bull market to that point in time occurred in October of 2018. This was a top-to-top relationship, as 1929 was a top, and 2018 was too.

Another Fibonacci time relationship may exist in the chart below. I have not seen this elsewhere and know of no-one else who has made us aware of it.

ES Futures - Monthly - Fibonacci Time

This relationship would also be a top-to-top relationship, as well, since 2007 was a very significant market top. The question now is, "do we, in fact, have the famous 'too-far-too-fast' signature of a contracting ending diagonal" - which up to this point in time has maintained it's length relationships. If so, then the Intermediate fifth wave (5) would clearly be the extended wave in the sequence, as it is longer in points than wave Intermediate (3) in this form. And this extended fifth wave would be contained within what is, itself, the extended fifth wave of cycle V.

This is not too make too much of one significant lower day. Many further price confirmations are needed. Still, fore-warned is fore-armed. The information is what the information is. The question is whether it will amount to a top, a near top, or even "the" top.

Another reason for liking this form of the end of the Cycle is that the NQ futures have more than surpassed a (B) = 1.618 x (A) relationship. That may not be fatal for an Intermediate (B) wave count, but it does pose a challenge to it. The ES futures have only marginally nicked slightly over the same point.

So, we will be cautious, but we will also be curious. We will inquire. We will ask the market questions and see what answers it helps provide.

Have an excellent rest of the weekend.
TraderJoe

Friday, January 24, 2020

Risk-Off Day

And it fits the Intermediate (B) wave count like a Fibonacci glove with Minor Y = Minor W, as in the two-day cash chart below when you use the lowest part of the triangle instead of the ((e)) wave.

S&P500 Cash Index - Two Day - Y = W

You'll also note that - in terms of "fit" - the usual expectation for a triangle target was met today. You take the widest width of the triangle and add it to the break-out point. The arrow on the right is just copied over from the one on the left. Picture perfect.

It's been a tortured, twisted, halting, grinding, count upward. I turned negative in the comments a couple of days ago. A bit too early. Or was it? Unfortunately, nothing about the long-term contracting ending diagonal scenario invalidated. The only difference is that you see wave ((a)) of Y as the extended first wave of the impulse for ((c)) of 5 of (5).

Probably because there is a little more room in the Cycle V diagonal count (shown in previous posts), the only thing that might convince me it was favored over the Intermediate (B) count, above, is a further higher high - to make five waves up.

Either count suggests a move down to the lows of Intermediate (A).

Here is how that last wave up ended from the Iran Tensions low on January 7th and 8th, as best we can tell since there is now a critical overlap in this chart. Either location you use for wave i results in overlap today, ruling out a further fourth wave location within this sequence.

ES Futures - 2 Hr - Divergence at the Highs

Right now our task is to count the downward wave as best we can. This is done using the ES 5-min chart, as below.

ES Futures - 5 Min - Five Waves Down

As best we can tell - using the principles of degree labeling - the third wave is the extended wave in the sequence. It is longer than i, or v. At this point the retrace wave looks sub-standard in terms of both time and price, so we may see more to that in the Monday session.

Have a great start to your weekend.
TraderJoe

Thursday, January 23, 2020

Three Down and Three Up (So far)

The best I could determine using either cash or futures is that price made three-waves down and three-waves up (so far). Here is the futures chart. The cash chart was repeated many times in yesterday's comments.

ES Futures - 30 Minutes - Three Down and Three Up

In this chart in the downward direction, c = 0.786 x a (to the pip), and in the upward direction the ((C)) or iii wave is 1.618 x ((A)) or i.

While such a pattern may start a diagonal lower, there is, as yet no conclusive proof of that. Such a pattern might also start a triangle that would lead to higher highs. There is still room to the upside, and there could also be down side surprises.

So patience is again the by-word. Now seems like the time for counting to see what larger form is materializing.

Have a great start to the evening.
TraderJoe

Wednesday, January 22, 2020

Repeat of Diagonal

For those who wish to see an Ending Diagonal to end the cycle, rather than an Intermediate (B) wave. This is a count I presented before. You can see that post at this LINK.

ES Futures - Weekly - Potential Diagonal

The major reason for liking this alternative is that the market sketched out two rather clear upper and lower trend lines shown. And the first retrace for Minor 2 is over 50%. Both the time and price length relationships are in the proper order: Wave 5 is < wave 3 < wave 1, and wave 4 < wave 2, and overlaps wave 1. Price would now be at the extended apex of the diagonal, which is often a turning point, and five waves up can be counted for the minute ((c)) wave of 5.

Price would now be in the throw-over of the diagonal, looking very much like it had "popped the cork" on a triangle or diagonal structure.

Again, there are some things not to like about this count, including a possible degree violation for Minor wave 2 and a slight truncation of the zigzag in wave 4. However, according to MotiveWave, no rules are broken in the count, and one would expect a fairly sharp reaction off of the high soon.

As far as I can tell, if you make the current high wave 3 of a larger diagonal it tends to remove those trend lines the market has already drawn. Again, as with any potential count, I'd like to see confirmation - beginning with first a daily reversal.

Have an excellent rest of the day.
TraderJoe

Tuesday, January 21, 2020

Temporary Simplification

Today was an interesting day. AAPL and the NQ futures made a higher high. The ES futures and cash S&P did not, but by just 0.25 - 0.50 points, an amazingly small margin. Also of interest, neither cash nor futures left a gap at the high. Still, we were able to follow the count downward in yesterday's comments, and you are welcome to review them at your leisure. The chart below of the ES 5-minute futures will simplify the short term picture.

ES Futures - 5 Min - Base Channel from the High

We have drawn a "base channel" around today's downward sloping waves. We caught the timing on a second wave very well; it is now longer in time than a first wave down (note, first and second can refer to a and b). Because this is such a short term chart, and there is insufficient information, we can not say that the downward waves are definitely i and ii, or a and b. For a third wave lower, there needs to be a 1.618 wave lower that breaks the lower boundary of the base channel, before there is a larger wave upward that breaks the channel upper boundary.

You can see that the setup is there. There may be a smaller degree .i first wave down following the wave ii / b high. As long as any upward price movement tonight remains in the channel, a downward count can remain in effect. Certainly so, if the base channel is broken lower. Very often, gaps down for third waves lower start in the overnight. Will that happen tonight? We don't know with certainty.

For that reason, we have placed a "wave counting stop" above 3,327 - which really is not all that far in points from the current price. Any movement above that level would likely indicate an incorrect count, and require counting like a sideways triangle or upward diagonal. But, we are not there yet, and it bears watching.

So have a good start to the evening and keep one eye on the overnight futures.
TraderJoe


Sunday, January 19, 2020

An APPLE a Day

"Uh. Tower. This is AAPL. We're approaching 1.618".

I know that a lot of people are interested in what I think the count in APPLE stock is. Here is the short term view on a two-day chart. I WANT you to remember something. Many, many wave analysts told me that the fifth wave up would form as an ending contracting diagonal. That is because APPLE stock was supposedly forming a diagonal. They were sure of it. I didn't see it happening at the location that they did.

So, here is the current local count on APPLE, as best I can tell. The rationale is below the chart.


APPLE, Inc. - Daily - Three Waves Up



There never was a diagonal in APPL. It would make an impossibly short B wave in terms of both price and time. There was a triangle; a "running triangle". It makes the B wave longer in 'time' than the A wave. So, lets get some measurements correct right off of the bat. Wave e of B overlaps A, as it is required to do in a running triangle. Within wave minor A, wave xi is the extended wave. Within wave minor C, wave xi is the extended wave. This wave is shorter in price and time than minor A which makes it a valid subwave of C. Within C wave, iii must be shorter than wave xi, so it must have ended already.

Price is approaching a perfect C = 1.618 x A. There should be a reaction off of that level.


Have a good rest of the weekend.
TraderJoe

Friday, January 17, 2020

Fractals ??

Does the chart below represent the hourly fractal of the larger fractal? If it does, I'll briefly mention the implication below.

ES Futures - Hourly Closes - Zigzag

This chart starts with the early morning of January 8th and the deep futures overnight dip to 3,180 on the tensions with Iran. When it seemed to abate, price rocketed higher in what I call a "no-pull-back A wave".  I did not have much trouble counting this wave as a diagonal. If so, it was Leading. But the wave can also be counted as an impulse. Because of the potential diagonal count, I thought it might have ended wave minuet (v), upward. That was incorrect. But, this wave was followed by a triangle. The running triangle was caught by reader Jack S. I did not catch it. I was working on, perhaps a larger diagonal. But, he did catch it. 

The triangle is followed by a ((C)) wave upward, which may or may not be complete yet. But, at least the ((C)) wave, up, starts with a wave that had a pull-back to back-test the upper triangle trend line. There is a nice divergence on the hourly MACD - but that's all it is at this point. Divergences can last a while. It's possible price wants to get a tad higher. That's OK with me either way. I'm in monitoring mode. So, where's the fractal? Here's the 2-day chart of the ES futures.

ES Futures - 2 Day - Fractal

As a Minor C wave, it has already passed its 62% extension on wave A. But, it, too, has a running triangle in the middle. That one I caught. This chart also started with an "event". It is the well-known announced turn-about in policy by the U.S. Federal Reserve to go into "patient mode" on raising rates and a decision to be flexible about normalizing its balance sheet.

Can this wave go higher? It can. It doesn't have to go much higher, but it can go to 100%. So here's the implication. If the hourly chart is making an ((A))-((B))-((C)), upward, that might start a diagonal wave or a large triangle that ends the sequence.

So, now it is a question of if I use this simpler description of the daily (two-day) up wave. In that case we may have A-B-C down to (A), and A-B-C up to (B). Let's take it step-by-step.

Have a good start to the weekend,
TraderJoe