Saturday, July 22, 2017

Don't Get All Sentimental

Our proprietary model of bullish sentiment across a wide range of market participants absolutely soared this week - jumping almost another five full points in one week to the highest level for all of this Primary Vth wave high.

Weekly Bullish Sentiment

The weekly percentage of bullish investors jumped to 61.2% from 56.4 %, which is amazing of itself but it also eclipsed the prior Primary V wave high at 60.9%. For those of us that watch this on a week to week basis, recording a string of eight weeks above 55%, and then seeing this, it is amazing to watch. The biggest jump in sentiment came from the mom & pop investors who "threw in the towel" on the bearish case and whose bullishness jumped seven points in a week! But there was also a rise in bullishness among professional investors and newsletter writers, as well. Pretty remarkable.

Of course, we view such one-sided sentiment as a contrary indicator in the long run, and attribute it to the power of the Minor 3 wave to sway opinion. When added to the wave counts shown  yesterday, and in the weekend video, along with the low trading volumes being experienced it adds to the case for caution in upward wave counting at this time.

But, there is further evidence, as well. Barron's magazine reports that Corporate insider transactions - those company officers and directors who must report transactions - are now skewed 62% to the sell side. (This is the ratio of Insider Sells to Buys). So, someone who knows something is selling at one of the fastest clips in recent history. It is interesting this occurs in conjunction with this sentiment high.

Well, sentiment is good, you say, but it is price action that determines gains or losses in the equity market. Is there any price evidence of concern while the major markets are near their all time highs?

To that end, we'd like to show you this chart of the Russell 2000 Index. It has a price bar not seen anywhere else on this chart - that of a "key reversal day". That is a day when prices first trade up through their all time highs - making a higher high than the previous day, then turn around and trade lower than the low of that previous day, and finally also closing lower than it, as well.

Russell 2000 Index - Key Reversal Day

This candle comes after prices may well have traded up into the triple zigzag we cited as possible in a prior post. The triple zigzag would be the minute ((b)) wave above, indicating that a steep wave ((c)) decline should begin to end the Minor wave 4. Triple zigzags are very rare birds indeed, and we wouldn't call this one except for the uncommon parallel nature of the price movement within. Price just peeked above that upper parallel, in what Elliott analysts call an "over-throw", before being smacked down back inside the channel again. Price movement down outside of the channel should well indicate that minute wave ((c)) is underway.

Well. Have a good weekend.
TraderJoe

Friday, July 21, 2017

So far, So Good

Market Outlook: Marginally higher highs possible, but risk continues to increase.
Market Indexes: R2K new all time high; None of Dow, S&P nor NQ made new ATH's today.

The herky-jerky action continues, but the waves continue to form properly in the ES E-Mini S&P Futures 4-hr Chart, and the Dow Jones Industrial Average.

ES E-Mini S&P Futures 4-hr - Wave c Formed Downward This Morning

The continued loss of momentum is shown by the break of the lower ES wedge line. A new all time high is possible, but not guaranteed. (Truncation is possible). A diagonal is still not indicated in the chart above, as there are no overlaps of concern.

DJIA Cash 4-hr Made it's b Wave Down On Schedule

The Dow fought a brilliant battle at it's up sloping trend line, and managed to close just above it. While point losses are minimal, the shapes of the various waves is what is troubling.

However, don't let it spoil a good start to your weekend!
TraderJoe



Thursday, July 20, 2017

Added New Wedge Line

Market Outlook: Marginal new highs still possible.
Indexes: Dow - no new high today; S&P500 new high, NQ futures new high

Added a new potential wedge line to the ES E-Mini S&P500 Futures 4-Hr Chart, below.

ES E-Mini S&P500 Futures 4-Hr Chart : New Potential Wedge Line Added

There's a good possibility the market will finish a fourth wave lower tomorrow which would be c of (iv) in the above chart.

The Dow's count remains in a "b" wave, as below.

DJIA Cash - 4 Hr Chart - Still in b Wave Lower

Today's S&P500 Cash Index high was less than one full point from the 1.618 Fibonacci extension we showed in the weekend video. As Dirty Harry used to say, "are you feeling lucky, punk?" If you are, it's OK. Just watch things closely.

Have a very good start to your evening.
TraderJoe

Wednesday, July 19, 2017

Still no 38.2% Pull-Back

Market Outlook: Marginally higher highs still possible; risk growing
Markets: ES, SP500, NQ higher all-time highs; not the DOW

Here is an update on the ES E-Mini S&P 500 Futures 4-Hr Chart. The upward movement broke a potential wedge shape, but in addition, still has not made a retrace of 38.2% or more. Therefore, the best count still remains an extended first wave, as below.

ES E-Mini S&P500 Index Futures - Still No 38.2% Pullback

Since we don't have a pullback of more than 38.2%, the best configuration of the count is with the extended first wave again. It might form a wedge, with a shorter wave (iii), but that remains to be seen. There is no evidence for a diagonal at this time, as there is no overlap of any significance.

Tomorrow the Bank of Japan, and some Central Banks in Europe bring their monetary decisions to the fore. Let's see what prices do on those announcements. Regardless, in this scenario, wave (iii) should not become longer than wave x(i), and wave (iv), when it occurs, should be in the sharp or triangle class of waves.

Here is what the Dow looks like today - not having made the new all-time high.

DJIA Cash - 4 Hr - No New All Time High Today

Volume rose a bit today. But not much. Today, the Shanghai Composite completely reversed it's "ugly candle". I'm going to watch that one for an expanding diagonal now - just because the waves are so overlapping.

Have a great start to the evening!
TraderJoe

Tuesday, July 18, 2017

Dow, NQ and SSEC Update

Market Outlook: Three Indexes (DJIA, SP500, NQ) Wedging; possible tops not long away
Special Alert: China's Shanghai Composite (below) had an ugly candle yesterday.

Here is an update on the Dow Jones Industrial Average converted to the same likely "extended first wave wedge" as in the weekend video (where we used the S&P500 Index for the example).

DJIA - Three-Day Chart Extended First Wave Wedge

We checked thoroughly, and wave minute ((iv)) does not overlap with with minute ((i)). The wedge shape is shown by the dotted blue line. This puts the waves in the same relative position as the S&P500 Index.

Now, if we take a minute to look at the NQ (NASDAQ 100 futures, below). We see any new highs can be taken as potentially being in wave three of an ending diagonal. I have sketched it in for you below.

NQ Futures - Possible Ending Diagonal in Progress

Translating the above idea from the NQ futures, now to the four-hour DOW chart - rather than the three-daily DOW chart, shows a similarly possible arrangement.

DJIA 4-hr Chart : Potential Ending Diagonal

I have chosen to represent the potential diagonal this way, for three reasons. First, so that minuette wave (i) would be the longest wave in time inside the potential diagonal. Second, so that the c wave of minuette (i), actually makes a new closing high over the prior wave minute ((iii)) - to show it's motive character. And, third, to align as best as possible with the NQ futures.

We don't know what the impetus for a turn will be. It might be domestic. It might be overseas. In that vein, I just want to provide a chart of the Shanghai Composite Index. Yesterday's candle was quite a nasty one, as below.

Shanghai Composite Candle was a Warning

While one candle does not make a case, we will also note that the indicators have also rolled over lower, and the 50-day MA is currently trending below the 200-day MA. Not the greatest! (Further from an Elliott Wave perspective, one may consider it to be the move that ended from an ending diagonal that ended on 14 JUL. Try drawing the properly shaped wedge yourself for practice.)

So, tread carefully, and pay close attention - at least on a daily basis to our markets. The wedge shape has to break at some point soon!

Have a very good start to your evening.
TraderJoe




Monday, July 17, 2017

Exceptionally Low Volume

Here's an update on the ES E-Mini S&P500 Index 4-hr Chart we showed in the weekend video.

ES E-Mini S&P500 Index 4-hr Rising Impulse Wedge

We were expecting a fourth wave in the sharp class (or triangle), and that is apparently what we have gotten. Prices closed up +2.50 in the futures, but the volume was terribly low (only about 842 MM contracts) which compares to volume around the New Year's Holiday, not typical trading at all. NYSE stock exchange volume has dropped to 2.77 Bil, much lower than the 4 - 4.5 Bil which reflect more usual levels.

On a different topic, the U.S. Dollar Index (DX) this morning did hit that 1.618 Fibonacci level, at 94.800, and bounced off of it. It's worth watching to see if we get that minute four correction.

Well, have a very good start to your evening.
TraderJoe


Sunday, July 16, 2017

Converting to Neely Style Charts, Counts

Below is the video that was promised for this weekend. Please scrub about 90% of what was said on Friday's post as the further work is showing something a little different and quite promising! Let's see if it delivers.


Thank you for your patronage of this blog as we attempt to deliver work that has potential for greater reliability in wave counting, fewer alternates, and fewer guesses. After reviewing this video, we hope you'll agree.

Have a great weekend.
TraderJoe

Friday, July 14, 2017

Converting to Neely Style Charts

Market Outlook: Slightly Higher Highs still Possible On Very Low Volume.
Markets: Dow new ATH, SP500 new ATH, $RUT new closing high.

I've been quite busy in the last two days updating many charts to Neely style charts. Yesterday, I showed you this daily chart, and a 15-minute chart, and said that new all time highs were possible based on my analysis of The Eight Fold Path Method. It seemed likely that a small degree (15-minute chart) wave four would begin lower. This latter portion of the prediction did not occur. The first part did.

SP500 Cash - Daily - Neely Style Chart with New All Time Highs

Instead, the market surge past the highs, faster than I thought, on very low volume (in the futures contracts and as volume in the cash market).

We have converted the 15-minute chart now to a Neely Style Chart, and it is posted below. The two most most probable reasons for not getting the slightly larger fourth wave were 1) the presence of the "running flat" fourth wave (.iv). Two of us called that out in real time chat, yesterday, I didn't react to it adequately enough. I will try to do so in the future; and 2) the third wave had not yet made a 1.618 extension. I should easily have caught something that basic - but didn't. (Hopefully, if I miss things like that in the future that would be what I consider as excellent material for the comment section).

SP500 Cash - 15-Minute Chart


At present, there is no confirmation that the top is in. You can see from the brown labels we are still looking to see if brown wave (iv) is looking to alternate in shape and time with brown wave (ii).

The up wave passed the 1.618 extension, solidifying it as an extended third wave (-iii), which means that normal fourth wave alternation should apply. However, the Elliott Wave Oscillator is on an up trend and has 'barely' diverged at the high.

After converting some other charts to Neely style analysis, reviewing wave degrees, and reviewing retrace analysis it has come to light that while I think the overall degree of the weekly up wave remains in Minor 3, that the placement of some labels within that Minor 3 wave is incorrect. While they are placed correctly on the daily chart above, they are not place correctly on the Weekly Chart, and I will explain that in a short weekend video which will be available by Sunday. And I think it will intuitively make more sense. (P.S. Unless you were in live chat today, it's not what you think it might be.)

Well, that's it for now. Have a good start to the weekend. I appreciate your patience as we switch to some hopefully even more effective methods.

Cheers!
TraderJoe

Thursday, July 13, 2017

Market Deciding How to Finish

Outlook: Short term new highs likely, or truncation possible with lower probability
DOW: New All-time-highs, S&P: No New All-time-high yet.

While nothing has occurred to invalidate the ES 4-Hr Triangle Count that we have been showing, The Eight Fold Path Method as of mid-afternoon now says something different per our discussion in live chat. First, here is that ES 4-Hr chart. It has served it's purpose.

ES E-Mini S&P Futures - 4 Hr Chart

I show this chart for the last time, only so you can see that (c) is not above (a), so technically nothing invalidated. But, we now have the .y wave substantially beyond equality with the .w wave without downward overlap, and within the (c) wave, the blue c wave of (c) would be much longer than the blue a wave of (c).

Since the above is true, and the upper line of the potential triangle is nearly horizontal, we started using The Eight Fold Path Method from the point labeled .x forward on an S&P500 15-minute chart.  We will analyze that chart at the end of this post.

Remember, we were very clear both that the former a wave up was five waves, up, and that the potential triangle had to form properly. It didn't! It doesn't have the "right look". Triangles are usually 78.6% retraces or less; this structure is 90% retraces or more.

Remember from the weekend video, we said it was possible certain indexes could make slightly higher highs. That appears to be what is happening, still within Minor 3. In this case minuet iv of minute (v) probably just became longer in time that minuet ii. As a reminder, here is the weekly chart we showed in weekend video. (The daily chart from wave (iv) will follow it).

SP500 Weekly Chart - Minor 3 Likely Topping

So, let's start from minute (iv) on the above chart, and again use the Neely-style method to plot the daily waves - not the weekly waves - below.

SP500 Daily - Neely Style Count

So, if we examine this chart, we see that wave ii is a FLAT wave, and wave iv is a double-zigzag which not only provides alternation, but also takes more time than wave ii! Now, we can debate for days whether wave iv overlaps wave i on an intraday basis, but it is clear it does not overlap on a daily closing basis! (See Note below).

Next, wave v of (v) is already beyond the 78.6% retracement level per the Fibonacci ruler shown. That is the first level Neely says we could consider a truncation to occur. But, there is no evidence for that, yet, at this time. And so, we should consider this as the vth wave up - whether it truncates or not.

So, as the result of this view, we began counting from wave minuet iv using The Eight Fold Path Method on the S&P500 15-minute chart, below.

Add caption

So, with 133 candles on the chart we are now counting either an impulse upward or perhaps the first three waves of a diagonal. Notice that wave (3) of ((3)) is on the maximum of the Elliott Wave Oscillator, and both wave (4)'s are longer in time than their wave (2)'s. We would now expect a wave ((4)) which is longer in time than it's wave ((2)).

We would expect a fourth wave down, and as long as it doesn't overlap 2432, the prior wave ((1)) location, then we should continue to count an impulse wave. If it should overlap, then we might have to consider ((1)) and ((3)) as only ((A)) and ((C)) of a diagonal wave. But, I need to be clear, a diagonal is not in evidence, yet. As you can see, the internal waves are extraordinarily choppy - yet the Neely style plot tends to smooth out this chop quite a bit - at least on the the daily time frame.

It turned out that yesterday's potential "tweezer's top" was nothing more than the B wave, up, shown. That has been happening a lot lately: the diagonal forms properly with contracting lines, and then is exceeded! And, then, when that was counted, then that B wave was exceeded higher also.

Stay with it! I am considering converting all blog charts to Neely style counts - as it may help provide greater clarity on a daily basis. Thanks for listening.

Note: The Elliott Wave Principle says that overlaps in the fourth wave might occur on an intraday basis only, and in highly leveraged markets. I don't know anything more leveraged than the ES E-Mini S&P500 Index futures, which impact on the S&P500. 

Have a good start to your evening.
TraderJoe

Wednesday, July 12, 2017

Update on Potential Triangle / Diagonal - 3

If you followed  the market today, you know that prices took off upward today in the direction we predicted from yesterday's post. This occurred when Chair Yellen released her written testimony before Congress, and it was interpreted as marginally dovish. Prices traded higher for most of the day and appeared to make a "tweezers top" or contracting diagonal at the end of the day. We'll show you that potential "tweezers top" later on the cash chart, but first, here is the continuation of the ES E-Mini S&P Futures 4-Hr Chart. The potential triangle is still holding. Barely.

ES E-Mini S&P 500 Futures - 4 Hr Chart

At the end of the day, because we were talking yesterday about the potential double-zigzag upward for the (c) wave, then it only had to stay below the (a) wave, and, remarkably, it did. However, we must recognize the actual measurement of the upward (c) wave is > 90% of the downward (b) wave. So far, the waves have acted per prediction - which is gratifying, but the situation still looks tricky.

When we transfer the above ideas to SP500 Hourly cash chart, then this is what the situation looks like - at this time.

S&P500 Hourly Chart

The first A wave down would be the expanding Leading Diagonal that we had commented on - on how wave (4) had just barely avoided invalidation, while the futures did invalidate. And since that time, we have only have three-wave sequences upward - to this point in time. The "deep retrace" might be the "deep retrace" of a diagonal. It is very near the high. At the end of the day you can see the "tweezers top" that may be all of or a portion of an ending diagonal. We do not know that the up wave is complete. It could be. However, in this count, the .y wave is allowed to be above the high of the .w wave, thereby avoiding a truncation.

The "three-wave chop" is what seems to make the a count like this possible, but since the Dow exceeded the highs, we continue to look for other types of triangle or diagonals that would fit this pattern. We haven't found them yet.

From a sentiment viewpoint - to a person the 'talking heads' on TV are still advising people to buy - again - at the highest prices in history (for the Dow). Interesting!

Have a good start to the night.
TraderJoe

Tuesday, July 11, 2017

Update on Potential Triangle / Diagonal - 2

Nothing much has changed, except the single zigzag that was originally proposed for wave (c) of the triangle count now looks better as a double zigzag. The update of the ES 4-hr chart is below. We were expecting downward movement, and that initially occurred today. Then, as we said, we have been expecting whippy light volume trading, and the market did whip around again on light volume without breaking any of the triangle parameters.


ES E-Mini S&P500 Futures 4-Hr Chart

One leg of a triangle, and only one leg, is allowed to be a double zigzag (i.e. Elliott Wave Principle says one "complex" leg - double zigzag or triangle).

We are very confident that yesterday finished "five waves up", shown in brown as (i) - (v), upward. We looked over things and recognized we may have missed a very small degree triangle on July 2 which is now shown with the blue lines. That converts the upward wave to a three wave sequence, which we have labeled as .w of (c). The downward wave into July 6th is clearly a three-wave sequence, and is then the .x wave. The five wave sequence up yesterday is a of .y of (c), and the down draft on the release of the Trump Jr. emails was a perfect 78.6% retrace for the b wave of .y of (c).

And, there is still Chair Yellen's Congressional testimony to get through tomorrow and Thursday. In terms of this somewhat excruciating count, please remember that the future blue c wave of .y of (c), should it occur, can be an impulse or an ending diagonal. I have no idea which it will be, except that when it finishes, there should be no higher wave than it for quite a long time. The (e) wave, upward, of a contracting triangle should not exceed the wave (c) terminus.

Further, another upward overlap of the a wave, down, on Jun 21 is required within the next couple of days.

Today, Art Cashin said on CNBC, the drop in the market may have had quite a lot to do with the low volume - which is what we have repeatedly stated. If you ask me, the pro's know there is a triangle here. Let's see how it goes.

Have a good start to your evening.
TraderJoe

Monday, July 10, 2017

Update on Potential Triangle / Diagonal

Below is an update of the ES E-Mini S&P500 Futures 4-hr chart as of the settle today. The good news is we were able to count a very clean five wave impulse up in both cash and futures today, and we got the upward overlap on the a wave we were expecting in last night's post.


ES E-Mini S&P500 Index Futures

The complexity is that we need a clean zigzag upward for either the triangle (as shown here) or a further extension of a downward diagonal. We don't have that yet. If wave .ii, .iii, .iv, and .v on this chart can form to complete the (c) wave upward, that will help clarify either of those two counts. So, that is what we expect. Perhaps wave .ii resolves tomorrow morning without making a new low below the lower blue b.

If - on the other hand - prices "just let loose" tomorrow morning, for some unexpected reason, then since the downward a wave has been overlapped upward, with five waves up completed today, then we would be forced to conclude we today had the (c) wave upward of a "failure flat". Those are quite rare structures so the odds are against this option. We just point it out because running structures have happened in the upward waves of this overall Primary 5th wave. We wouldn't want it to catch you off guard.

The other thing we wanted to mention was that downward a wave can be counted as a :5 in the futures, and/or a :3 in the cash market. It's just one of those ambiguous waves (not like the :5 we counted today). That's why there is still an option of a large expanding diagonal downward, if it's the :3, or a five wave a wave that comes before a triangle. So, the market kept it's options open today (no pun intended), and we did too!

Have a good start to your evening.
TraderJoe

Sunday, July 9, 2017

Hot Topic -- Hot Topic: Move ES Wave Counting to 4-Hr Chart

Outlook: Whippy Triangle Still Possible Followed by exit to the downside

On Wednesday, in our blog post entitled, One Possible Interpretation, we had noted the possibility of a triangle downward in the SP500 Index. And, because of the sharpness of the triangle, we specifically said, "And it is entirely possible, the triangle could even expand a bit if it wants."

Then, on Thursday we gave a specific level for a "wave counting stop" at 2424 on the S&P500 Index, as far as the downward count goes. It appeared in the SP500 15-minute cash chart. And that level was indeed hit on Friday, which put the larger down count temporarily on hold.

Because since there was some support found at the 50-day moving average, and a new price low was not made in the process, the hypothesis of an triangle which is pushing out it's boundaries a bit now seems entirely plausible. Here is the chart of the ES E-Mini S&P500 Index Futures - on a four hour time frame. I highly recommend that - until further notice - this time frame be used for counting waves.

ES E-Mini S&P500 Futures -  4 HR

The waves of the triangle are the five waves, (a), (b), (c), (d), (e) if they form properly. Please have a look at the time signature within the possible larger triangle. Each of the waves is currently becoming longer in time. Wave (a) is 16 candles, wave (b) is 18 candles, and wave (c), so far, is more than 34 candles.

Furthermore, there is relatively little economic news in the beginning part of the week which could result in range-bound whippy trading until Chair Yellen begins her testimony before Congress on Wednesday. It does not end until Thursday.

Waves (d) and (e) do not have to take more candles than (c). The only requirement here is that if a triangle forms properly, that waves (c) and (e) cross up and over the downward a wave from 21 Jun. If you look at where the 18-day SMA is on the daily chart, you will probably note the same thing that Ira Epstein might. "The battle is being fought at the 18-day SMA - the line in the sand".

For this chart, both of the blue b waves are hard wave invalidation points

Have a good beginning to your week as it might be good to hear what Chair Yellen has to say.
TraderJoe


Saturday, July 8, 2017

New Weekend Video

To say thanks for your responses to the prior blog posts, I have developed a new weekend video that appears below, and on my website, and contains several interesting topics not usually discussed.


Thanks once again, and keep the ideas, thoughts, and corrections coming. I am sure we can all learn this even better than some of the supposed experts!

Have a great weekend.
TraderJoe

Supplemental:

I get a lot of requests for the Russell 2000 Count, so I have posted it below. The RUT has always had the advantage that the first wave up can be counted as a non-overlapping impulse.

Russell 2000 Small Cap Index - 3 Day Chart

Within minute (i) up of Minor 1, there are five non-overlapping waves up (i - v), where iv is a clear running triangle. Minute (ii) is a flat wave, and minute (iv) is another clear running triangle to alternate with the flat wave (ii). Notice that Minor 2 occurs at the lowest reading in the RSI since the up trend began, and we think this reinforces why this is the proper location for Minor 2 in the Dow and the S&P charts, as well.

Minor wave 3 then "blasts off" after the election, and breaks the channel to the upside, demonstrating it's power as a third wave.  The first a wave down is "too short in time" to correct all of minor 3, and the upwardly sloping b wave is a choppy overlapping affair currently on a divergence with the RSI.

When completed, this suggests that a c wave down will occur to complete Minor 4, on the same schedule as the Dow & S&P500. Wave minor 4 may not overlap with wave 1 before a minor 5th wave completes, upward. And, since Minor 3 is shorter in price than Minor 1, then wave Minor 5 must be shorter than Minor 3.

Please note. This is not a contrived wave count. I have studied the top in excruciating detail, and because of the overlap at the blue b wave, and the lower low at x, it is not possible to have a diagonal to a higher wave 3 location. That is because diagonals are not allowed to have flat waves for any of the numbered waves (only the b waves within diagonals may be flats). Try it for yourself. I can't find a way with the current waves. Also, the entire "upwardly sloping structure" does not converge like a diagonal. It is remarkably parallel, almost perfectly parallel, and therefore it does not have the "right look". Next, the internal time signatures are not contracting like a common diagonal, again tending to rule out this option. Lastly, it is not possible to replace the 3 wave label with "a" of the first wave of a diagonal, or to replace blue a with c of (i) of a diagonal because wave 3 can not be a diagonal in it's entirety within an impulse wave.

I have looked for triangles in the interior, and can spot a couple of possibilities, but, all they would do is extend the parallel in time.

All of this suggests  the parallel would break to the downside for minor wave 4. While we do not yet know that the upward b wave is over, it is fine for a z wave up to breach the upper trend line, and then close quickly back within it. And it is fine for the z wave to also "fail" to make a new high. But, if full daily candles begin to be printed over the upper parallel line, only then would be conclude that the last x wave, which does overlap wave 3 is somehow a second wave base for a larger advance. Such an alternate count has no evidence to support it at this time.

Hope this helps.

Thursday, July 6, 2017

Downside Follow-Through

Yesterday's idea of a triangle b wave in the hourly S&P500 Index worked out exactly as expected today. Price had closed yesterday at 2432.54, and by the open on the daily chart, there was a gap down to 2423. (See red circle). Price made a lower low than yesterday, and continued falling down to 2404.70, before closing at 2410.24, down -22.79 points. Volume picked up a bit today, as well.

Here is  the daily S&P 500 cash chart, updated for today's bar.

SP500 Daily Chart - Lower Low and Lower Close Day

The result was prices made a lower low (LL), and lower close (LC) day than yesterday, and prices made a solid close below the 10-day SMA.

Still a lower low below 2405.70 is needed to confirm a down trend. The odds are it will likely happen. But, we caution, look at how many gaps there are in the wave from May 17th upward! Any or all of those could fill.

We are still counting a c wave downward. Below is the chart from the live chat room on the S&P 500 15-minute chart. We called each of the waves, including the diagonal c wave of wave iv in real time. Be aware, the down wave looks incomplete at this time. While there may be some backing & filling before the low is taken out, it is possible that the fifth wave of this series is 'extending' and that could get a bit brutal.

SP500 15-Minute Chart - Downward Count

Yesterday's hourly triangle is to the left of the chart. Today's downward movement has, importantly, taken out the wave ii of the a wave of (c) of the triangle. And, the level to beat is still the (b) wave of the triangle. Look how beautifully, that ending diagonal c wave of iv formed perfectly in every detail!

It will not be my intention each day to show you counts from the live chat room. However, I feel it is critical at this likely turning point. But further, I want to show you examples of what a good wave count looks like. Why is this one good? Notice that within today's downward wave iv took so much longer in time that wave ii. Knowing that likely relationship gave us patience all day to wait for the b wave of the flat to be exceeded lower. Further, it was clear wave ii was a sharp wave (a zigzag), and that, again, gave us  the expectation of a flat (or triangle) wave iv for alternation.

If your Elliott analyst is not doing these things, then they simply are not following Elliott wave theory properly, and no matter how 'objective' they say they are being, then they simply are not. No way.

We hope we at least may have helped you dodge a bullet today and over the last several days. But that is up to you. We do not provide trading or investment advice, ever. We just count waves. All decisions are your own.

We hope you will tell your friends and family about this blog. If you do, it would be great to leave us a comment and let us know. Otherwise, there is not much point in publishing it.

Well, have a good start to your evening.

TraderJoe

Wednesday, July 5, 2017

Lower Highs - One Possible Interpretation

From middle June to the end of June, the S&P500 Index made a series of lower highs, and lower lows. The pattern can be clearly discerned on the daily candle chart of the S&P500 Index, below.

SP500 Daily Candle Chart

However, so far in July - while there are lower highs - there really aren't any lower lows. Throughout this time, price has been weaving and bobbing about the 10-day SMA closing on or near it several times (green dotted line). Today is one such day.

Any number of people, including myself, are scratching their heads looking for possible diagonal patterns lower, even though we know the Dow Jones Industrial Average, and the Dow Transports made a new all time high on July 1, confirming a Dow theory continuation signal in the bull market.

However, today I will offer a slightly different view. The low volume, algorithmic trading, may only be a sign of a triangle, as below, on the hourly chart of the S&P500 Index.

SP500 Hourly - Possible Triangle b Wave within a Larger Diagonal Downward

If the upward market movement had ended on 19 June, with the thrust to a C wave from the B wave triangle I had shown in previous blog posts, then, the first movements down may only be a, and triangle b, of what will initiate a c wave downward to start a larger diagonal, downward.

First of all, by crossing up over the a wave, the ((E)) wave of such a triangle has already potentially validated such a "running triangle". And a running triangle would be a continuation pattern lower. What would the purpose of such a triangle be? If it plays out properly, it might be to allow the Dow and the S&P to partially synchronize again, in that the Dow may only have made it's first wave lower today, since the all time high was on July 1.

Anyway, the pattern is already valid, and now it is a question of if the pattern plays out. A triangle would seem to fit with a light volume "messy" structure. And it is entirely possible, the triangle could even expand a bit if it wants.

We'll have to keep an eye on it for you, as people begin to come back from their vacations, flush with cash from the lower gasoline prices.

The main point is, we have lower highs on the daily chart. Lower daily lows would be needed to better validate that a down trend is underway.

Have a good start to your evening - vacationing or not so lucky.
TraderJoe

Thursday, June 29, 2017

Down Day on Heavier Volume

While we had to observe the overnight action last night (see yesterday's blog post), somehow, almost as if it were ordained, futures prices held the high, punched through the 18-day SMA lower mid-day, and then made lower lows. In the process the possibility for an expanding leading diagonal lower was not invalidated in the overnight in the cash market.

First here is a look at the ES daily futures chart.

ES Daily Futures - Outside Reversal Candle Lower

The futures today had made an outside day down which actually took out the low of yesterday's outside day up. In the process, the daily futures today bent the lower Bollinger Band downward, and overlapped the high of the candle on May 16. They found some support there, and then retraced back to the lower Bollinger Band, closing just a whisker below it. In doing so, price closed below the 18-day SMA, and, therefore, has a negative bias again. It's possible the 100-day SMA (dotted green line) could be the next target.

In terms of the SP500 2-Hr Chart, the topping process was as confusing at it could get. There are two ways to count a top. There first way is with the triangle B wave count we showed you in the Thrust from Triangle Count we showed you at the post in this LINK. In this case, the B wave of the triangle has been exceeded lower, and  the A wave now clearly overlapped.

The second way is with the diagonal with the truncation, as below.

SP500 2-HR Chart - Diagonal with Failed wave ((v)) - Truncation


In this count, price was clearly turned back today by the lower up trend line shown, and this scenario may make more sense. Here the A wave has been overlapped, so far, but the B wave has not yet been exceeded lower which would help prove a diagonal. (The futures 'daily nearest' contract did take out the B wave low.)

In any event, we said some of the gaps lower could be filled, and today, in one day, yesterday's opening gap, now shown in black, was closed, as was the June 1, opening gap up, also now shown with a black circle.

There has, in all honestly been a lot of discussion in the live chat room as to whether to count the downward wave as an impulse or an expanding diagonal. That's fine. We are sure the situation will clear up quickly in a manner we can understand. While the diagonal may have held on the cash chart, it didn't in the futures. And, today's down move was so swift as to make one question the slower jerky moves inside a diagonal. This latter fact would more support an impulse lower.

Volume today on the futures was a bit heavier. So, not everyone left for vacation yet.  Since today was an outside reversal candle lower, then the high should not be exceeded within 48 hrs. or it would be considered a trap for the bears - just as, since yesterday's low of an outside day up was exceeded within 48 hrs., it constituted a trap for the bulls.

As for me, it's time to start thinking about family fun on the Fourth, anyway.

Hope you do, too!
TraderJoe


Wednesday, June 28, 2017

Have to Wait and Observe

By the close of cash trading, nothing had been done to invalidate the possibility of an expanding diagonal first wave lower. In such a diagonal, the fourth sub-wave is now both longer than the second sub-wave, and it takes more time than the second sub-wave. Both of those were as expected.

The reason for the concern comes from the futures market. The futures opened lower and put in an outside reversal candle, up. The futures likely made the lower low because of overseas trading, but it did not carry through to the cash market, and so at the open, the cash diagonal pattern, lower, was still holding. In fact, the futures behaved right until the close, and then moved higher after the settle. Here is the futures chart.

ES Daily Futures Outside Range Candle Up

The futures took out their Jun 9 low today (which may have been related to contract rollover), and have closed over the 18-day SMA. (Crude Oil and the NQ futures closed right on or just below their 18-day SMA's, as an aside). Cash, as of today, hasn't taken out those Jun 9 lows.

This leaves the chart with "no trend", as it has higher highs but lower lows. And the negative bias on the chart yesterday changed to a "positive bias" today, with price back over the 18-day SMA. We cautioned yesterday that "extreme care" should be taken in the down count because there were only three waves down. This is why. There would be more confidence in a downward count if price stopped below the 18-day SMA, but it did not.

For the time, this leaves us cautiously, observing the market. Just like the cash chart righted itself this morning, perhaps it will do it again tomorrow morning. But, there are no guarantees of that. This is light volume summer trading, and messy counts are very possible.

Take it slowly, let's see where the cash market opens tomorrow. After all, it's summer! Enjoy it.
TraderJoe




Tuesday, June 27, 2017

Correction Likely Begins

Yesterday we provided two very clear scenarios for how this up wave could end. The first scenario we showed you was the alternate count (until yesterday), and it was the (b) wave truncation count. The truncation occurred only in the last wave of a contracting ending diagonal, and only after that wave had retraced more than 78.6% of it's preceding wave - as we noted. We'll again show that chart in a minute.

The main count - which we said depended on a gap up today - was put on the scrap heap in the live chat room as the market opened with a gap lower today. In terms of wave counting - we counted with the main trend of the market until we could no longer. That's the way it's supposed to be done. After today's gap lower, the market retraced the gap completely, at noon, and then headed lower again. They loved 'em for lunch, but got heart burn with 'em by dinner!

Prices traded lower enough in two days to take out wave ((iv)) of the diagonal, lower, and, yet, the diagonal required almost a month of trading days to build! We have quite a lot of time left to prove out an ending diagonal. Remember, if a contracting diagonal is valid as an ending diagonal, then price should entirely retrace the diagonal - down to beyond the blue B wave in this case - in less time than it took the diagonal to build. Today saw more than a 61.8% retrace on that wave B already. We'll keep you updated on the status.

SP500 2-HR Chart : Diagonal with Truncation Ends the (b) Wave

We think this count is correct because of how many times price hit or closed on those diagonal trend lines, and the fact that the last wave ended as a three-wave sequence and took less-time than it's third wave, wave ((iii)). All of the time and price relationships are correct. Wave (v) is shorter than and took less time than wave ((iii)) which is shorter than and took less time than wave ((i)). Similarly, wave ((iv) is shorter than and took less time than wave ((ii)), and overlapped wave ((i)).

Again, we cautioned for days about the fact that downward gaps could fill. There are several prominent ones remaining - shown with red circles. Clearly, I am not neutral in price stance at the moment. I am counting waves to the down side with a target of the lower parallel trend line on the weekly charts. First target is 2317 (futures), and  the second target is 2262 (futures). In no way is this to be taken as trading or investment advice. There will be lots of backing and filling as any down trend progresses, and you and you alone are in charge of your investment decisions. I am only expressing my opinion of where I think the market is headed.

Whatever you do, please be very careful, as there are already ways to count the down move either as an impulse or as an expanding diagonal. One thing we know for sure from the live chat room is we do have three waves down at this point, and the third wave is slightly longer than 1.618 x the first. The exact count will depend on whether price gaps lower or higher tomorrow, and / or whether there is any eventual overlap on the first wave down. The first three waves down so far are 2437, 2443, 2419. We do not know that the third wave is over, but since 1.618 has been exceeded to some degree, this could signal there are more down waves ahead.

Have a very good evening. We hope we have been some help in identifying this very precocious apparent topping structure.
TraderJoe


Monday, June 26, 2017

Diagonal Proven - Invalidation Removed

SP500 prices gapped higher, again, as expected from our diagonal count. They traded as high as 2450. Then, they traded lower to fill the gap, and again made a 78.6% retracement wave, lower, before recovering to change up less than even one full point. No doubt, if people aren't scratching their heads at this point, they should be!

Meanwhile, we have continued to point out the lack of momentum in this up wave. It's frustrating for both bulls and bears, which is why I remain neutral and just counting waves at the moment.

That price traded up to the 2450 level is critical. That is the 78.6% retracement level on the prior down wave, or from ((iii)) to ((iv)) on the chart below, where a truncation may be claimed to occur (ala Glen Neely, from Mastering Elliott Wave). So today, we now remove the former labels showing Triangle / Diagonal Invalidation because it is now possible to state that a diagonal may have completed with proper form today. I want to clearly caution that this is the alternate count at the moment.

SP500 2-HR Chart : Possibly Completed Diagonal ALTERNATE Count

The main count still sees that in the last wave, which is now (c) of ((v)) of C, that today's up wave was just wave i of (c), as in the chart of the main count, below.

SP500 2-HR Chart : Diagonal As Yet Incomplete

So, if there is not a gap up tomorrow for wave iii of (c), as shown above, then one has to get concerned as to whether a turn-around is happening or not. I have shown two levels on the chart, that the reader may wish to note.

As you may know from dealing with contracting diagonals, wave ((v)) should not become longer than wave ((iii)). That means that the diagonal count would invalidate above 2466.50, and some other count would apply. (I can see one other possibility, but I will only show that count should it become applicable.). 

For now, the thing for me to look for is to see if we can get that sometimes characteristic "throw-over" of the upper trend line, and then a rapid price decline following it, which allows all to agree there was a diagonal wave. Time will tell.

For now, have an excellent start to your evening.
TraderJoe

Saturday, June 24, 2017

Some Volume Divergence

Often in the past, at appropriate times, we have showed charts of the Dow Jones Industrial Average and / or the S&P500 Index, and compared them to the Chaikin Money Flow or to On Balance Volume.

Today, we will do the same, below, for the Dow.

Dow Jones Industrial Average Daily versus On-Balance Volume

The purpose of this chart is two-fold. First, the brown dotted line at the top of the price chart shows higher price highs in the Dow. Meanwhile, the brown dotted line in the bottom indicator panel shows how on-balance volume has not kept up with the price rise and diverges from it. There is also a recent break of the higher highs and higher lows pattern on this indicator.

A similar pattern exists on the S&P500 Index. And the Chaikin Money Flow (or CMF) indicator also currently diverges for both indexes. Apparently, this rise in price is not being well-supported by volume.

Second, the Fibonacci ruler shows - that on the Dow at least - a (b) wave in this location would be cresting very near the 1.382 exterior retracement of it's (a) wave. The weekly Dow candle pattern is that of a "spinning top", but a weekly lower close candle would be required to confirm it, and that is not in evidence yet.

For these reasons (that the Dow may have topped, and it and other indexes may yet swing upward next week), I currently have only a neutral opinion of the market, and am only counting waves until it appears that a 'top is in'. Remember, if we are making the (b) wave of a flat at this level, then the (b) wave itself was a flat wave because of the slightly lower low in April.

Nothing in this update is to be taken as trading or investment advice. Your decisions are your own.

Have an excellent weekend!
TraderJoe

Friday, June 23, 2017

Still in Line

In a bit of a testy session, the S&P500 opened slightly higher again, then traded lower, but did not make new daily lows beyond the prior (c) wave of ((iv)). Then, prices traded higher in a tricky five-wave impulse, then they traded lower in a three-wave decline. So we have given today's labels (a), up, and (b), down of the potential wave ((v)) of wave C.

SP500 2-Hr Chart Close on the Trend line

Today's erratic, low volume price movement closed right on the lower red-dotted trend line - as best we can draw it. So the market seems to know it is there. (And the ES daily futures again are settling right on the 18-day SMA).

First, here is a chart showing how this market was counted today in the real time chat room from the prior wave ((iv)), which is shown as 0 on this very short term three-minute chart.

SP500 Cash 3-Minute Chart

As best we could tell using the Elliott Wave Oscillator, and the Eight-Fold Path Method, there were five-waves up. Because of how sloppy and lazy they are, they could very well be that next (a) wave up. Then, there were three clear waves down to just short of the 78.6% Fibonacci retracement level. This is often (b) wave territory.

Then, there were five clear waves up to end the day before a slight pull-back. This could be wave i of (c). In order for this diagonal to hold, then this morning's lows should hold. And that raises the invalidation level to 2431 (in cash).

Next, we want to comment that the Dow has some downward overlaps. It also twice traded today below that 21,374 level which is the C = 1.618 x A extension level we have written about before and which appears in the prior YouTube video. Because the Dow now can be counted as having a small degree five wave down count, I do not know whether it will make a new high or not. It could, but it does not have to.

Once again, even wave (c) and wave ((v)) of C in the above S&P500 2-hr chart, are not obligated to make a new high. They could, but, remember, in dealing with a flaky (b) wave, truncation is possible!

Well. That's it for me today. Have a nice start to the weekend!
TraderJoe

Thursday, June 22, 2017

One Chance

The S&P500 first had another small gap up this morning - which filled - traded slightly lower and then started making higher highs which were not matched by the Dow Jones Industrials. Then, in the mid-afternoon, when the President said he did not tape former FBI Director James Comey, and the text of the health bill in the Senate was released, the market started trading lower, and almost broke the current wave ((iv)) lows, but not quite.

SP500 2-Hr Chart - Higher then Lower Today

This 'can' be (a), up, and (b) down within ((v)) - as the primary count. But then the lows must hold, and they are at high risk of breaking.  The alternate would be that the current location of ((iv)) is just (a) of ((iv)), and today was (b) of ((iv)). If so, then in no case could a (c) wave of ((iv)), lower, break the 2425 level lower because wave ((iv)) of the diagonal would become longer than wave ((ii)) and that is not allowed in a contracting diagonal.

If 2025 is exceeded lower, the number of upward options begins to narrow dramatically, but I will only discuss that should it occur. Regardless, it should be clear that momentum is being literally sucked out of this market, and volumes are already running "summer light". There is uncertainty in whether the market has already topped (it would be in the thrust out of the triangle shown in earlier posts). Therefore, I remain neutral and just counting waves until we see what formation and measurements occur.

The NQ futures traded above their daily 18-day SMA or "line in the sand", but closed below that level. So, their bias is currently still down. And, the Dow Transports have still not confirmed the latest all time higher highs in the Industrial Average.

Cheers! And have a good evening.
TraderJoe

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