Wednesday, November 30, 2016

Watch 2,193 on the ole S&P

In Saturday's post, we noted the booming level of sentiment, and the building divergences. With today's higher high, most of these have have gotten worse - not better. Here is the count as we have it today. We are happy to say that in live chat, we pointed out the "running triangle' fourth wave shown in blue, making today's new higher high the potential wave v .. of something .. we'll explain below. And we did start a downward count.

Hourly S&P 500 with higher all-time-high out of Triangle

So, when we took some measurements on this chart, yesterday, and provided them in live chat, we found that a minor C wave would equal 0.618 x minor A between Friday's high, and today's high. Further, within wave C, then minute iii would equal 2.618 x minute i, to the pip. The internal waves are also shown.

Because of the narrow trading channel, indicating loss of momentum for the C wave, and the "election result" wave A - which itself has some very peculiar properties (like starting from an overnight halt in the futures market), we think this minor new high in both the DOW and S&P500 counts best as Intermediate wave (3) in the weekly chart below.

Intermediate (3) likely complete in the weekly SP-500 with marginal new high

So, now the thing to do is to watch to see if Intermediate wave (1), upward, is overlapped in the downward direction by price crossing below 2193. If it does, and if the minor A wave of Intermediate wave (3) at 2182 is also overlapped. then there should be much more confidence that an Intermediate Wave (4) is getting under way.

We'll have more to say on this later. But any bulls out there - and there are quite a few of them based on the sentiment numbers - simply had to be disappointed by today's close. Instead of today being "gap and go" for them, it was "gap and trap", as today's opening gap was closed in short order. We can not 'positively' rule out new highs at this point, but the overlaps indicated would help do so.

For my part, and this is not trading or investment advice, just my opinion - I do not currently have a favorable outlook on the market. That may change, but that's the way things stand today. In my opinion there is more down side risk than there is potential upside reward, and this is said with complete recognition that higher highs of 3 - 5% are possible.

Hope this helps.

Saturday, November 26, 2016

A Few Charts

Although not publishing it regularly, I've have been rigorously tracking bullish sentiment as the market has risen. Here is a current update.

Weekly Combined Bullish Sentiment

You can see combined bullishness is at a new recent high at 58.6% bullish, compared to the February low of 37.1%. This is quite a swing and compares to previous market peaks in the 63 - 66% level. In fact, professionals and newsletter writers are 63% bullish, and individuals have recently swung from 23.6% as a low to a recent level of 49.9%. We are not claiming this level of sentiment necessarily represents an ultimate top. But things are definitely heating up.

One might also want to note that even as the DOW and S&P500 have powered to new all time highs, the $VIX is currently diverging and has not yet made a new all time low.

$VIX is Diverging Currently

The all time low in the $VIX is in the 9 - 10 range, and, even though the 11 level was reached in August, even that level has not been breached in November.

It is also worth noting that the Dow Jones Transportation Index may soon run into the resistance of a parallel trend channel line, as in the chart, below.

DJ Transportation Index - Possible Trend Channel Resistance Soon

A further look considers the S&P500 Index versus both it's current volume and it's On-Balance Volume which has not by any means broken out to new all time highs as price has.

SP500 Compared to Volume and On-Balance Volume

Finally, there is this comparison to the current NYSE Advance-Decline line, as below. Even though the SP500 and DOW are at new all-time highs. The advance-decline line is not currently.

NYAD Currently Diverges from Price

So, one has to ask to question if these are actually the first real chinks in the bull market - or whether they will correct themselves on short order. If these conditions do not right themselves, then it is possible the diagonal is actually forming. If they do get corrected relatively quickly, then it might suggest that Primary V will be the impulse count and not the diagonal count.


Thursday, November 24, 2016

A Wave

Not just any wave, but the "A" wave : the minor A wave - most likely. We had said that if  the DOW passed 19008, then it would numerically invalidate the possibility of a diagonal A wave in the hourly Dow Jones Industrial Average. The Dow did that this holiday shortened week, and formed an impulse count as best as we can tell.

But unlike some market prognosticators - even some various serious Elliott wave types - we did not scream "top tick", nor did we call for a new Primary III bull market. Neither did we post some outlandish new price targets like many gurus. Instead, we advocated for calm, and flexibility. (Check out or post of 11/12/2016 - and look how many more days have had new higher highs.)

So, after considering numerous possibilities this week, this is the count that seems most on track. It is just the Minor A wave as a impulse, rather than as a diagonal.

DJIA - Hourly - Minor A Wave as a Diagonal

This count has already proven itself, and since minute wave iii is longer than minute wave i, then minute wave v can be almost any length - but it is a common target than v = i, and this wave is approaching that level. The A wave may still not be completely done, but it is getting very close.

After this wave wraps up, then there should be a pull-back for a B wave - that realistically can be 23.6 - 78.6% of wave A, followed by a C wave up.

We have to admit because there is a triangle involved - which 'could' be the B wave, itself, then the best alternate would be that Intermediate (3) is completing at this time. But there is no significant evidence, other than the triangle, for that point of view just yet. Still, there is a triangle, and a triangle should precede the last wave up in this series. But, and this is a big but, that triangle is a "running triangle", and running triangles - with their higher (b) waves - are still bullish, and still point to higher market highs at some point.

This "A" wave would be part of Intermediate (3) of the potential larger weekly diagonal we diagrammed in previous posts. And, again, we said we have no preference as to whether this upward wave completes as a diagonal or an impulse. And there is no good solid evidence for either count, yet. The Diagonal would be better supported by a three-wave Intermediate (3), and the impulse would be better supported by a five-wave Intermediate (3). In the overall impulse wave up, this minor A wave would be the minor 1 wave.

So far, the market has been slightly stronger on the upside than we might have expected, but this still can be the "no-pullback" quality of an A wave up. So, once again, we remain flexible and patient and will continue to follow all the rules, and as many of the guidelines as we can.

On a positive note, we were correctly critical of those calling for "top tick" in an effort to sell their newsletters, and/or promote their services, and we hope that helped your perspective to some degree.

Cheers, and have a great holiday!

Sunday, November 20, 2016

Here's Where Some Others Think the Market is Going

In an article published on November 18, 2016, authored by J. L. Yastine, and published in the The Sovereign Investor Daily, here is where some other people think the market is going.

Four Market Gurus Call for DOW 30 - 50,000

Right on? Not in my view! Have a good week & safe travels if you are on the road.

Friday, November 18, 2016

Five Waves Up

As of today, we successfully counted five-waves up in the SP500, and E-mini S&P futures. The significance of this is two-fold. First, with five-waves up in the direction of the trend - one should expect at least another five waves up - albeit after a correction.

Secondly, we are finally able to place the latest A wave up of Intermediate (3) on the two-daily chart, as below.

SP500 2-Day Chart - Five Waves Up to A

Next, some will say that the five-waves up could also be a minute wave (i) of a much larger Intermediate (3). And, again, while we are not ruling out an impulse, when we just look over the wave above, it is very hard to find impulsive character in it. So, the "look" right now is one of a diagonal.  That means wave Intermediate (3) has high odds of forming as three-wave zigzag, rather than a full-on impulse.

We can not say for sure, yet. But we do find it telling that a wave A may have stopped short of making the new all time high - perhaps as a warning. Certainly, there is no signature on the EWO of an impulse third-wave. The EWO is still diverging. Then, too, as we were counting waves today, we noted that the DOW may have slightly truncated it's fifth wave up - where the S&P 500 completed it successfully - another possible warning sign.

So, we remain patient and flexible, and continue just to follow the rules and guidelines as best we can. (And let's see how many web-sites and bloggers begin to follow this count and post it as their own - as they get whipped around in the near constant chop at the moment.)

As usual, I will indicate that the downside invalidation level for this count is below the low of wave (2) on the cash chart. Each of the Dow, the S&P500 or the ES may make one more higher daily high as part of the A wave, without affecting the overall count, (and that would likely have to be Monday or Tuesday), but another new high is not required in the A wave. It counts acceptably as it is.

Have a good weekend!


Tuesday, November 15, 2016

I Here You Knockin'

Well. Presumably Elliott Wave International has the resources to publish interim bulletins on any day that they wish. In Saturday's post, we took exception to Prechter's call of possible "top tick!" in the Dow. As you know, by now, Monday made a higher all time high, and today made a higher closing high. So, why not publish the "top tick" call Monday or today?!

Here is a 15-minute chart of the Dow Jones Industrial Average. There is a bit of an ominous structure at the end of the wave up from the election low.

DJIA Cash - 15 Minute - Potential Ending Contracting Diagonal

So, the Dow has indeed been going almost straight up since the election, and the wave may be making the statement of "too far, too fast" in the form of a diagonal. We will have to see. For this count to be correct, according to the text book methods of regular Elliott Wave, it means that the Dow must reverse course temporarily before it reaches 19,008.

At the present time, we have wave (v) shorter than wave (iii), wave (iii) shorter than wave (i), wave (iv) shorter than wave (ii), and all zigzag sequences. Wave (v) must remain shorter than wave (iii) in order for a valid diagonal to be claimed.

IF the ending diagonal proves itself, and this is all of a no-pull-back Minor A wave up, then the B wave down of Intermediate (3) must travel below the low of wave iv (circle iv) in order to honor the very meaning of an ending diagonal. When a true ending contracting diagonal minute wave v (circle v) forms, then price must retrace back below the low of the start of the diagonal at minute wave iv (circle iv).

During much of the time that the Dow has been tracing out the diagonal, the S&P 500 has been tracing out a triangle. This adds confidence to such a wave count because a triangle usually proceeds the very last wave in a sequence, and the S&P500 is very close to exceeding it's minute wave iii, also. Minute wave iv was a triangle in the S&P, and today would be much of minute wave v.

After the A wave concludes, price could retrace 38 - 78% or more in a B wave of Intermediate (3). So, watch this level closely : 19,008 in the Dow.

If that level is exceeded in the next two days, it means the Dow has not formed a valid diagonal, and a larger up wave - possibly that of an impulse count - is forming. This is simply what we mean by the fact that the patterns must form properly in every detail. If they don't, it is not a failure of Elliott Wave. No, it is more just a function that a larger wave is forming. Either way, the potential pattern, provides valuable information when the rules are applied - whether it completes properly or not.

Again, we can watch closely - without panicking - and try to follow the rules and guidelines as best we can.


Saturday, November 12, 2016

Say it Ain't So!

No, not that President Obama and Donald Trump shook hands after the things they have said about each other (I would have been much more in the Howie Mandel fist-bumping category on that one!), but, rather, on Friday noted Elliotician and author Robert Prechter published a count which he said could be terminal for the stock indexes.

The count looks like this.

DJIA Weekly - Robert Prechter Terminal Count
Now many of you know, I have spent literally months debunking the stock market calls made by the so-called OEW method of market analysis. (Using the chart, below, not the one above). I called for a decline at Primary 3 (circle 3) when OEW called for a massive new rally to 2500, or more, I called for a Primary 5th wave up at the Primary 4, low, when OEW called for a massive bear market to begin, etc. The work was done - not out of malice of any type - but to help the everyday person appreciate the true nature of wave counting, and to call out as a possible scam the huge fees being charged to learn the proprietary OEW material - which I viewed as essentially worthless. There is better material you can get elsewhere for a lot less, or even free.

But, now, unfortunately, it is time to turn a critical eye to the popularizer of Elliott's method, himself. Many people are critical of Robert Prechter for making many, many bad calls from 1987 to 2015. Let's see if we can catch him in the act, too, shall we?

So what is wrong with the above chart? The fact is that the chart is not constructed as Robert Prechter teaches in his own book!

Students of Elliott Wave can quickly point out that Prechter's guidelines say that minor Wave 1 of a diagonal should crest above that prior Intermediate wave (3), "in order to shows its motive character." And, clearly, the way Prechter has it drawn, it does not. Now, to be fair, waves 3 & 5, do crest above the prior wave (3), and Prechter also says this is the minimum structure for a turn. Yet, a further criticism of this count is that in the futures, his wave 2 would be an undisputed FLAT, and waves 2 and 4 of a diagonal must be zigzags, not flats.

Prechter publishes this count in a critical Interim Bulletin, with alarming comments like, "Is the Dow at top tick?" And my question is, why would he do this now?

As you know, if a diagonal is involved, my view appears in the chart below, and the Fibonacci ratios shown in the chart are offered as evidence to support the count. Wave (2) is almost precisely at a 0.236 x Wave (1) relationship.

DJIA Weekly - Most Likely Diagonal

Further, to support the count is the fact that the most recent up gap now appears in a wave (3) - just as one would expect.

So, while I think Prechter may be close, and one might ask, "why quibble?" The answer has to be that either Elliott Wave works the way that Prechter teaches in his book, or it works the way that he uses to sell his newsletters and other products currently. His newsletter calls are different than his own methodology. Certainly his recent "newsletter methods" did not work to call the ultimate top in 2000, or again in 2007, whereas his published book methods worked for us just fine!

But there is another reason yet. We have said that we simply can not rule out that this wave will be an upward impulse - rather than a diagonal. And, to this day, we do not have confirmation that a diagonal is in progress. Neither does anyone else. We likely won't get that until we see only three waves up in a zigzag for wave Intermediate (3), and a zigzag down for an overlapping wave (4). Until that occurs, we might also just get that impulse up.

Yet, it is true, what the impulse currently has working against it, is a lagging advance-decline line,  and a fractured market - with the Dow having made new highs but the S&P500 not. It's our experience that these conditions do eventually make a top, but the divergences with the advance-decline line can go on for months. And, recently, the Dow Transports are getting quite frisky again.

So, why rush a call? Yes, it could be that he needs to tell institutional clients well before the turn so they can quietly scale-out of positions. But, that could be phrased much, much differently in a newsletter than by screaming "top tick?!"

Have a good weekend all. You - especially the Veterans among you - deserve it!

Wednesday, November 9, 2016

Believe It Or Not!

No, not the election result, silly: the fact that the cash diagonal we showed you on Monday is still completely on the table - even after the futures plunged more than 100 points last night. Here is an update of the cash chart.

SP500 Cash (2-day Chart) - Diagonal is still Possible

From what we can see, and the fact that the Dow Jones Industrial Average is now near the prior all time high, it appears that we are in the A wave up of wave (3), at least. Here is what the DOW chart looked like mid-day, during live chat, and you can see how close to the high it was.

DJIA Cash (Daily) - Close to All Time Highs

On the way up, today, cash DJIA closed the two gaps in green, and very nearly crossed the high. So, this does look like the A wave, up. (See comment on alternate, below).

How does such a cash count possibly square with a count in the futures - especially when they did what they did in the after hours? Here is what we think the best count is on the futures as it was presented during live chat.

ES Futures Daily - Intermediate wave (2)

We agree! We did not predict this type of pattern in advance, and it was not our original count. But, since a low below the June low did not occur - it is hard to argue with. There is a clear wave (v) which is longer than wave (iii), a wave (iii) that is longer than wave (i). Wave (iv) is longer than wave (ii), but does not travel beyond it, and wave (iv) overlaps wave (i). This meets the requirements of the expanding diagonal, and the wave is difficult to explain in any other manner.

And, if the futures did indeed make an ending expanding diagonal C wave lower, then, it would predict at least marginal new all time higher highs.

So, we'll see how it goes, and take it one step at a time. The cash chart rules the pattern until more is known. And, yes, a (1), (2), 1, 2, upward is still on the table, as well. If the look of the diagonal gets strained, we will convert to that as the main count. First, let's see if the new highs are made because the SP500 is lagging the Dow. If we are in Intermediate (3) of an impulse, upward, then if we do finish five waves up in good form, it would be Minute i in that count (not shown).

Again, we have no preference - at this point - as to which count it is: diagonal or impulse.

Cheers! And enjoy the charts.

Monday, November 7, 2016

Best Count Currently is that of Diagonal Primary V

One chart, below, should say it all today after the news broke over the weekend about the FBI not being likely to pursue charges against candidate Clinton regarding her emails.

SP500 Cash (2-Day Chart) - Likely into Wave (3) of the Diagonal

If you measure wave C of Intermediate Wave (2) downward, especially in the futures, then the measurement is C = 0.618 x A to the pip! The upward gap action suggests that the trend lines for the diagonal be redrawn until we know where wave Intermediate (3), and Intermediate (4) are placed.

In the after hours today, wave minute-e (circle-e) of the triangle was exceeded, higher, and even cash price has clearly entered the triangle again. So, it does suggest that upward movement may not be over, though it may be halting or tricky.

Remember, wave (3) in such a count should be an A,B,C zigzag higher. Wave (3) must at least make a marginal new high, and it must remain shorter than wave (1).

That's what the chart looks like at this time.


Sunday, November 6, 2016

Under The Big Top

What is no one talking about? As of this weekend, you hear very little serious discussion whether or not the market has, in fact, actually already made the big top - and we just don't know it.

Back on my post of September 29th, I showed a chart of the Dow Jones Industrial Average, and said that because of the Orphan Wave at the bottom - where the Dow did not make a lower low in February - but the S&P500 did - it was, in fact, possible to count the DOW as having completed an Intermediate (5)th wave of a Primary Vth wave higher. I will repeat the chart below.

DJIA - 2 Daily Chart - Possible TOP Count

From the standpoint of The Eight Fold Path Methodology there is a lot to like about this count. First, there are about 117 candles in this count - very close to the minimum 120 suggested. Second, wave 3 of (3) is on a peak of the Elliott Wave Oscillator (EWO), and wave 5 of (3) diverges from it. Wave (4) sees the EWO retrace to below zero, but not more than -40% of the value of the peak of wave (3). Then Wave (5) again diverges from wave (3), as it should to indicate the loss of momentum, and the market has since broken the lower trend line.

From the standpoint of other indicators, the Dow Jones Transportation Index is still diverging from the Industrials - in what may still be a Dow Theory Non-Confirmation. As I have showed before, the Chaikin Money Flow diverged from the highs, is now below zero and declining. Here is the divergence we showed you back then, and you can see where money flow is now. Clearly, the market is bleeding volume!

SP500 Index Versus Chaikin Money Flow

The question is still whether the hemorrhaging is only a pre-election phenomenon or not. To add to the DOW's chart, we want to show you two ways now that the NQ (the NASDAQ 100 futures) could have topped too, and one way that it might not have.

In the first count, there is a large flat for wave (2), and a triangle for wave (4). There is a higher high for wave (5). There is nothing that violates the rules of a count like this, but suggesting the count may be rushed is a potentially valid criticism.

NQ Futures (2 Day) - Possible Top

In the second, perhaps more ominous possibility, we can see that of a Contracting Ending Diagonal in it's entirety.

NQ Futures (2 Day) - Possible Top

There is nothing technically wrong with this count either. 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 waves (1), (3) and (5) all make new all-time market highs. It is also pretty clear that all of the waves 'could' be considered zigzags. And, it would be hard to consider such a count as rushed. It has the right look for a diagonal wave.

So, we have the clear possibility of a top, but there is still one way, the NASDAQ 100 could not have topped, and that is in the A, B, C count, where C = A, below.

NQ Futures (2 Day) with C = A

In this case - just the C wave is an ending contracting diagonal. Still this case is pretty ominous because, it would suggest that the B wave will be soon exceeded lower.

So far, the only three factors I can see which suggest a possible all-time top is not in are: 1) the NY Advance-Decline line as not diverged from the highs. It would be atypical for a bear market to start without price divergences from the A-D line. 2) The Dow Transports, while not at all-time highs, do have a pattern of higher local highs, and we can not assume the upward move in them is over yet, and 3) it is more difficult to count the S&P500 as a top. It's not impossible, but it is more difficult.

From a timing stand-point, we are now within +/- six months of a Fibonacci (8) eight years since the March, 2009 lows - and that is plenty accurate for me. It was, after all, one of my key motivating factors for calling February 2016 as only the Primary IV (Circle 4) low in that the market had not had eight years to express itself as a bull market.

Could we go higher? Yes! It is possible. The A, B, C count up allows that only Intermediate (1), up has been made of a much larger contracting ending diagonal, and we are now in only Intermediate (2) downward. This is still a very, very, viable scenario, but obviously not below the February 2016 lows.

The purpose for this post is firstly to recognize a similar potential top in the NQ's, and to make sure these alternate counts of a potential top are clearly in your mind because there is not much discussion of them - and forewarned is forearmed.

Still we are not counting upward until we see clear five-wave sequences in that direction, and until the minute (e) wave of the Minor B triangle is exceeded to the upside. It is price that has to convince us to count upward - not the other way round.

For our part, we just remain flexible, patient and cautious as one of the biggest news stories in four years comes to dominate the headlines.


Friday, November 4, 2016

Reality Reflects Reality

I have never been a big supporter of the idea that an Elliott Wave count predestines the fate of an election or vice-versa. As an example of that I will spend some time in this update to argue utilizing the facts at hand.

First, I have no idea how the election results will turn out on Tuesday. The market does not either.

To make this case. Here is a chart showing my call this morning in the live chat room that we had likely finished a five-wave sequence down to the lows - when considered from the (e) wave of the barrier triangle which was the subject of previous posts. And, the recognition of an expanding ending diagonal, in perfect form, is what prompted the call of a completed impulse lower.

SP500 15-Minute Chart with Completed Five Wave Sequence from the Triangle E wave.

That chart was made at 10:47 am. Here is the result with the rest of the trading day on the chart.

SP500 15-Minute Chart : After the Close

As you can see, the upper down trend line of the diagonal was broken in a three-wave sequence higher, and then the move was retraced to the lows. In fact, by the close the DOW made a lower low. And after the close, the ES futures made a lower low, too. When you examine the upward sequence you'll find the c = 1.618 to the tick. So we are quite confident of the wave sequence.

But, unfortunately, with only three waves up, the market has left us with two distinct possibilities. Initially, when the fourth and fifth waves upward failed to form, it actually left us with three possibilities, including that of a double-zigzag upward. But that possibility was eliminated by the DOW's lower low and that of the futures.

So, now, with three waves up, we either have 1) a small second wave (a wave retracing about 32%) - which is not very typical unless the market is extremely weak. Or, 2) with the marginal lower low in the futures we might have had three waves up to (A) of a FLAT, and the downward movement in both the DOW and the S&P is the (B) wave of that FLAT, with a subsequent (C) wave up to follow.

If we have the small second wave, the market can keep impulsing lower on Monday. If we have the small flat, the impulse direction would be upward!

These possibilities allow the market to impulse either higher or lower on Monday, or both!

As you might know, the cash S&P500 has now traded all the way down and is sitting exactly on it's 200-day moving average. If you recall, the 50-day and the 200-day SMA's are what the banks and larger financial institutions use to help identify trends. The significance of price being at the 200-day moving average is that institutions can have their cake and eat it, too! If price is to go lower, those wrong on the move can say, "well, see.. we at least sold down to the 200-day in advance!" And, if price is to go higher, those wrong on the move can say, "see we recognized the 200-day as support".

So, with very satisfying count possibilities demonstrated above in either direction, we need to be clear that if one is betting on the election, one is doing just that! It is not a bet based on wave counting because the count clearly can go either way on Monday / Tuesday. And, while we do think in the short run price is eventually heading a bit lower, the path between here and there is what is a bit unclear.

In other words, the election is uncertain. And that uncertainty is reflected in the most likely count possibilities. While the current trend of the market is down, and the DOW's lower low today indicates it may not be over, we simply take neutral wave-counting position until we know more. Remember, the election could happen in three different ways: 1) Trump could win a clear victory, 2) Clinton could win a clear victory, or 3) no one could win a clear victory. And, in the latter case, the lack of a clear result, and the resulting uncertainty, could spell short or long term trouble for the market.

So, let's see what happens Tuesday.

Thursday, November 3, 2016

Cash below 2189 Violates Diagonals

So, the diagonal counts lower were holding on by a slim thread until the very last half-hour of the day. No matter. We said we could not start an upward count until or unless we got clear five-wave sequences upward. That just didn't happen in the last couple of days during live chat.

Then, in the last half-hour today, the downward diagonal possibilities were invalidated with downward waves that were too long to follow the rules. That leaves us with a clear cut case that the only valid count in cash and futures is the B wave triangle count. It is as we described for the most part. It just had a short "e" wave. But it still follows the rules in both cash and futures. First, here is the futures count.

ES Daily Futures - Contracting Triangle B Wave

So, first note that the futures made a higher high at the point labeled v, and this prevents us from counting cash as a larger expanding diagonal downward. That point would be wave two of a diagonal on cash, but if v made the higher high, it simply can not be a second wave. Whereas, the futures triangle above does follow all the rules. And during live chat I specifically remarked how I could not say how long the (e) wave would be - and that was the specific reason why we tried the experiment on the 2 hr. cash chart shown on the prior posts. The experiment didn't work out. But the triangle did.

Secondly, note that the futures do not have a lower low on October 13th - like cash does! That actually prevents the futures from being counted like that potential cash diagonal.

So, here is the updated triangle on cash.

SP500 Daily - Barrier Triangle

As I've said before, risk in wave-counting has gone up! And, while I must apologize for the quick turn-around in the count, we have to follow the rules. Period. Welcome to B waves, and diagonals and triangles!

There is now the potential of a measured move, lower, shown by the second blue arrow that could go down (with backing-and-filling) to fill the 2040 gap.

Often, a market turn will occur near the apex of a triangle, and price is not yet near that apex. There is still no sign of an upward turn  - even though by several measures downward movement is getting stretched. The daily ES is now three-days below the lower Bollinger Band, the slow stochastic is now the second day into over-sold territory, but it has not embedded yet. So, a bounce could occur at any time.

But, again, it is not likely we will resume upward counts until price is back above wave (e) of the triangle.

While I hope this helps, I will provide a reminder of a "Payroll Friday" tomorrow and the volatility that tends to bring.


Tuesday, November 1, 2016

Risk Has Gone Up

The experiment we tried in the last post - that of counting a barrier triangle minute (e) wave higher did not work out. An upward wave to cross the EMA-34 on the two-hour time frame did not fully occur. Instead, we only got the (alternate) B wave, upward, that was clearly indicated in the SP500 15-minute chart (again, refer to previous day post).

Remember the overall purpose of that proposed triangle was to find one way to get the S&P500 to overlap it's April, 2016, high of 2011.00 - just as the Dow and the NYA had previously.

On that failure to make an (e) wave, price proceeded to make a new daily low. In fact, then price went on to overlap the 2011 level, trading as low as 2097+, and filling the gap in the middle of the chart shown in green. That made all those people who were formerly counting 1,2,3,4.. up from the June low incorrect. They had ignored the Dow and the NYA overlap. We did not.

Therefore, that leaves us with the following scenario - which is that of a contracting diagonal.

SP500 Daily Contracting Diagonal with Acceptable Measurements and Structure

This contracting diagonal scenario is good down to wave (v) = 2089. Beyond there, wave (v) would be longer than wave (iii) - which is not allowed in a contracting diagonal. The market did close on a back-test of the lower diagonal trend line. We can not say (no one can) whether such a diagonal is leading or ending. We suspect the latter, but there is little evidence for it, yet.

The only point of this exercise is to say that the remaining upward counts in the S&P are Intermediate (2) down of the contracting ending diagonal for Primary V. Or minor 2, down, of Intermediate (3) up of an impulse. Neither of those counts can come into clear focus until or unless five-wave upward impulses begin to be made. We must stress, we do not know this pattern is completed to the down side yet!

Regardless, there is a Fed meeting tomorrow to pay some attention to, and it should now be clear that wave counting risk has gone up. The number of points now needed to validate a wave scenario keeps getting larger and larger.