Friday, November 17, 2017

Usual Expectations - 2

Market Outlook: A Challenge of the High is Underway
Market Indexes: Most Major U.S. Equity Indexes were lower; RUT higher
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

Let's continue where we left off yesterday. The market, as measured by the S&P500 Index, closed yesterday at 2,585. While other sites and analysts took the bullish case hook-line-and-sinker, we took a different approach and said to monitor the gap direction. Prices gapped lower at the open to 2,582, and traded down to 2,579. In the process, they confirmed the case we stated yesterday that to begin any new down count, the prior wave 4 would have to be exceeded lower in less time than wave 5 took to form. That occurred on the open, the continued five-minute chart is below.

S&P500 Cash Index - 5 Minute Chart - Wave 4 Beaten in Less Time Than to Build Wave 5

The blue arrow shows how much time it took to beat the wave 4 low, the green arrow shows how much time it took to build yesterday's wave 5. So, we started a downward count. We counted five waves down, including a gap in wave (3), and monitored almost all day as a triangle formed wave (4). Without wavering, we expected a new low out of the triangle, and that occurred in the last thirty minutes of the day, making a complete five-wave sequence (:5) down to the 2,577 level. And, the gap was not closed for the balance of the day.

On this chart you will see two boxes: the first is the "height" or number of points of wave (2). We contended that the purpose of the triangle was to help equalize the net distance traveled by wave (4). Since wave (4) is measured by it's E wave, the net distance traveled thus became remarkably consistent. If the wave movement ended at B, the A wave retrace would have been "too large" in terms of net points traveled, for a fourth wave compared to wave (2). We waited, and waited, and then the thrust out of the triangle occurred and made the new lows of the day. Please note the down movement "may" not be over. Wave (5) could further subdivide. In fact, after the cash market closed the futures did continue lower still.

As far as I can tell, this is now the five waves down to an ((A)) wave, of a larger correction. What larger correction?

Shortly after the open I published in the live chat room, this chart of a potential much larger triangle in the S&P500 Cash Index - Hourly. It is a 78% triangle in both directions with waves (c) and (d) both 78.6% retraces of their prior waves.

S&P500 Cash Index - Hourly - Potential Larger Triangle

It is entirely possible to count a-b-c down to the (a) wave of the triangle, and a-b-c up to the (b) wave of such a triangle. Both of these would be the "simple-legs" of the  triangle, and then the potential diagonal downward would better count as w-x-y-x-z as the "complex" (c) leg of the triangle followed by yesterday's :5, :3, :5 upward to another "simple leg" of the triangle, and then, we were expecting an (e) wave downward to also be a simple leg. In a running triangle such as this, it is required, that the (e) wave, cross down over the origin of the triangle at (0), the prior third wave, and it did that at the close.

So, there is now a validated triangle.like it or not. Could the (e)  wave go lower? Absolutely. Does it have to? No. But, keep in mind that so far we have a five-wave down count in this last leg. So three-up, and five more down should at least be expected next. And, keep in mind, some seven leg triangles have been documented in the annals of Elliott Wave history that would add an (f) and (g) leg if the market needs more time to make it to an important event or news announcement, let's say. The only reason we mention that is this triangle - while is has the right look - may be a bit stubby, yet. Hard to know how it will finish.

Now, is  that Leading Expanding Diagonal down from the top dead? No, it most certainly is not. But, again, this is exactly what I have been trying to communicate to you is the very essence of The Fourth Wave Conundrum: exactly the same valid wave structures can result in different interpretations of the current count.

That's fine with me. I'm used to it. As I said in my YouTube channel video, it is in the fourth wave (or diagonals) that people want to know what the count is. They think things like, "don't make excuses; just tell me the count, what the target is, and how many more points up or down. I need to know what the count is because I'm being whipped around like crazy". Sorry. That is the reason I coined the term. I can show you in detail how to count. I have done that above and on numerous charts. What can not be done with high probability is state what direction the next break out will be. So, we are patient and try to do our best job counting each wave. We leave the fortune telling to others. In short, the above triangle could break up or down.

What makes the Leading Expanding Diagonal slightly less probable now than the triangle is the fact that, as a diagonal, it did not make a new low below (a) of the triangle. Why not? Well maybe it is not expressing true Motive character - the ability to get prices really moving in one direction or the other, downward in the case of the Leading Diagonal.

If you're a savvy trader, you might say, "the trend is friend until it is not". And that might add odds that the next break will be in the trend direction (or up in this case). And often that works, until the last time.

Well, that's enough for me today. Have a very good start to your week.
TraderJoe

Thursday, November 16, 2017

Usual Expectations - So Far

Market Outlook: A Challenge of the High is Underway
Market Indexes: All Major U.S. Equity Indexes were higher; NQ futures new ATH
SPX Candle: Higher High, Higher Low, Higher Close - White Soldier
FED Posture: Quantitative Tightening (QT)


In yesterday's post we wrote, "The retrace downward at the end of the day, today, was to the 62% level so a further up leg is possible to near the level of the B wave of (5), if the gap direction tomorrow is up." It was. And price exceeded that B wave location, quickly eliminating at the open that wave (5), lower would sub-divide. (Wave 2 of a C wave may not travel beyond the start of the B wave).

The market as measured by the S&P500 closed yesterday at 2,565. The futures were higher overnight and price gapped up at the open to 2,573, then climbed to 2,590 intraday. As soon as we saw the B wave exceeded, we drew the confluence of these two Fibonacci levels on the chart.

S&P500 Cash Index - Half-Hourly Chart - Fibonacci Confluence

We took the extension from yesterday's intraday high and low (in blue), and the retracement of the entire move upward (in green). These were the only two Fibonacci levels that agreed: a 78.6% retrace, and a c = 1.618 extension. Those two measurements also were in the area of the (4)th wave of one lower degree.

For the day, this upward location held price rather well, and it started to back off a bit into the close. But, we did not get confirmation (yet) of a lower wave beginning. Let me explain with reference to the 5-minute Neely-style chart below.

S&P500 Cash Index 5-Minute Chart Neely Style

Yesterday, I was able to count "five waves up", shown as the :5 (which is a structure label, not an Elliott wave progress label). It literally just means "five waves up" that meets the definition of an impulsion. Then, I was able to count "three-waves- down" as A,B,C to the location marked :3. Again, this is a structure label that only means "three-waves-down" that meets the definition of a corrective structure. And today, with the gap up, it was possible to count another five-waves up, again, as :5

But, the gap was in a very odd location - it could not be counted as a "three-of-three" gap. It could only be counted as a "1". So, when you include alternation, it seemed like the best count was as a sharp for wave 2, and a flat for wave 4. This would mean that was 3 was shorter than wave 1, and so wave 5 would have to be shorter than wave 3.

In the chart above, you can see the 5 = 3 location. Somehow price never crossed it today, and the rule of wave three not being the shortest has, so far, been met. Very interesting.

BUT in counting in the downward direction, while we got some overlaps, we did not, by the close, meet a key Neely guideline for beginning a downward count. That guideline is that to start a down count, the down wave should beat the wave 4 label, today, lower, in less time than wave 5 took to form. Now, there is nothing magic about the close; this guideline could be met on a gap downward tomorrow. But, so far, it hasn't. So, the gap direction again becomes key tomorrow.

As long as this guideline is not met, then all we have in the upward direction so far is :5, :3; :5 in which the second :5 is 1.618 x the first :5. That means there "could" be another five up tomorrow. Or, there doesn't have to be and an upward corrective wave could be over for this index. This is simply the way Elliott Wave labels are assigned, as I understand it, in the Neely method. So I wanted to show a relatively clear example.

But, once again it places us in the position of having to monitor the gap direction tomorrow for further clues. This is not always the case, but we are still in The Fourth Wave Conundrum hopping around and opening and closing gaps. Today's gap up open helped close two of the gaps shown in black circle on the half-hour chart, above. But, now there is a gap both above and below the market.

Suffice it to say, the usual expectation of a 78.6% "deep retracement" after a diagonal wave has been met. And the question is "what's next"? Will an impulse form upward, or will price movement in the downward direction resume? It is very, very difficult to find a set of market metrics that can predict the overnight gaps when the market is not clearly in trending mode. Anyone who has better clues on that score, please let us know!

As you can see, sometimes not being able to clearly predict the very next wave is not a matter of whether a person can count or not. Sometimes, the market must leave the situation unclear enough so that there is enough uncertainty to make a market. If there weren't uncertainty, the market would cease to function because it would become one-sided. 

In the meanwhile, thanks for all your comments yesterday. I may not have gotten to all responses yet, but I will. It was a bit overwhelming to not to get anything for days, and then to see so many. I truly do mean, "thanks", but, also, I hope you will help spread the word about the blog. I'm not advertising, and so word-of-mouth is the best.

Thanks again for helping, and have a good start to your evening.
TraderJoe

Wednesday, November 15, 2017

Another Lower Low Day

Market Outlook: A Top of "Some Degree" appears in Place
Market Indexes: All Major U.S. Equity Indexes were lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 Index closed last night at 2,579. The futures were lower overnight, and the market gapped down ten points to open at 2,569 and continued lower to 2,557 which was fully -20 points lower, validating a count we had started yesterday in the live chat room and referred to in the blog post yesterday. When the market bottomed at that level, a sharp rally was mounted back to the 2,573 level, but not closing the opening gap.

Yesterday, I said I would share with you the downward count we developed in the cash index if it came to fruition. That count is shown in the S&P500 Index Cash Half-Hourly chart below.

S&P500 Cash Index - Half Hour Chart - Downward Count

This morning we got validation of a properly formed expanding diagonal in the downward direction. Wave (5) is just longer than wave (3), Wave (4) is longer than wave (2), but does not cross above wave (2)'s high, wave (4) overlaps wave (1) in the upward direction and they can all be counted as zigzag sequences lower.

By showing you the yellow (5) flag in an even lower location, it should be clear that it is possible that the diagonal continues lower. In order words, the C wave of (5) could sub-divide, with the current C wave location only the first wave of C. Time will tell.

As we indicated, the EMA-34 is currently headed lower. That has been telling. The retrace downward at the end of the day, today, was to the 62% level so a further up leg is possible to near the level of the B wave of (5), if the gap direction tomorrow is up.

So again, either we have a diagonal to the all-time high ending a fifth wave up, and a diagonal downward, starting a down trend, or the upward diagonal is just a (b) wave, and the downward diagonal is the (c) wave of a flat.

The VIX made a higher high today going all the way back to Aug 21, but it's daily slow stochastic is not yet in over-bought territory. And the daily ES E-Mini S&P500 Future today hit it's daily lower Bollinger Band, but it's daily slow stochastic is not over-sold yet, either.

Today we discussed a slightly different count in the ES E-Mini futures (versus cash above), because the futures make their high at a slightly different location. The two counts are currently "compatible" but they are not the same. The advance-decline line, and up / down volume continued to decline.

Right now, I am monitoring the speed of the decline (price points per number of days) to determine it's significance for longer term charts. But, so far, so good.

The daily chart that shows the best possibility for a (b) wave high - instead of a fifth wave top - is the NQ daily index. However, price has traveled low enough today, that it is time - and advisable - to include the invalidation point on the ((iv))th wave of this daily chart. Here is that chart.

NQ Daily - Last Chance for a Non-Overlapping ((iv))th Wave

I have to admit, I am quite disappointed that people are not contributing by commenting on the blog. Further, I see that readership lately is down. If readership was up, and commenting was down, I'd think you were just satisfied with what your are seeing. With both down, it makes me think I should back off considerably  as people are not spreading the word regarding what is here, and neither are they paying significant attention to it either.

Well. Have a good start to your evening. Time for me to relax, too!
TraderJoe

Tuesday, November 14, 2017

Small Point Losses

Market Outlook: Topped (more probable today) or still topping
Market Indexes: All major U.S. Equity Indexes were lower; DJUtil higher
SPX Candle: Lower High, Lower Low, Lower Close - Hanging man or Hammer
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 index closed yesterday at 2,585. Overnight the futures were lower, and the market gapped lower at the open today down to 2,578, then traded lower to 2,566 before rebounding, in the process creating a lower low day than yesterday. The rebound appeared to occur in three choppy waves: 2580-2572-2580, so far, to the 62% retracement level.

Because of the lower low day, the potential red wedge count alternate today lost "the right look", as below. It no longer looks like a wedge. Therefore it will be eliminated in the next update.


S&P500 Cash Index - Daily - Red Wedge Lost the "Right Look"

Therefore in the ES 4-Hr futures, we published this potential ending diagonal after the market opened. This diagonal would correspond to the blue wedge in the daily cash chart, above.


ES E-Mini S&P500 Index Futures - 4 Hr - Potential Ending Diagonal

The clear alternate for this count is the B wave of a flat or triangle, but until there is more price movement, it is difficult to assess. We have started a downward count in the live chat room, but it has not proven itself yet. If or when it does, I will let you know.  As always, for such a diagonal to prove itself, price must exceed the start of the diagonal at iv in less time than the diagonal took to build.

Meanwhile, you can feel the tug-of-war as the daily E-Mini S&P500 Index futures traded on both sides of the 18-day SMA, "the line in the sand", closing slightly above it at the settle.

Please note that while a triangle did not technically invalidate by the end of the day, it's "look" is strained a bit also at this time. That is because the upward b wave would look extraordinarily long in comparison to the other waves. But, a triangle could develop more proportionality and I will keep monitoring for it.

In the mean time the 4-hr EMA-34 now has a downward drift to it. So that is something to keep an eye on as The Fourth Wave Conundrum still requires the same commodities: patience and flexibility.

Have a good start to your evening.
TraderJoe

Monday, November 13, 2017

Small Point Gains

Market Outlook: Might have topped or topping
Market Indexes:  DJIA, SPX, NDX Higher; RUT slightly lower
SPX Candle: Outside Candle Higher
Fed Posture: Quantitative Tightening (QT)

The futures were first higher overnight, then lower in the morning. The cash S&P index had closed Friday at 2,582. They gapped down about six points this morning to open at 2,576, and traded down to 2,574 before quickly reversing to chop their way higher, filling the opening gap, to close at 2,584 or up about 2 points. While they did whip around (as might be expected in a diagonal or triangle) the overall point gain on the close was very modest. In the process of closing higher, the cash market did close Friday's gap down, but not Thursday's. The chart is below.

S&P500 Cash Index - Daily - Potential Red Wedge Still in Tact

While the cash market did make an "outside day higher", the ES E-Mini S&P500 Futures did not. But, as of the settle anyway, the futures did, for the first day, lose their embedded slow stochastic reading if it holds into the close of trading. The only day the futures could get it back would be tomorrow.

The red wedge in the cash market has not been invalidated.  We provided the invalidation levels in a previous post. But, we want to be clear, as of this time ...

There are two other plausible or possible counts - other than an ending contracting diagonal - right now, 1) an overall triangle dating from the 23-October high, and 2) a downward expanding diagonal from the high. This is precisely The Fourth Wave Conundrum that happens at every degree of trend, and we will have to take our clues from gap direction. Nothing says upward price movement is over yet, and careful monitoring of the over-night is temporarily needed. (For the triangle - just start a line down from the highs).

Again, the DJIA has already invalidated any further contracting upward diagonal - as it's fourth wave would be too long for it's second wave - and it's MACD is not looking very healthy. You might like to review that one. The Dow has not invalidated a larger triangle.

Also, the summation index on the Nasdaq is not looking very healthy, as per this weekly chart.

NASDAQ Summation Index Weekly

The slow stochastic looks rather ominous here. And while it could hitch up, it tends to be rather smooth in it's movements.

It's just another reason why patience and flexibility are needed at this time.

Have a good start to your evening.
TraderJoe

Sunday, November 12, 2017

It's Time ... For Time

A lot of people try to comment on price levels in the U.S. stock market. Great. Me too. But fewer people comment on time relationships in same. I think some people are a little less comfortable dealing with time and how it is expressed in the wave principle. So here are some charts for you to review.

Plus or minus .. give or take .. the stock market often expresses it's time relationships in simple Fibonacci numbers. The current "big picture" is first. At present, each of the turns may represent a simple Fibonacci number (1, 1 ,2 ,3 ,5 ,8 ,13 ,21 ,34 ,55 ,89...and so on).

Fibonacci Numbers of Years in the U.S. Stock Market

And, similarly, within the wave up from 2009.

Fibonacci Number of Years in U.S. Equities

In this case, in particular, the first corrective wave, (2), is longer than a year, and the second corrective wave (4) is shorter than a year, but both adding up to about two years. Plus-or-minus, give or take, making the whole sequence eight full years - almost approaching nine.

What I then found interesting, as we may be in that (5)th wave up, is that the current expression of time is another simple Fibonacci number.

Fibonacci Number of Months in U.S. Equity Markets

We are twenty-one (21) full months from the February, 2016 stock market bottom. (The first full month would have ended in March, 2016.) If a turn were to occur here, would it be a coincidence? Inquiring minds would like to know.

Enjoy the rest of your weekend.
TraderJoe

Friday, November 10, 2017

Taxes - What the "Powers That Be" Don't Get

Corporations are legal 'entities' that are allowed to be greedy. If the kindergarten teacher sends a note home with Billy - that he won't share the crayons with the other students - then his mother wacks him upside the head when he gets home.

But when CEO William comes home, many years later, and says that he's taking the whole family out to celebrate his mother's birthday - made possible because of the profits he led his company to over the last year, and bonus received, then the mother misguidedly beams with pride at the successful lad.

Profits are the excess of what the customer paid to purchase  an item over what the company paid for the raw materials, labor, distribution, and retailing, etc. - pure and simple. Not many are against making reasonable profits. Otherwise, there would be little incentive to open a business or remain in one.

The problem is when CEO's and Corporations get so greedy that they forget why they are in business. Some think it is to maximize shareholder wealth. Some think it's all about their company reputation. Some think it's all about their bonus. There are precious few CEO 's that will work without a bonus. What? Only get paid for the job I do? Nothing extra? It goes on & on. The result is that may CEO's can make 50x, 100x, 200x, 300x or more what their first line workers make - like the worker doesn't have to get out of bed and provide breakfast for the kids, too. Sickening.

Further, because of the high-priced Corporate lawyers, many Corporations don't have to currently pay Federal income tax, at all.

Here is how USAToday reports it, "There are 27 companies in the Standard & Poor's 500, including telecom firm Level 3 Communications (LVLT), airline United Continental (UAL) and automaker General Motors (GM), that reported paying no income tax expense in 2015 despite reporting pre-tax profits, according to a USA TODAY analysis of data from S&P Global Market Intelligence."

Clearly this situation seems unfair to most taxpaying Americans. They pay their taxes, and the best lawyers can prevent companies from paying any taxes.

First and foremost, Americans want to see the greedy Corporations and the wealthiest of the lot not to be able to escape paying their income taxes. The taxes are needed to fund the infrastructure that allows the companies to be successful in the first place. They use it. They should help pay for it. This, I think, is what most of us mean by a "fair" tax. It's one applied to all but the poorest, according to our means to pay. So, this is the first thing that must be fixed.

Second, unfortunately in the U.S., determination of what is "excess" compensation falls - you guessed it - to the IRS! The Internal Revenue Service monitors to see that "in comparison" the reported wages make sense. Huh? It results only in a never-ending upward spiral of CEO pay. This clearly results in the increasing income disparity we see among the 1%. I contend that the tax system can be used to make bonuses less attractive than straight-forward compensation. For example, bonuses could be taxed at a much higher rate than wages - this would make them less attractive, until they are taxed out of existence. It is precisely items like this that most people - if they have an honest discussion about it - want to see fixed via the tax code.

Third is simplicity. Simplify Corporate taxation so that all companies use exactly the same accounting rules, and arrive at the same result. Lawyers not needed = companies become more profitable and competitive. Then, apply a rate that helps make the companies globally competitive. But, eliminate many of the unfair practices compared to the worker. One such glaring example comes to mind. Why are companies allowed to "buy-back" their own shares? Doesn't this amount to trading on inside information? Only the company gets to time it's buy-back with the knowledge it has which no one else has. And why are such costs (as all business costs are) tax deductible? No, it seems that if a company wants to buy-back it's shares (supposedly for some strategic reason), it should actually pay a penalty for doing so. The reason is quite simple - if the company has too many shares outstanding, then it must have somewhere made a mistake. That is the very definition of "too many". And mistakes in business should be dis-incentivized, not rewarded.

Along the lines of income tax simplicity, most individuals recognize the sheer nonsense that is going on. Why are your social security benefits taxed, at all? If it's a benefit - just reduce the benefit by the amount that would otherwise be taxed and save all of that needless calculation and paperwork! This is only the tip of the tom-foolery iceberg.

Why do you pay in withholding taxes to the system, only to apply for a refund at the end of the year? This is crazy. Let's take it away, and try to get it back. Huh? This is what insane people do when they are not banging their head against the wall. Please stop. Isn't there a fair way to have an employee just state what their situation is in the year, and have the taxes paid by deduction and be over and done with it? No financial calculations - not even the post-card. Just a status update. I'm married with four children, and I own a home, with a mortgage of X, and pay property taxes of Y. The taxing authority just then calculates the appropriate deductions during the year. No audits - because it is THEIR fun with the numbers, not yours.

I could go on & on. There are many, many more examples of idiocies in the system. And there are just as many ways to make a taxing system more simple and fair. All one has to do is think a little outside of the box. Unfortunately, all of our government leaders seem to be stuck glued inside that box! At least for now.

Today was an inside day, with the market down slightly for the week.
Have a good start to your weekend!
TraderJoe






Thursday, November 9, 2017

Wedges

Market Outlook: Possibly Topping this Week
Market Indexes: All major U.S. equity indexes were lower.
SPX Candle: Lower High, Lower Low, Lower Close - Hammer Candle ?
FED Posture: Quantitative Tightening (QT)

If you did not read the special post this morning, you are encouraged to read the prior post HERE before reading this one.

The market as measured by the S&P500 Index had closed yesterday at 2,594 in what we suggested was a "b" wave. It may have been. The futures were lower overnight, and the market gapped lower to open at 2,584, and traded down to 2,578, then up to 2,587 before turning tail and dropping to 2,566 (fully -28 points lower), before turning around to trade back up to the 2,587 level the lower edge of the gap.

During the day, we gave precise price points for the levels that would cause the daily S&P500 Cash Index or the ES E-Mini S&P500 Index Futures to lose their short-term daily diagonal shape. Those levels are 2,562.96 in the cash index, and/or 2,558.75 in the December futures. Neither of those levels were hit today before the markets rebounded into the close. Today's downward retrace was just shy of the 62% mark of the prior swing low. Both of those levels remain in effect for tomorrow.

So, we now have the case in these two indexes where the fourth wave of the daily contracting diagonal could be at today's low, and one more zigzag up is needed to complete the wave sequence. Here is the simplified picture on the cash index.

S&P500 Cash Index - Wider Diagonal or Topped?

However, the DOW has broken it's near term diagonal pattern, and therefore may have topped. It is also possible for the above sequence to have topped as well - but since it contains more influence from the NASDAQ 100 stocks, we are giving the S&P500 more time.

The blue wedge line above shows the diagonal that may have topped with a truncation. The red wedge line shows the continuing potential diagonal.

The Dow Transportation Index continued to make lower lows, as in the chart below, and closed a prior mid-point gap that is shown with the black circle.

Dow Jones Transportation Index - Gap Closed

Because the NQ futures "may" still be in a longer fourth wave, we must allow as an alternate to all indexes that the "wedges" are difficult to count (b) waves. There's no problem with that. That is the usual alternate for a diagonal. A quick look at the NQ futures, below, will explain why.

NQ Daily Futures - "Possible" Flat or Triangle Wave (4) ?

One thing is clear, this was the largest down candle in the NQ since back in the JUL - SEP 2017 triangle. It literally seems like just a question of how the wave finishes. A triangle here would be superb. But .. only time will tell. So patience, calm, and rationality are still needed.

At the lows of the day, the daily ES E-mini S&P500 Index futures were both trading below the 18-day SMA, and had lost the embedded slow stochastic status. Both of them were regained before the close. As Ira says, "it's not over 'till it's over".

Have a very good start to your evening.
TraderJoe


EMU - Fifth Extension Terminal

EMU = Early Morning Update, Before the Thursday Opening Bell

Over the course of the weekend, I outlined how because of price and/or time degree violations, the Weekly ES E-Mini S&P500 Index futures could be tracing out the larger pattern known as the Fifth Extension Terminal (or Expanding Ending Diagonal).

I'm sure many of you "rolled your eyes", and said, "yep, sure it is". Again. I am only trying to correctly observe the rules and guidelines to finish a Primary 5th wave, in whichever way that happens. And I am trying to show that you don't need to break the rules or re-invent completely impossible bogus patterns (such as one site's irregular zigzags) in order to complete Elliott Wave counts.

Elliott Wave International may have one way of seeing the market terminate here - which does count correctly. So, we must respect that view. But again, that pattern doesn't channel well, and it may contain a time-degree violation in the cash market and a time & price degree violation in the futures market.

However, yesterday afternoon in the real time chat room, I was able to call a smaller degree Fifth Extension Terminal in real time, and, since I got confirmation on it early this morning, wanted to provide this example to you in near real time at the moment of confirmation. The example is on the NQ Futures - 30 Minutes in the chart, below.


NQ Future - 30 Minutes - Fifth Extension Terminal

The pattern was called in the chat room at the end of wave a of (v). And what is vital about this type of pattern is how violent the fifth wave is. It is, after all, the extended fifth wave. The extended fifth wave is where the pattern takes it's name from. Now Neely says this pattern can often be a "C" wave, most usually, or a fifth wave. And in this case it might be the c wave of a B wave. We can't be certain yet.

But, what we can be absolutely certain of is that a valid diagonal was able to be called in real time. And we know that because you are seeing this chart at the near moment of confirmation. The down move out of the diagonal, completely retracing it, occurred in less time than the diagonal took to build! Thus, the diagonal was fully and completely confirmed.

Now I know what some of you might say. Well, it's some other goofy B wave - like a triple zigzag. But, we know that simply can not be be the case in this instance, because there is a rising pattern - likely an a wave of a larger B wave - appearing as the wedge lines before this wave. Therefore, this pattern must, in, fact, be a terminal, an ending pattern. And triple zigzags are always a pattern into themselves. Further, and very importantly, triple zigzags usually, "most-often", occur in a channel. And the central feature of this pattern was there was no way to draw a channel!

Once again, here is just another view on how the stock market could top - following the same logic - if it does not top with this diagonal following the Elliott Wave International count.

ES E-Mini S&P500 Index Futures - Potential Fifth Extension Terminal

Again, the very specific rules for the pattern are: Wave (5) longer than Wave (3), Wave (3) longer than Wave (1), Wave (4) longer than Wave (2), but Wave (4) does not break below wave (2)'s low, Wave (4) overlaps Wave (1), and each wave is a zigzag pattern.

Have a very good start to your day.
TraderJoe

Wednesday, November 8, 2017

Likely B Wave

Market Outlook: Possibly Topping this Week
Market Indexes: NQ futures made a new ATH; not Dow, S&P, RUT or Trans
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

There are two ways to interpret today. Either the today was the low of wave (iv) of the diagonal we have been showing on the ES 4-hr chart, with a slight truncation, or today's high was b up of (iv) down. The latter interpretation is preferred right now, as new higher highs were not made today.

Here is the cash chart.

S&P500 Daily Cash Index - Wedge

There was downward overlap, and the ES 4-hrs did cross the EMA-34 in whippy action. We'd expect the whippy action inside a diagonal. That's fine. A lower low before a higher high would make a more proportional count, but we must also not forget that there could be a truncation at the high of a significant wave, as well. Time will tell.

The Dow Transports actually continued to make lower daily lows, as below.

Dow Jones Transportation Index - Daily - Lower Lows


For now, have a good start to your evening.
TraderJoe

Tuesday, November 7, 2017

Near Round Trip

Market Outlook: Possibly Topping this Week
Market Indexes: DJIA, S&P500 cash new all-time highs, ES and NQ futures too!
SPX Candle: Higher High, Lower Low, Lower Close - Outside Candle; Doji and/or Key Reversal
FED Posture: Quantitative Tightening (QT)


So far, so good. The market as measured by the S&P500 cash Index, closed Monday at 2,591. Futures were higher overnight, and the cash market opened with a small gap up, and traded up to a new all time high of 2,597. Then, as if on cue for a "turn around Tuesday", stocks headed lower and traded down to 2,584 by noon - in the process breaking yesterday's cash daily low. At that time, they began to trade sideways to up for the rest of the day and closed at 2,591, closing only 0.49 points lower than where they started. But it was enough for the cash market to make an outside range day, lower, and possibly a "key reversal", although the point change was quite small.

So, here are the two charts we showed you yesterday. The first is of the S&P500 cash index channel and how price again found resistance at the upper channel, then reversed to trade lower.

S&P500 Cash Index - Daily - Resistance at Upper Channel Line

Price is still inside that daily wedge at the highs.

And here is the ES E-Mini S&P500 Index Futures - 4 Hr Chart showing two possibilities for the wedge.


ES E-Mini S&P500 Index Futures - 4 Hr Chart - Wedge Counts

If one adjusts the trend line across the highs we showed yesterday, now shown in blue, above, then we can still be in the formative phases of the potential diagonal. However, if one keeps the original trend line (now shown in red, above), then it is possible to see today as the "throw-over" of the trend line, and the potential end of the move. The alternate count for the completed diagonal is shown in red below the pattern. In this second case, October 18 is "a" of (i), and October 19 is "b" of (i) and October 21 is "c" of (i) of the completed diagonal.

The uncertainty in the two counts goes back to how the market bottomed back in late August and/ or in September. Did it bottom as a simple zigzag or as a triangle? This affects the number of waves upward to count. In live chat room today, we were able to show a satisfactory counts on the triangle and completed diagonal combination, but only said it was possible. There is no confirmation yet.

In the above ES chart, trading below 2,558 would invalidate the black diagonal, and begin to confirm the red diagonal. Because of the choppy internal trading today, we must have patience until there are more impulsive clues as to resolution. But, so far, so good.

So have a very good start to your evening.
TraderJoe



Monday, November 6, 2017

Some Resistance at the Highs

Market Outlook: Possibly Topping this Week
Market Indexes: DJIA, S&P500 cash new all-time highs, ES and NQ futures too!
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Since I wrote a lot over the weekend, I'll keep this brief and the let the charts speak for themselves.  The market, as measured by the S&P500 Index closed Friday at 2588. At the open, the index dipped two points, then began climbing, eventually making a marginal  new high at 2,593 by 15:30 EST. The cash market is seeing some resistance at the highs and from the parallel channel shown below.

S&P500 Cash Index - Daily - Some Resistance at the Highs

Both cash and futures prices are potentially trading in a wedge shape, shown above, and, as below.

ES E-Mini S&P500 Futures - 4 HR - Potential Wedge

And so, it is possible we are counting a potential contracting diagonal. So far, the trend lines are holding nicely. For a well-formed diagonal, wave (iv) should trade below the blue EMA-34 shown. Of course, wave (iii) must still hold first as a shorter wave than wave (i).

Have a very good start to your night, and to your week!
TraderJoe

Sunday, November 5, 2017

Profound Conflict and the Ways Forward

In again reviewing the works of Glenn Neely, I have run into a profound conflict that can not be reconciled in an impulse count in this current market. This conflict has significant implications as far as I can tell, and I want to explain it to you simply.  The conflict is between two concepts:

Degree versus Zero-to-Two Trend Line

In my post last weekend I showed this chart and stated (under Neo-Wave) in theory, that no part of a third wave should be outside of a line from wave zero-to-two.

S&P500 Index - Neely Trend Line

And, I stated that this would mean that the August peak should be taken as Minute ((i)), with the recent re-acceleration of the market as Minute ((iii)).

But when I had time this weekend to review the implications of that count, I ran into the profound conflict with Neo-Wave's own instructions. That is, if Minute ((i)) were placed at the August high, that would mean that Minute ((i)) would be longer in length than Minor 1! That is not possible. That is a degree violation!

The very concept of degree means that a smaller degree wave may not be larger in price or time than a larger degree wave! Minute ((i)) can not be larger than Minor 1. Let me illustrate.

S&P500 Cash Index - Weekly - Degree Violation Error


Regardless of which location for wave 2 you choose (the Brexit low in July 2016, or the election low in November 2017), then any location for a trend line that does not cut out a wave three results in a Minute wave ((i)) which is too long in price. They are each longer than Minor 1.

In Neely's latest audio interview he says specifically that degree violations are one of the most common charting errors. So, in the current market environment, his system can't have it both ways with an impulse count like this.

In fact, the only way to avoid a price degree violation for an impulse is with the Elliott Wave International style impulse count like the one below.

S&P500 Cash Index - Weekly - Minute Degree Price Resolved

I now clearly understand why EWI has labeled the chart as they have. They have labeled it to be cognizant of price degree. But, there are other problems with this chart in addition to the ones we noted earlier (like the $NYAD nearly at all time highs, and the weekly RSI at a near all time high).

Now some of the sharp one's among you will note that there is a potential time degree problem with the above chart. If minute ((ii)) is really minute ((ii)), then why does it consume more time than Minor 2??!! I can almost "hear" the EWI-style response to the time degree problem. Something like, "Well, time in the wave theory is the most flexible; corrections are goofy, and really Minute ((ii)) was just waiting on the election results. When we got the election results, then Minute wave ((ii)) ended. End of story! And don't ask any more stupid questions."

I presented a chart in the live chat room which can help answer the time-degree problem, and I'm going to present it at the end of this article as long as you understand that there is no price evidence for it, yet.

Let's look at just one more problem with this chart.

S&P500 Cash Index - Weekly - Deceleration, then Acceleration


Why, then, if we were working on a beautiful third wave, why did it suddenly decelerate, break the trend line and then accelerate again? And why is it that we have a wave than can be counted as triangle - right at the arrow location?? The EWI-style count explains it with Minute ((iv)) of Minor 5, with Minor 4 at the April, 2017 low. There is a distinct possibility that the EWI-style count can be completed, as shown below, and it would still explain the recent acceleration of price points higher.

S&P500 Cash Weekly - EWI Style Count Extended

Yes, each of the minute waves in the above chart is fewer price points that Minor 1, and the recent third wave can explain how that weekly RSI is so high at this point in time. To be fair, this count might call for a Thanksgiving swoon, and a Santa rally - which are common expectations on Wall Street. You will also note in this count that wave ((iii)) of minor 5 does not break a line drawn from wave 4 to Minute ((ii)) - not shown. This is also as Neely suggests. But, if that rule works for this wave, then why doesn't it work for first 1,2 in this series??!! And then there is the problem with the time degree issue: Minute ((ii)) of Minor 3 takes more time than Minor 2, and that violates Neely's principle of time degree.

Furthermore, in the above EWI-style chart we are supposed to be in a Fifth Wave of a Fifth Wave, and there is not even an obvious daily triangle or diagonal that can yet be seen? What is going on there? And the wave doesn't even form a parallel trend channel that well?

Well, I already know you are not going to like this. I don't. But the only way I can use all of Neely's guidelines to arrive at a count, is presented in the weekly chart below. It doesn't change anything overall. We would still be in Primary 5. But this chart also makes some quite exact predictions, so let's at least let it see the light of day. I am again going to show you this chart using the ES E-Mini S&P500 Index Futures so you can see that all price travel is accounted for in this chart.

ES E-Mini S&P500 Futures - Weekly - Fifth Extension Terminal

This chart would be of The Fifth Extension Terminal (or Ending Expanding Diagonal) and is well documented in Neely's book, Mastering Elliott Wave. The requirements are Wave (5) longer than wave (3), Wave (3) longer than Wave (1), Wave (4) longer than Wave (2), and Wave (4) overlaps wave (1) but does not travel below the low of Wave (2). Finally, every leg must be a simple zigzag.

So first let's cover the strengths of this chart: the most important of which there are no degree violations! This chart reflects the primary 4th degree at the February, 2016 low. Minute (ii) is shorter in both price & time than is Intermediate (2), and even shorter in time than it's prior B wave. And, the minute degree waves are all shorter in price than their minor degree counterparts. There is no minute degree wave that is longer than minor C of Intermediate Wave (1) in this configuration.

And we know within Intermediate (3), then there is no problem with the length relationships within zigzags. There is no rule stating that wave C can not be longer than wave A, and so that fits, as well.

In this chart, a line from Primary ((4)) to Intermediate (2) cuts off no part of wave Intermediate (3), and a line from Minor B of Intermediate (3) through Minute ((ii)) cuts off no part of wave Minute ((iii) - following the Neely guideline quite well, in fact! Profound conflict possibly resolved!

Further, this chart may explain the $NYAD being at recent new highs, along with the weekly RSI because we are actually in a wave Intermediate (3), and not wave Minor 5 as posited by the EWI-style count.

This chart makes some quite specific predictions. It states that wave Intermediate (4) down must be of the zigzag category, and that it must overlap wave Intermediate (1). To the best of my knowledge there is no one else on internet web-sites who's charts make this prediction! This would also be just a great way for Intermediate (4) to become longer in time than Intermediate (2). And, of course, by the very name of the structure, we don't have to look for a triangle or diagonal any more. We would be in it right now!

Then, after Intermediate (4) concludes, the chart also suggests that there will be a robust but narrow rally - most probably to a new high. And this may fit with the fact that even though sentiment is at extremes, the banks are supposed to now have better capitalization to withstand a draw-down. So, that might make some economic sense, as well.

So, if the chart has all of these predictive strengths, then what is it's weakness? Well, it should be clear this is a preliminary idea. There is absolutely no price evidence for it, yet. The best initial evidence would be if price breaks down out of a parallel. There are quite a number of amateur and even professional Elliotticians expecting the true parallel to hold. Whether it will or not is a matter of speculation.

The second issue with this count is the concept of time degree. I alluded to this issue earlier. Neely is quite concerned about the issue of time in his work. Elliott Wave International, not so much in the short run - although they do pay attention to longer time cycles.

So here is the thing: until or unless the concept of time-degree can be better illustrated or, hopefully, more rigorously proven - even mathematically - then we must hold it up to skepticism. I must admit, that my own internal counts in the live chat room have improved when better considering the time relationships and alternation among corrective wave sequences. But, overall, as a critical issue or element of wave theory, judgement must be reserved. I did have one idea for the longer run that I may work on for a future video. Stay tuned.

And - while we will advance this idea forward - we will bide our time and be patient, as there is nothing yet that says that upward counting is concluded. The best to you!

Have a very good weekend.
TraderJoe












Friday, November 3, 2017

Interesting Day

Market Outlook: Likely now In Minute ((iv)) of Minor 3
Market Indexes: DJIA & S&P500 cash made new all-time highs, ES futures did not
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Since we have showed you the key reversal candle in the Dow Jones Transportation Index, it has continued to make new daily lows, as in the daily chart below. Now, it also has a very interesting overlap.

DJTA - Lower Daily Lows and Overlap

This overlap restricts the number of possibilities for wave counts that may be applied to this index.

The best the S&P500 could do today was eek out a 0.02 point gain as a new high. There is a possibility this index is in an upward "b" wave, possibly the "b:3" wave of a barrier triangle or flat. The ES E-Mini S&P futures only tied the high, while the NQ futures did make higher highs. And, the ES futures had another one of those uncharacteristically low volume days with less than 970k contracts traded, versus even summertime lows of 1.1 or 1.2 MM contracts traded. Something is up, yet again!

Today's up move was sufficient that the upward diagonal we were counting was aborted about half way through the session. (At least we were counting upward!) But the up move was very halting, and did not display much impulsiveness. What I mean by that is prices never made it up and over the upward sloping channel shown in the chart below.

S&P500 Cash Index - 15 Minutes - Upward Channel

However, it's not that today wasn't quite the "short-squeeze" if nothing else. During the live chat room, we noted fully 14 candles without a lower low being made by any candle in the sequence after the point marked as wave .ii on the chart. That is quite a run! As a result, after the close I adopted the above count.

As I mentioned in the prior blog posts, with only "three waves down" from the prior high, now shown as a-b-c to a:3, it seemed like we were only counting a corrective sequence. That was correct. The problem is that with only a fractional new high today, we may still be in a corrective sequence. We are still leaving room for new highs yet, as we still don't have a (c) = 1.618 x (a) wave, or a wave which is (iii) = 1.618 x (i).

But, we must also be on the look out for tricks & truncations. If the upward wave movement ended right here, I would call it .v that truncated slightly. But there is no reason to at this point in time. If price is making the suspected triangle shown, then upward price movement might end soon enough anyway to be a b:3 wave. The best alternate for a b:3 wave is a further up wave within a diagonal.

The reason for the above count is simple. There is no way to count that .x wave as another impulse. A middle wave would be "too short". It 'must' be counted as a-b-c to the .x wave. If price gets much beyond 1.618 (at >2,591, or so). I would simply relabel the (a) wave as a (i) wave and go from there. And it would make for another flat second wave, instead of (b) wave shown.

I will try to address the larger count in equities on the weekend.

Just today daily Crude Oil did crack the previous high (reference the weekend video) and may be on it's way to the 38.2% retracement shown on the monthly chart in the video. So, a triangle for Crude Oil's Intermediate (4)th wave may be ruled out. And the W-X-Y or double zigzag count would be the next on the list to look for.


For now have a very good start to your evening.
TraderJoe

Thursday, November 2, 2017

Lower Low Day

Market Outlook: Likely now In Minute ((iv)) of Minor 3
Market Indexes: DJIA cash made new all-time highs, S&P500 did not
SPX Candle: Lower High, Lower Low, Higher Close - Yin-Yang Candles
FED Posture: Quantitative Tightening (QT)

On a poor reaction to Facebook's earnings reports, the ES E-Mini S&P 500 Futures and the NQ futures were substantially lower in the after hours. The ES futures went down, and hit the 18-day SMA  bounced off it, and went back down to hit it again during the cash session, and bounced off it again.

The market as measured by the S&P500 Index closed yesterday at 2,579. Prices opened only ticks higher, then began to trade lower reaching 2566 (-13 points) in the first 45-minutes, making three-waves down from yesterday's all-time high. By the close, price was at 2,580, a one point change on the day. Here is a chart below from the high.

S&P500 Cash Index - 15-Minutes

With only three-waves down from the high, and the DJIA having made a new all-time-high, it is best for me to assume the move downward is corrective only in one manner or another, rather than assuming that the bear market started yesterday (i.e. per a major Elliott Wave service).

There are still ways this move could develop. With today's lower low, Ira Epstein's swing line has turned trend-less, but with a positive bias, over the 18-day SMA. We're counting as best as we can. And while we have a clear three waves down, we do not yet have either a clear three waves up or five waves up, as yet. In the chart above, the current location of wave (iii) makes it shorter than the current location of wave (i). A downward overlap would be needed for a diagonal. Lack of a such an overlap could result in an impulse count, upward.

The proposed tax plan and new Federal Reserve Chairman were advanced today. The market seemed to shrug on all that news. After hours Apple announced it had beat revenues, earnings and shipments with some upward movement in the stock and the futures.

Due to likely being in a fourth wave, and the possible presence of The Fourth Wave Conundrum, patience and flexibility are still needed until the situation further clears. We'll update the longer term when we get waves that break relevant fractals.

Until then, have a good start to your evening.
TraderJoe

Wednesday, November 1, 2017

First of Month

Market Outlook: Likely now In Minute ((iv)) of Minor 3
Market Indexes: NQ,  Dow and S&P 500 cash made new all-time highs
SPX Candle: Higher High, Higher Low, Higher Close - Spinning Top Candle
FED Posture: Quantitative Tightening (QT)

Today was the first new trading day of the month. We have often cited that the new money enters the market from dividend reinvestment plans, pension plans, 401k's, profit-sharing programs, company bonuses, and other sources that become available on the first of the month. Today was no exception.

The market as measured by the S&P500 Index had closed yesterday at 2575. As soon as the overnight futures opened last night, they started flying higher in anticipation of the new funds, and creating a gap up to the open, and quickly invalidating the potential "C" wave down scenario. Cash traded up about 13 points to 2,588, and then began to reverse. By about 13:15, the opening gap had closed, and the upward waves  that could have created a "one-two-three-four" were overlapped.

As the gap was being closed, we noted that the NQ futures had backed off of their high. Before I show you the S&P500, first here is the chart of the NQ futures.

NQ Futures - Daily

In the thrust out of the triangle, it is highly possible that wave ((iii)) has been made. While it is not for certain, a five wave sequence up to ((iii)) can be counted, and prices back off. Further, the futures are currently trading lower after the Facebook earnings. So, it is possible this index is now in it's ((iv))th wave. A potential channel for the move is shown.

Now, we'll show you the chart of the S&P500 Cash Index. In the S&P500 cash, we were able to count a triangle with the (e) wave of the triangle, last night's aborted wave in the downward direction.

S&P500 Cash - 2 Hourly Chart - Triangle

There are two ways to view an interim top here. They are as a triangle or as a diagonal. I can only say that when each wave is counted, the usual structure of a diagonal is not very well met: you have to break too many guidelines. But, the triangle fits without breaking any. And this triangle may be seen to have the purpose of "equalizing" the net point travel between waves ((2)) and ((4)). As we clearly delineated on the chart, the 25 October down wave is the longest down wave since the up trend began. We noticed it and were focusing on it intently. By itself, it would be too large to pair with wave ((2)). But, as part of a triangle, it fits perfectly, as the net distance from ((3)) to (E) of ((4)) is now actually smaller than wave ((2)). Terrific.

You'll also note that this count utilizes the "non-limiting triangle" concept we highlighted back in our October 23 post HERE.

As the down wave progressed, it was yet again quite a slow wave from the top. So, as a result, the thought right now is that we are only entering the minute ((iv)) wave in the weekly chart, below.

S&P500 Index - Cash - Weekly

If minute wave ((iv)) proceeds as expected, then traveling back to around the channel mid-line might be expected. For confirmation, we must see new daily lower lows. You can already see from the above chart, that prices are being "stuck" near that 1.618 Fibonacci extension level. You can also see why, if we are only in a minute ((iv))th wave, an ending diagonal count may not be appropriate - as nothing would have specifically ended yet.

The Russell 2000 futures did make an "outside reversal day down" but did not make a "key reversal" as prices did not make a new all time high today.

Crude Oil put in an outside reversal day down after a potential "double-top", and bears watching. The daily slow stochastic is not yet below 80, and so as of tonight has not lost it's embedded status.

Have a good evening and let's see how it goes.
TraderJoe

Tuesday, October 31, 2017

Another Inside Day

Market Outlook: In Minute ((iii)) of Minor 3
Market Indexes: NQ Futures made new all-time highs; Dow and S&P 500 cash, not.
SPX Candle: Lower High, Higher Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 Index has closed yesterday at 2,573. Overnight the futures were higher, and there was a small gap up of four points, extending the blue (C) wave up, as we had suspected might happen ("often", not always) in yesterday's post. The market traded up about four points to 2,577, then within the first thirty-minutes turned lower to fill the gap. After trading weakly down to 2,572, the market turned slightly higher again - in the process tagging the 62% retracement level of the down move. This may be seen on the updated chart below.

S&P500 15-Minutes Likely (C) Wave

In the process, the cash market may have traced out an ending contracting diagonal for a (C) wave. Wave 5 is shorter than wave 3, Wave 3 is shorter than Wave 1, Wave 4 is shorter than Wave 2, and Wave 4 overlaps wave 1. Further, each of the segments may be counted as a zigzag.

By the end of the day, price had fallen out of the potential diagonal trend lines, and at the close had just overlapped the upward (A) wave in the downward direction. As always, potential diagonals must prove themselves, and this one must do so by trading lower than the start of the potential diagonal, the extreme of the (B) wave in less time than it took to build it - or before the end of tomorrow.

We also noted that the upward corrective wave has now consumed more time than the downward motive wave (expanding diagonal) did. That was something that hadn't happened yesterday and made me suspicious that more up movement could occur.

So, since the ((A)) wave down is a diagonal, if a ((C)) wave down begins tomorrow, then the ((C)) wave itself should be an impulse in it's entirety, not a diagonal, although either wave (1) or (5) of the ((C)) wave - which are waves of lower degree - may be a diagonal. This is so that there is a good pattern of alternation within the corrective structure.

Those of you who are Elliott Wave students can clearly see the alternation in the ((B)) wave, itself. Wave (A) is a short impulse, and wave (C) is a very long diagonal. This is a very typical pattern of alternation within a corrective structure. Looking for proper alternation can help provide one patience in slow markets.

Again, if a ((C)) wave downward forms properly, we may have the beginnings of an upward diagonal or the continuation of a triangle. We briefed that live chat room on how an overall upward diagonal might happen to finish wave minute ((iii)), pending that outcome. If we get the needed wave structure tomorrow, I will post it here, also.

For now, that's a lot of work for an inside day. So have a good start to your Halloween! I will.
Boo!
TraderJoe

Monday, October 30, 2017

Split Market

Market Outlook: In Minute ((iii)) of Minor 3
Market Indexes: NQ Futures made new all-time highs; Dow and S&P 500 cash, not.
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

The market as measured by the NQ futures (NDX, NASDAQ 100) continued slightly higher today while the ES E-Mini S&P500 Futures were lower. The Russell 2000 led the way to down side.

As of Friday, we had noted only three waves up in the S&P500 Cash Index (fifteen minute chart, below). And with only three-waves-up, there was only a (c) = (a) or (iii) = (i) relationship. See chart below.

S&P500 Cash Index - Fifteen Minutes : Three Waves Up and Clear Diagonal Down

The market as measured by the S&P500 Index had closed Friday at 2,581. When the market gapped lower this morning, we began count an expanding diagonal which formed perfectly in every detail. Cash traded down to 2,568. Wave (5) was longer than Wave (3), Wave (3) was longer than wave (1), Wave (4) was longer than Wave (2) and Wave (4) overlaps Wave (1), upward. This diagonal was of the 5:3:5:3:5 variety which means it should, after retrace, be followed by at least one more wave downward.

Following the diagonal there has been a clear three-wave retrace upward, but the retrace may not be over. Often, the retraces of diagonals go quite deep. Not always, "often".

If the full three-wave up move from Wednesday is retraced 62% we might suspect that an upward diagonal is under way to conclude Minute wave ((iii)) from the weekend post. This might explain some of the divergence we are seeing between markets while the NDX rallies.

There is no doubt the "three-waves-up" from Wednesday could also be a "B" wave - perhaps one which is part of a triangle. We don't know for sure. What we do know is that price has fallen out of the Elliott parallel trend channel shown, and has not made a 1.618 extension at this time. Those facts alone should bring wave-counting caution.

Have a very good start to your evening.
TraderJoe

Friday, October 27, 2017

Non-Confirmation & Neely's Simple Game

Market Outlook: In Minute ((iii)) of Minor 3
Market Indexes: S&P500 and NQ Futures made new all-time highs; Dow not.
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Every major stock index made new highs today powered by the preliminary U.S. GDP report, and by the earnings reports of selective technology stocks, including Amazon, Alphabet (Google), and Microsoft. Facebook has yet to report. As you know from the this blog, I employed specific price and time tests to see if a confirmation would occur that we were out of Minor 3 and definitely into Minor 4. Those price and time tests were not met, and the subsequent non-confirmation led to a rally. Now what?

Here's what. I want to play Glen Neely's simple game again. Let's start with an almost blank chart of the S&P500, below. This one is a two-day chart for clarity, but the time frame is irrelevant.

S&P500 2-Day Chart from the Election Low

So now let's play Neely's simple game. Where is a point on the chart in which a second wave would not cut off any part of a third wave?

This first location won't do it.

SP500 2-Day Chart : First location for a second wave won't work.

This second location won't quite do it either.

S&P500 2-Day Chart : Second Location for a Second Wave Won't Work Either

 Yes, you're getting warmer. That means that only this location works.

S&P500 2-Day Chart : Only Location where a Second Wave Works

This suggests that the best count for this cash wave is as follows. (I switched programs to insure all measurements are correct.)

S&P500 Cash Weekly - Minute ((iii)) Count

If it's good for the first 1,2 up, it's good for the next one too. And minute ((iii)) wave would reflect the count acceleration we are seeing now.

Whenever minute ((iv)) begins, it must be longer in time than minute ((iii)) is in time. All the other corrective waves - as shown - are longer in time that their respective impulse waves.

Have a good start to the weekend!
TraderJoe