Saturday, April 30, 2016

Go Along to Come Along

To go along with the ES count posted on April 22nd, this week I reviewed many of the charts and they are posted below.

In this first chart of the NASDAQ Composite, I originally had the thought that perhaps wave 5 was forming a 'megaphone' pattern of an expanding ending diagonal. But as the week progressed, this chart did not take on the "right look" - even though to this minute it has not technically invalidated. This revised count goes along much better with the idea of having the "right look", and the fact that the ES is currently below it's 18-day SMA, and maybe headed lower, at some point, according to the slow stochastic index.

NASDAQ Composite Index - 2 Hourly Chart - Five Waves Up

This next chart shows the NASDAQ 100 counts perfectly well as a five-wave sequence upward, also. (My database uses IUXX for the NASDAQ 100 cash index). You will also note there is no Fibonacci relationship in this wave. It is not C = A, it is not C = 0.618 x A, because that level was exceeded. In short, it is another simple impulse wave – just slightly ugly in it’s characteristics. That’s because it ‘may’ be a first wave up (yet to be proven) or it may end the movement entirely – depends on the retracement.

NASDAQ 100 Index - 2 hourly Chart - Five Waves Up

By the way – some of you may recall, the NQ futures low was on 11 Feb, but cash did not follow it lower. I have also counted the NQ, and, while slightly different, it can ‘also’ be counted as five minor waves up where 4 does not overlap 1. Also, in this chart, being below the prior wave 4, now 'validates' the idea of an ending contracting diagonal for wave 5.

The idea of ending diagonals in these charts likely means we have topped - at least for a while - and it likely coincides with "sell May and go away" - - see a small caveat below. (Remember: nothing in these charts is to be interpreted as trading or investment advice - just a recap of typical market seasonal patterns there).

Next, here is the current S&P500 cash index on a 30-minute chart. I starting count this wave down on a five minute chart, as the very first "a" wave that you see on this chart on 21 April.

SP500 30-minute Possible Expanding Leading Diagonal or 1-2-i-ii lower

That first 'a' wave down has too many overlaps in it to be part of a typical third wave lower, and so it was counted as a contracting leading diagonal, perfect in every respect, with a running flat 'b' wave to follow it, followed by a 'c' wave down. This likely counts as wave (i) of an Expanding Leading Diagonal lower. Next, there was a clear "running triangle" inside of wave (ii) which also crested at the 61.8% Fibonacci retrace level. Based on the location of the gap lower on 29 Apr, the downward wave appears to best counted as a-b-c, but that is tentative at this point. It is 'possible' the structure is developing a true 1-2-i-ii lower, but more evidence is needed for that. Regardless, the second downward sequence is now longer than the first one, and given the signature of the EWO, and the position of the slow stochastic, this 'may' indicate a diagonal in formation.

So, based on these charts what is one highly likely market scenario for the next year? Well, it's possible we had Intermediate wave (1) up - as per the ES chart chart on 22 Apr. and the above charts, as well. If (here's the caveat) the day of 2 May sees inflows from mutual funds, pension finds, 401k's, etc. and we do indeed make an Expanding Leading Diagonal lower, then it could be the Minor A wave of an A-B-C lower to Intermediate (2) over the early summer.

This 'could' be followed by a pre-election rally for Intermediate (3) higher, and a dip in late November / early December for Intermediate (4), followed by a year-end to first quarter rally for Intermediate (5) of Primary V.

I don't "know" if this will happen. As always, especially when price is hanging around prior tops, we will be both very cautious, very flexible, and very open to what the market has to say. Why? Because with these five-waves up, it is also 'possible' Primary V just ended in a slight truncation. Just look a DJIA chart to see that possibility. Either way it goes, we will be patient and diligent to the extent possible.

Cheers!

5 comments:

  1. Thanks Joe for correlating the charts! I know it takes a lot of your time but what you do is much appreciated and is always a treasure of information.

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  2. As always your charts and comments are very helpful. Thanks Joe.

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  3. Thank you very much for your really profound and thoughtful analysis. It is always worth reading and and a pleasure recognizing so much passion and talent for Elliott's great theory. I am very grateful to be amoung your readers.

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  4. Love your work. I'm not a trader, but a long term investor and I got out before the big plunge last September because of watching your videos (which agreed with my own simple indicators that I watch) and it gave me the courage to get out despite what others were saying. I miss the videos because I'm a slow learner and I'd play them over and over again. I hope you'll still do some of those in the future. Now, I read your posts over and over again on both your blog and Tony's! I appreciate your excellent analysis. Please keep posting. THANK YOU!

    ReplyDelete
  5. Love your work. I'm not a trader, but a long term investor and I got out before the big plunge last September because of watching your videos (which agreed with my own simple indicators that I watch) and it gave me the courage to get out despite what others were saying. I miss the videos because I'm a slow learner and I'd play them over and over again. I hope you'll still do some of those in the future. Now, I read your posts over and over again on both your blog and Tony's! I appreciate your excellent analysis. Please keep posting. THANK YOU!

    ReplyDelete