Thursday, May 25, 2017

DJIA makes 90%

Let's hear a minor hooray! The DJIA finally made that 90% level and avoided breaking an Elliott Wave rule (not a guideline) for the minute ((b)) wave of a flat. The upward wave was a total mess, but we recognized that the lower low in the Dow that was not made in the S&P500 meant we did have another flat construction - which must have also followed the rules for a 90% retrace in the downward direction after the three-wave "a" sequence below from Mar27th to April 5th. It did! It even made a lower low - the very signature of another flat.

DJIA Daily finally makes the 90% Level to Validate a Possible ((b)) Wave of a FLAT

So, the overall upward sequence from March 27th counts as the flat-x-zigzag that we mentioned in prior posts, where a,b,c to (w) is the flat, w-x-y-x-z is the (x), and now we are working on a three wave zigzag upward for the (y) wave. So, while this has been a real terror of a wave to count, we are most satisfied that no Elliott Wave rules are broken.

It is likely that the market knows what you and I suspect - that a strong and steady minute ((c)) wave down is expected for Minor 4, and there had to be a lot of bronco-bucking to make sure no one is on board for it.

The upward movement is probably not over yet, but volume continues to fall off. It will be very interesting to see if the upward-sloping channel drawn in contains the corrective price movement. With today's locally higher high, all of the gaps are now to the down side, and we can envision a scenario where the trading algorithms go "on the hunt" for those gaps at some point in the near term.

You might ask, "how do you know the upward wave is a zigzag"? Earlier today in live chat, I published this 15-minute chart of the S&P500 Index.

SP500 15-Minute Chart

Today's re-acceleration upward was likely the third wave of a (c) wave higher. Why? First, because of insidious price overlaps it is almost impossible to count the waves up until May 23 as anything other than one wave, in itself. Then, yesterday's FED meeting wave was so shallow and overlapping that, on reflection, we can only call it a (b) wave. Price has not really attacked the channel lower, although it did glance off it, and the Elliott Wave Oscillator (EWO) has remained above the zero line almost the entire time.  For these reasons, it does not seem to me that this wave follows The Eight Fold Path Methodology.  There are too many anomalies, and that tells me the upward wave is corrective.

Here is a similar upward wave in 2-Hr Crude Oil futures, and look what's happened to it today!

WTI Crude Oil Futures - 2 Hr Chart - Corrective Wave Upward

Clobbered! ...and now overlapping the minute ((a)) wave up. This is a likely an excellent example of a zigzag wave where ((c)) = 0.618 x ((a)) when added to ((b)) as the green Fibonacci ruler shows. I'm not sure how many of those you get to see in your lifetime, so I wanted to point this one out.

By-the-way, MotiveWave counted the minute ((c)) wave upward as a contracting ending diagonal in beautiful form. I didn't even have to tell it to! If it is truly an ending contracting diagonal, then price should fully retrace below the low of the minute ((b)) wave in less time than it took to build the diagonal. Looks like the chart has a very good start on that objective.

And I hope you have a very good start on your afternoon and evening, too. Cheers!
TraderJoe

Wednesday, May 24, 2017

Kompression

As if yesterday's wedge wasn't bad enough, today's overlapping waves made an even more severe compression on exceptionally light volume. Stocks dropped on the FED's FOMC meeting minutes, then they rose, then they dropped back again, over-lapping over themselves in near psychotic manner.

And while it is possible to count a top today - in diagonal fashion - there is no incontrovertible sign of one yet. Price has not yet retraced below the 2390 level in futures to signify the start of a downward move. The ES futures are ticks from a new all time high, as is cash S&P500. Only the Dow lags. The dilemma of the count can be illustrated most clearly from the Dow daily chart, below.

Daily DJIA Cash

At the point labeled (0), the Dow had not quite made the 90% mark for the minute ((b)) wave of a flat that it should make. Yet, the way down from there measures properly for, and can be considered, an expanding leading diagonal five-wave sequence, either as an "A" wave or a "1" wave. This is shown as the sequence (i) through (v).

But, since the all diagonals consist of three zigzags, then the way down can also be considered just a triple zigzag corrective wave, or "X" wave, instead of "A" or "1". This is shown as the sequence (in circles) w-x-y-x-z.

If the Dow exceeds the (0) mark, it must then be the "X" wave. And, this may allow the Dow to make the 90% mark which it should have for the minute ((b)) wave of a larger flat. This would simply result in a more complex ((b)) wave.

The NQ has exceeded the high today. If the other markets do tomorrow, then it will likely solidify the larger ((b)) wave. And, the upward count may form like a flat-x-zigzag, upward, in the Dow. In such a case, even the prior high in the Dow could be exceeded before starting on the C wave lower.

The only thing we can say is you can see how the volume, while up volume, or green, is falling off badly in the Dow, and this is especially true of the ES futures, too. While that can go on for quite a while, it is not an especially good sign.

Patience and flexibility remain needed to count this market.

Have a great night!
TraderJoe

Tuesday, May 23, 2017

Potential

Potential Only. For the last couple of days, I've been noting this potential wedge shape in the upward direction in the ES E-Mini S&P500 Index Futures. This means there is potential, and potential only, for a turn lower tomorrow.

Hourly Wedge Shape in the ES E-Mini S&P500 Index Futures

If the wedge should break down, it is possible to begin the third wave of the minute ((c)) wave lower of Minor 4. Today, a gap that you can see over on the left hand side of the chart was filled. Note that the downward and upward waves can be counted in several ways. The downward wave did not follow The Eight Fold Path Methodology. Neither did it make a significant new low.

The downward wave can, in fact, be counted as 1, A, or X, and the upward wave can be counted as either a three-wave sequence or a five-wave sequence at this point. So, the overall wave sequence can be 1-2, or A-B (in which a flat is or is not used in either case!). Or, the downward wave can simply be an X wave, such that a higher high is made, and the Dow can try once again to make that 90% level in a more complex minute ((b)) wave.

Additional downward overlaps and/or a cash gap are the item of significance that can help clarify the count at this point. Either way, its a correction, and it's nice & muddy - as correction are wont to be! This is the primary reason that I have no interest in trying to micro-label this count. There are several ways to do it at this time.

Trading below 2,390 would be more significant for the downward count, and a new higher all-time high would be needed for the upward count of a more complex minute ((b)) wave. Patience and flexibility are still needed!

Have a good evening.
TraderJoe

Thursday, May 18, 2017

Daily ES

Below is a chart of the daily ES E-Mini S&P500 Futures. Also shown is a Fibonacci ruler from the Election low.

Daily ES E-Mini S&P500 Futures

If the March high capped minor 3 wave up, and then we had three waves down to minute (a), and three waves up to minute (b), then the most common form for wave minor 4 is five waves down to minute (c).

The most important item on the chart would be the 38.2% Fibonacci level at 2261 as this is a common target for a fourth wave retrace after a third wave is completed. But, in a Primary 5th wave with lousy momentum, there would be nothing wrong with a 50% retrace of this wave, either, at the 2217 level. It would be best not to "micro-manage" this count for several reasons.

First, price can go sideways at any point before going significantly lower - like today. There was an initial lower low, then sideways, making for a green candle overall. Next, there is some evidence already that the downward wave has not followed the Eight Fold Path, and even though it may be counted as a five-wave sequence lower. So, it may only be an "a" wave, lower, and starting an ending diagonal (c) wave, lower.

But, in the less common form of a fourth wave, the exact same sequence since minor 3, can be counted as minute (w), and minute (x), meaning that a minute wave (y) down to minor 4 would only be a three-wave sequence. It is probably the level that is more significant than the form. And the form only reflects the issue we have pointed out before - in numerous posts - and in our YouTube channel. And that issue is titled, The Fourth Wave Conundrum. It is nearly impossible to tell, in advance, what form a fourth wave will take, although some clues are provided in advance.

The most significant clue was that, since minor 2 was a simple zigzag (sharp) wave, then minor 4 could be expected to be a flat, with or without a higher (b) wave, and so far, we are headed very much in that direction. But, it could also devolve into a double-flat or flat-x-zigzag - if that's what it takes to fool the most people - and still make the 38.2% retracement. The only sequence that would not seem to apply here would be a triangle from these levels, because with this form a triangle could not reach the 38% retracement level.

Because this is likely a corrective wave sequence overall, whippy market behavior is still expected. So for that reason, remain patient and flexible.

Have a good evening.
TraderJoe

Wednesday, May 17, 2017

We Tried to Prepare You

On April 28th - over two weeks ago - our post clearly indicated how "Sentiment Soared" and we asked, "who is drinking the Cool-aid now?". Then on May 13th we clearly stated in regard to the triangle count, "The immediate implication of a vth wave up (especially if it results from v = i), would be that a minute ((c)) wave down should occur as a five-wave sequence to end Minor 4."

Then, on Monday of this week we said, "Just keep in mind, the likely (now validated) triangle, and the deep nature of the Dow's wave iv both suggest a loss of momentum, and may be occurring just prior to the last wave-set upward. And keep in mind - since we are likely dealing with a pesky overall ((b)) wave higher - there would be nothing unusual if a truncation occur at or near the top since we are likely in a fifth wave already now." (Underline emphasis added.)

And with those quotes in mind, here is the update of the ES E-Mini SP500 Index 4-Hr chart.

ES E-Mini S&P500 4-Hr Chart Upward Count Completed

And it should be clear, that we are most likely in the minute ((c)) wave down of what will likely be Minor wave 4, on the daily chart.

So what about that Dow? In live chat we clearly indicated the truncation count in the Dow. It did fail to make that 90% level by just a few points, but, in our count, it does have five-waves-up, overall and we did provide a warning to you to expect just such a truncation in a squirrel-ly ((b)) wave count. And certainly, neither the S&P500, the ES, the NQ nor the Russell missed the 90% level - with them making new all-time highs.

DJIA 2-HR - Truncation in the Minute ((b)) Wave Up


We note now how devastating the decline is now that the market algorithms are on a "search and destroy mission" to fill the gaps.

We urged caution, patience and flexibility. We still do. Whippy market behavior is still expected as the $VIX is back up over the 15 level, today.

Take care, and have a good night.
TraderJoe

Monday, May 15, 2017

New All-time High Confirms Triangle Completion

Today's new all time high in the S&P500 verifies that "at least" a triangle upward has occurred properly in the cash index as well as the ES E-Mini S&P500 futures we have been showing you. Here is that triangle count on the futures, again.

ES E-Mini S&P500 Futures Potential Triangle

Today in the live chat room we added the EMA-34 to show how this triangle now has "proper form and balance" because every significant wave in the count is on an opposite side of the EMA-34. Notice that even the new ((E)) wave crossed downward over the EMA-34 to express this counting guideline, and how the ((E)) wave also crossed back down over minuet wave iii to show that it is corrective to it.

The futures have not made the new ATH high yet. They might tonight in the overnight hours. While we are waiting to see if that occurs, here is the same count in the SP500 Hourly Cash Index.

Hourly S&P500 Cash Index with Validated Triangle Shown

Regardless of the specifics, we have a wave that "has moved price sideways, taken up a lot of time, and occurred on low or declining volume". Besides the 3:3:3:3:3 structure of the zigzags in the triangle the previous verbiage describes the essential nature or personality of a triangle.

We note that while the DOW is making good progress in it's attempt to make the 90% level representing the possible minute ((b)) wave of a flat, it simply isn't there yet.  Here is the updated chart as of today.

DJIA - 2 HR - Good Progress on the 90% Level

Because the Dow has not made the 90% level yet, we may see more upward waves in this move. And if we do, that is fine.

Just keep in mind, the likely (now validated) triangle, and the deep nature of the Dow's wave iv both suggest a loss of momentum, and may be occurring just prior to the last wave-set upward. And keep in mind - since we are likely dealing with a pesky overall ((b)) wave higher - there would be nothing unusual if a truncation occur at or near the top since we are likely in a fifth wave already now.

Give it all some thought, and thanks for hanging in through some of the technical difficulties.

Have a good night!
TraderJoe

Saturday, May 13, 2017

Update on Potential Triangle

Here is an update on the potential triangle in the ES E-Mini S&P500 4-HR chart. If this triangle completes properly, it may allow for a new high. And if a new high occurs in the S&P500 Index, then it might similarly allow for a new higher local high in the Dow Jones Industrial Average.

ES E-Mini S&P500 Futures Potential Triangle

Essentially, all of the requirements of a triangle in this index have been fulfilled. All of the waves internally overlap and wave ((E)) overlaps wave iii, downward, demonstrating that the potential triangle is corrective to it.

Wave iv would now be much, much longer in time than wave ii, and the triangle may represent the wave before the last wave up in both indexes. If the indexes do struggle to a new high, it would be one of the longest and most protracted upward  minute ((b)) waves on record.

The immediate implication of a vth wave up (especially if it results from v = i), would be that a minute ((c)) wave down should occur as a five-wave sequence to end Minor 4.

Still, however, this triangle is only a potential triangle. To be a proper triangle, it must demonstrate that price can exceed the high of iii before traveling below wave ((C)), downward, the invalidation point.

Potential triangles, being what they are can sometimes expand once. This means that, in the process of traveling sideways and taking up time, it is possible for the ((D)) wave to pop once higher, and to get an ((E)) wave a little further along to the right-hand-side. This would / will be OK if the ((E)) wave comes back down to overlap wave iii, again. If prices travel north without the return overlap for the ((E)) wave, then one simply assumes the triangle is over as of today. Usually triangles like this can be more symmetric, however, which is why we must allow for a higher ((D)) wave - since the bottom of the potential triangle is relatively flat.

The Dow Jones, on the other hand, can be seen to be in a regular FLAT for it's wave iv, with a clear lower low that the ES futures so far have just refused to make (twice!). A chart of the Dow as of the close on Friday is below.

DJIA - 2 HR - Wave iv is a FLAT

It is interesting, that within wave iv, but not overall, the ((B)) has made the 90% level of the ((A)) wave. We also counted the five-wave down expanding diagonal in the live in the chat room.

The reason for showing this chart is that it is possible that the DOW and the ES will synch up while the ES is in the triangle process. That is certainly a possibility providing that the triangle completes in proper order.

In case you are one of the individuals that is skeptical of wave counting, and / or Elliott wave work, here is a chart of the Russell 2000 ($IUX, on my quote service). Look at the beautiful, ending contracting diagonal that was formed for a C wave, upward, just before the Russell spilled to a fresh lower low.

Ending Contracting Diagonal C wave in the 5-Minute Russell 2000

In this clear example, wave v is shorter than wave iii, wave iii is shorter than wave i, wave iv is shorter than wave ii, wave iv overlaps wave i, but does not travel lower than the end of wave ii, and each wave sequence within the diagonal is a clear three-wave zigzag. Perhaps more importantly, wave i has it's crest clearly above the former high, signalling it's true motive character. This is way most contracting ending diagonals form. This is the pattern that should be looked for above all else before considering a true contracting ending diagonal.

It is clear from the above chart that price then rapidly and quickly retraced the entire diagonal (beyond the point marked as 0), in less time than it took to build the diagonal. This is a critical measurement and this diagonal passes that test, and how!

I hope you will keep this example in mind, because you will see beginning Elliott analysts that haven't quite grasped the concept yet, trying to call all sorts of waves that don't have their start over the prior high as contracting diagonals (when often they are just "b" waves of one degree or another).

That said, it is not at all clear that this observation applies to expanding ending diagonals. Just look at the DOW chart, above, and the expanding ending diagonal ((C)) wave of iv. It seems to me that because of the very compressed nature of the expanding diagonal, it almost assures that while wave (i) in an expanding diagonal will be recognizable for one of several reasons - such as traveling outside of a parallel channel, or making a larger recent retrace than previous ones. But, whether it exceeds all of the prior lows (in this case) of the prior wave certainly seems nearly impossible. Yet, wave (v) in this sequence has, and now price is currently above a declining diagonal trend line.

It is good to have the Google Blogger editor and upload service back on line - at least temporarily. Let's see if it stays that way, and have a great weekend.

Thanks for your support through the technical glitches.
TraderJoe

P.S. In order to see if file space limitations were involved in the technical problems, a number of blog posts with interim status were removed (and unfortunately can't come back). When deleting a lot of old posts and files did not resolve the issue, it told me almost completely that the issue was with the host. I tried not to delete the most important posts - such as The Eight Fold Path, and the Paraphrase of Ira Epstein's Guidelines for Trading.











Friday, May 12, 2017

SE - NC

No, not Southeastern North Carolina, SE = Some Evidence, NC = Not Conclusive. There is some evidence now of a possible very ugly triangle in the ES E-Mini S&P500 futures, as pictured below. Please click on the link (which is only to a picture on my main web-site).

Potential Triangle Count

If a triangle does form properly (and one may have already), then it would likely precede the "last wave up" in the ES and S&P500 - perhaps allowing the DJIA to make the elusive 90% level for the minute ((b)) wave of the flat. It is possible to count the up wave as .d and this morning's down wave as the .e wave, but the triangle is not yet conclusive as of this time.

It would be 'nicer' from the perspective of form & balance if a larger .d wave was made, followed by another .e wave down. But, this does not have to occur.

From the standpoint of invalidation, such a triangle would invalidate below the low of the .c wave.

Sorry I could not post the picture directly. There is some issue with Google Blogger that I am trying to resolve. It has resulted in less than timely posts.

If the problem continues, I will be forced to move all activities to my main web-site.

Thanks and hang in there,
TraderJoe



Saturday, April 29, 2017

Sentiment Soars!

The percentage of bullish sentiment across multiple surveys of individuals, fund managers and letter writers normally moves at a snail's pace - sometimes changing only 0.5% or 1% at a time. This week, apparently on just the news of round one of the French elections, bullish sentiment has soared by more than five points.

The updated chart is below.

Weekly Bullish Sentiment Soars More Than 5 Points!

A change like this is almost unprecedented in one week. (Note that the 5 point drop off in sentiment from 60.5 to 54.4 occurred over almost six weeks!).

Someone is drinking the Cool-Aid again - within points of an all time high for the S&P 500. We hope it's not you. We also note some real anomalies like extremely low trading volume in a number of instruments - and just want to alert you to it. The chart below, of the ES E-Mini S&P 500 Futures shows this volume decline during April.

ES E-Mini S&P500 Futures Volume Decline in April

And CNBC Reported Friday that SPY volume might come in at the lowest of the year!

So, while there may be a few more up days in this current move, the lack of support by volume combined with the high bullish sentiment, above, may be indicating undue complacency. And, it is again interesting, that after it's new high, the Russell 2000 is again leading the way lower with a difficult day on Friday.

Further telling is a decline in readership and comments across a number of market-related web sites. It seems people usually get interested after the big movements have started, and not before.

Well, that's enough for this weekend. Enjoy the rest of it!
TraderJoe

Friday, April 28, 2017

Possible to Complete an Impulse for the Minute ((b)) Wave

With 127 candles on the chart, S&P500 30-min prices started attacking the lower channel line as indicated in The Eight Fold Path Method. This chart is shown below.

SP500 Cash Half-Hour Chart

This count does provide alternation for wave (ii) and wave (iv) in that wave (ii) is a running flat - where the x wave goes over the high by quite a bit. Within wave (iv), neither the ((B)) wave nor the x wave goes over the high. It is the lower ((B)) and x waves that provide that alternation.

With Monday possibly seeing the "beginning of the month" inflows from mutual funds, 401k's, dividend reinvestment plans, company month-end bonuses, etc, it is possible that a (v) = (i) wave will carry over the top to end the minute ((b)) wave upward. See the two black measuring boxes which are the same height.

The Elliott Wave Oscillator is in good position to indicate a fourth wave because it is within +10% to -40% of the high for wave (iii). And, it is clear we have indicated wave ((3)) of (iii) on the peak of the EWO, with ((5)) of (iii) on a divergence.

Further, if you measure the wave in this manner, you will find wave (iii) equals almost precisely 2.618 times wave (i). Today, we were expecting a 38% retrace of wave (iii), but, while close, that did not happen. It suggests there may be some strength on Monday. The primary word of caution would be that wave (iv) has not yet taken up as much time as wave (ii). Perhaps that is symptomatic of a minute ((b)) wave up, or it may indicate there is one more down leg to be provided by the overnight on Sunday. If the correction gets deeper, however, a (v) = (i) leg will likely not cross the high, and we might have to look to (v) = 0.618 x net distance traveled by waves (0 through (iii)), the common second target.

It turns out the DOW can be counted in this same manner, but, interestingly, the DOW has not made the 90% upward mark that the other indexes have. A new high over wave (iii) would allow that. Again, the reason we can count this wave up as an impulse is the Dow made it's previous sub-waves (a) and (b) ALSO as a flat, so this is minuet (c), as an impulse, to end minute ((b)), as best I can tell. The S&P500 is in exactly the same count.

Per our charts of Crude Oil in the last two days, Crude Oil did make five waves up from the low, with good alternation, and then began undergoing some corrective waves.

Have a great start to the weekend.
TraderJoe

Wednesday, April 26, 2017

Likely Bad News for the Dollar

Yesterday provided a lower low in the Dollar Index which has given it most of the required formation for a contracting diagonal lower. Here is the daily chart of the Dollar Index, showing that potential contracting diagonal.

Dollar Index New Low makes a Contracting Diagonal Possible

The lower low below minute ((iii)) now means that as a leading diagonal, the minute wave ((v)) lower has not failed. Remember, the fifth waves of Leading Diagonals may not fail, only the fifth waves of ending diagonals may fail.

Note, too, the slow stochastic is in over-sold territory, price is against the lower daily Bollinger Band, and there are two clear unfilled gaps shown in red.

Further movement down for the dollar is certainly possible, but to maintain a diagonal shape, then wave minute ((v)) must remain shorter than wave minute ((iii)).

During the day I provided this updated count of the Russell 2000 which accounts for the new all time high. It considers that we may still be in the 4th wave (count in blue) because the lower channel has not been contacted yet.

Russell 2000 Cash Index - Count that Includes new ATH

Many of you will recall I counted the Russell's move down in April as a contracting diagonal. That was a 'good call', as it was, in fact, a diagonal - an ending one. However, since the low of wave minute ((a)) was not exceeded lower that means the contracting shape at the top - which could have been counted as a diagonal - was not, in fact, an ending diagonal, but only a minute ((b)) wave. This is very often the case. And, yes, a flat or complex wave 4, would have good alternation with the sharp wave 2. But, because wave 3 would then be shorter than wave 1, then wave 5 would need to be shorter than the length of wave 3.

In the daily S&P500 cash index, I can provide only this 'partial' count from the low of Minor wave 2. I have taken great pain to follow the guideline that when a second wave retraces less than 38.2%, then it likely means the first wave is the extended wave in the sequence. The resulting count is below.

S&P500 Daily Cash - Interior Wave Only

So, within Minor wave 3, the count is simplified and streamlined now, and follows more rules and guidelines although a good Elliott parallel is not formed for wave 3. None-the-less, the count breaks no rules, and a 38.2% wave could be allowed for the minor wave 4. As of today, the S&P500 did hit and surpass the 90% mark in the upward direction that was needed to claim the three wave ((b)) wave upward. Remember, the signature of the upward ((b)) wave can be very messy. It could be the simple (a), (b), (c) shown, but if a true impulse is not made for the (c) wave, then the minute ((b)) wave 'could' be counted as a (w)-(x)-(y), as well. So far, though the upward wave is still in an impulse channel upward, so the (a)-(b)-(c) for minute ((b)) is more appropriate. If and only if the upward wave does not finish properly will we give it the latter designation. And, recall that, yes, the ((b)) wave can go over the top, with no issue.

Then, too - just like the Russell - a flat for Minor 4 will also alternate very well with the sharp wave we counted for Minor 2.

In Crude Oil, using the 2-hr chart, and The Eight Fold Path Method, it looks like we are coming to near end of a five-wave sequence downward, as the Elliott Wave Oscillator recently hit the zero line in the upward direction, as in the chart below (see the circle on the EWO indicator graph.)

Crude Oil - 2 HR - Nearing a Five-Wave Sequences

You'll note that there are now about 112 candles on the chart, and wave ((3)) of iii is on the low of the Elliott Wave Oscillator, and the EWO returned to the zero line for wave iv. While only more more new low - beyond ((X)) - is needed to prove out this count, there would be nothing wrong, and it would be good form, if wave v became as long in price as wave i, was.

Let's see how this works out. It sure has been odd to have Crude Oil and the Dollar declining at the same time. But, that is a perfect example of why I "consider every market in it's own count" and do not look to the correlations that periodically happen. Sometimes, those supposed relationships just vanish, too!

Have a good night.
TraderJoe

Saturday, April 22, 2017

Weekly Review - Two Plausible Scenarios & Just One Preferred

Some websites want to send you back to the beginning of recorded stock price history in the U.S. to tell you why their Elliott Wave counts, which don't seem to work out when viewed under close scrutiny, must work out in the future. Just recently, one (ahem) shall we call it alternative Elliott Wave site, which claims it is objective, was projecting higher and higher third waves - which, as you know now - never developed. But, the odd thing is the authors of such sites rarely, if ever, say, "we got it dead wrong". How can a site be objective if it won't admit when it's tools and techniques just don't work? Wrong at the May 2015 high. Wrong at the 2016 bottom. Wrong at the March 2017 high.

I on-the-other-hand prefer to stick to real Elliott Wave analysis, as I understand it. And I think many, many people really don't understand it that well yet either. That's why I try to help show you how real wave analysis works - on any time frame from 5-minutes (as in yesterday's post) to weekly, monthly or more. I prefer to live with some uncertainties of true Elliott Wave analysis because I know that's what mirrors life. There is almost always a choice. There is almost always an alternate. This week I will show you the two most likely Elliott Wave Counts on weekly charts, and tell you which I prefer and why. It is no change from the past several weeks.

SP500 Cash Weekly - Primary 5 Impulse Count - ALTERNATE

The first count above is of the potential Primary 5 impulse wave upward. As of this point in time there is nothing that breaks any true Elliott Wave Rule in this count. It would be made up of five Intermediate sized non-overlapping waves higher, and that would normally be fine. Just, if Intermediate (2) were a flat with the higher B wave, as shown, then one would expect Intermediate (4) to be a triangle or a more simple zigzag to provide alternation with the flat wave (2). That could still happen.

But, there are five reasons why I don't like this count that go beyond 'simple' wave analysis, and proceed to more modern wave analysis as it has been further delineated by the likes of Glenn Neely, and Bill Williams.

Fibonacci Five Reasons for Alternate Designation of the Impulse Count
  1. Part of Wave (3) breaks the Primary wave ((4)) to (2) trend line, indicating loss of momentum at that point. Wave 2, as you can see, drops below this lower channel line, and it is more extreme if the real zero-to-(2) trend line were drawn in. 'Usually', 'most-often' all of wave three is above the zero-to-two trend line except in diagonals.
  2. Wave (2) does not have a very deep pull-back - it is only 38.2% at maximum. 'Usually', 'most often' second waves are between 50 - 78% or more except when the first wave is the extended wave in the five-wave sequence. But, the supposed third wave is longer, ruling out wave (1) as the extended wave in the sequence.
  3. Wave (2) is not a sharp wave. 'Usually', 'most often' second waves within true impulses are sharp or zigzag waves, and this one is a flat. While not a deal-breaker, it is a cause for concern.
  4. Sentiment. As you know, we track sentiment weekly. And you can see from the chart below that while sentiment is falling off - as expected - from the high of March 1st, it is nowhere yet near the lows of prior waves. I would expect, before an upward turn, that sentiment will fall lower yet.
  5. Finally, the NYSE Advance-Decline line has recently made new all-time highs. 'Usually', 'most often' the $NYAD will diverge with price before the all time highs are made. That just hasn't happened yet. 
Sentiment Chart

Weekly Bullish Sentiment is Not Yet Near Prior Wave Lows

For the reasons above, and not because of any sacred mystical cycles or hidden proprietary analysis, the count below is currently the preferred one.

SP500 Weekly Cash - Ending Diagonal Count - PREFERRED

As you can see, because there is no Intermediate third wave yet, this count eliminates all of the problems with a third wave breaking the zero-to-two trend line. In fact, in this count you can see from the channel that minute wave ((iii)) exactly lives up to that guideline. Yes, it is not a rule, but it is a guideline we would rather waves live up to than not. Also, there would be four more Intermediate sized waves in the near future to show divergence with that advance-decline line.

So, that's the rationale. We can see both sides of this coin, but clear and unequivocal reasons are provided for preferring one over the other. The real item of interest is that in either the Intermediate Wave (4) wave in the Alternate, or the Intermediate wave (2) in the Preferred count, it is very likely that that down wave could have the form of a zigzag! And that is the amazing part. And that is why the ES 8-hour count published previously may be taking the form of the downward expanding diagonal that we have been showing for weeks now - because in a true zigzag, a real minor A wave is needed - made up somehow of five minute-sized waves.

But, the most important thing is that it is regular Elliott Wave analysis. There is nothing mystical about it. There is nothing mysterious about it. There is nothing here that doesn't already appear in two or three books, and a couple of videos all of which are available for only modest cost or no cost.

Are you learning your Elliott Wave? We hope so. Can we be wrong? You bet. But when we are, you hear it here first - along with why!

Have a great rest of the weekend.
TraderJoe

SUPPLEMENTAL: At the request of a comment that asks good questions, I am posting these two one minute charts from the live chat room  that were done in real time.


SP500 1-Minute April 21 1546 PM ET
The first chart shows the detail that is possible today with good measuring tools and speedy equipment. At the time of posting this in the live chat room, I intentionally left all of the wave marker data on the chart, so a person could see that the measurements are exact for an expanding diagonal. Wave ((v)) is longer than wave ((iii)), which is longer than wave ((i)), and wave ((iv)) is longer than wave ((ii)), overlaps wave ((i)) but does not travel beyond the low of wave ((ii)). They are all three wave internal sequences that look like zigzags to me because they don't have "pull backs" in them.

But, this is  the key to me, if it is really a diagonal that I had identified, and not a series of one's and two's higher, then, it should have - as a prediction - at least a deep retrace if it is a Leading Diagonal wave up, or a failure lower if it is an ending diagonal. And here is what the result was ...


SP500 1-Minute Chart April 21 1559 PM ET


Well, there it is! Another Elliott Wave prediction come true. So, please be careful about criticizing building up larger fractals from smaller fractals because they are definitely there! But, stop being amazed there, and think. Look at the very top of the wave in the first chart. You notice that I did not call ((v)) done by placing it on a wave bar? That was because I couldn't find an ending formation yet.

And when you look at the second chart, what do you notice? C'mon now. There is a perfect little ending contracting diagonal for the (c) wave of ((v)). I just didn't draw in the trend lines. Can you?

Wednesday, March 22, 2017

Last Chance 4th Wave

In yesterday's post, I noted that trading below 2,335 in the S&P cash would start to signal a problem, and the count of a diagonal in the major indexes. Today, I'd like to show you where that calculation comes from.

The S&P500 4-hour chart below, now has the needed 120 - 160 candles to be indicative of The Eight Fold Path methodology. It actually has 185, but any lower time frame results in too many candles, and any higher time frame results in too few. The count below is one that was established as an alternate on the ES E-mini S&P 500 futures. This is just the extension of that count to the future.

At this exact point in time, it should be seen as an "equal alternate" to the counts shown yesterday.

SP500 4-hr Chart : Last Chance Fourth Wave?

The rationale for this potential count is that usually, most-often, fourth waves and second waves can travel a similar net amount. The black rectangle shows the total number of points traveled in wave 2, from low to high. And, the blue rectangle is just a copy of the black rectangle and shows a near exact measurement for a wave 4 at this level. This morning cash hit 2336.45, narrowly missing that 2335 level.

This count would provide the needed alternation for an impulse, as wave 2 would be the sideways holiday trading, counted as a double combination w-x-y, with the y wave as a triangle, and wave 4 would be a sharp - and simpler - (zigzag) correction.

At a level of -16, the Elliott Wave Oscillator is just  barely hanging on to a -40% of the peak of +40-2 on this chart.  A UBS strategist said it well this afternoon (paraphrase), "the market has decided to make this vote on health care the decider as to whether a further correction begins here or not".

In this count wave 3 is shorter than wave 1, so a wave 5 would have to remain shorter than wave 3. And, by way of invalidation, in no case, could a wave 4 overlap wave 1 (in this count).

As I said in my weekend video having clear alternates - and clear rationale for them - is an item that helps keep an Elliott analyst's ego in check. Breathe. Enjoy. Stay patient and flexible.

Have a good evening.
TraderJoe


Monday, March 20, 2017

Anything look familiar?

If you watched my weekend video, you might see some patterns here that look familiar. If not, might want to watch it a second time - with popcorn!


SP500 Half-Hour : Patterns in a Potential Triangle

By the way. We know that the five waves up to (c) at 2389.70 on FED day, Wed, March 16th, were, in fact, an ending contracting diagonal - as we had surmised in live chat - because the start of that diagonal has been exceeded lower. Now, it looks like we have another contracting diagonal lower.

This suggests in the very short term the next move will be up, then down. A triangle is not a certainty. It is only a probability until it proves itself.

Have a good evening!
TraderJoe

Sunday, March 19, 2017

Weekend Video

Here's a video I made a commitment to provide, regarding the relationship between Elliott Wave Counting Decisions and Trading Decisions.


Enjoy the video, and best of luck in the markets.
TraderJoe

Thursday, March 16, 2017

The Fourth Wave Conundrum And Pseudo-certainty

Pseudo-certainty is pretending one is certain of something when, in fact, certainty is not possible or likely. I specifically coined the term "The Fourth Wave Conundrum" because when an Elliott analyst is in the throes of counting fourth and fifth waves, it is less likely one will get the count correct the first time.

First, there was nothing untoward today to the down side. Voicing their 'opinions' some will say the market had a "consolidation day" after the large rise on the FED meeting announcement. Others might say "there was a failure to follow-through" and begin looking for a downward count. Others are "certain" we are going higher - but will  not show how. Those that express their certainty are often involved with trying to sell a product: like a web-site subscription or a course with their super secret keys to unlocking the mystery of the trading universe.

Few will just refer back to the Elliott Wave Principle, outlined by Ralph Nelson Elliott, and realize all the possibilities here.

Next, in yesterday's chart, we showed how we have "three waves up" so far, which could be i, ii, and part of iii of an impulse. Or, it could be a, b, and part of c of a diagonal. Today we will show a slightly shorter term chart than the SP500 2-hr chart, instead focusing on the narrower 30 minute time frame, below.

SP500 - Half Hourly Triangle Alternate

I am showing this alternate only so that you have a full understanding of how and why a precise call in the fourth or fifth waves may not be possible - at this point in time. I have not even shown this chart in the live chat room.

So, suppose the down wave from 2401 is a three-wave structure as shown to ((A)), read as circle-A. So far, the up move has been limited to 78.6% of the down move, also in three waves, at this point in time. The Dow has already downwardly overlapped the Mar 10th (A) wave. The S&P has not.

Suppose more downward wave movement is in store for the S&P500 tomorrow. We don't know that. We are just supposing. Then, it's possible the ((C)) wave down of a larger fourth wave triangle would form.

But, and this is key, we are just supposing. There is nothing yet to say that the upward wave is over. So far, there has been little more than a 38.2% retrace of the March 15th high - which could either still be an internal fourth wave or an internal second wave of a continuing upward wave.

In other words, it may be premature to label ((B)) upward as over. We could still very well go on to form 1) an upward impulse, or 2) an upward diagonal over the highs.

And anyone who feigns certainty in such a situation is largely selling you cigar smoke in my opinion. You can go ahead and buy it, but there just isn't a lot there.

Have a good evening!
TraderJoe

Wednesday, March 15, 2017

Parallel Remains in Tact

The S&P500 today did make a higher high than the tentative ((A)) wave we posted in the prior chart. This means for now that the upward sloping trend channel remains in tact. (Remember, ((A)) is read as circle-A).

SP500 2-Hr Chart Higher Local High

Yesterday, the down wave again challenged the lower trend channel line, and extended to the point (a near exact 78.6% retracement) that we can give it credence as "either" a ((B)) wave, or a second wave, so both upward counts are currently noted.

If it is ((A)), ((B)), then the structure will be of a diagonal. If it's ((1)), ((2)), then the structure is that of an impulse. As of the moment, I have no preference what-so-ever. However, the Elliott Wave Oscillator (EWO) has both turned green and is now above the zero line which should indicate a fifth wave in this sequence. The NQ futures have already made higher highs, while the Dow is currently lagging the S&P. And we are now at about only 146 candles, well within the 120 - 160 that are typical.

On another note, we previously showed you this example of a 138.2% wave that we labeled b:3, and said the prediction in the Dollar Index was to be below the a:3 wave. As you can see from the chart below, as of the end of the NYSE session today, the Dollar did indeed trade today below that a:3 wave. So, you have seen a prediction made days in advance come true.

US Dollar Index b:3 Wave at 138.2%


Even though the over-all prediction came true, calling this downward wave in real time became a real challenge because several of the downward legs did not follow The Eight Fold Path. For example, the first wave down down from the top (wave i) was an expanding leading diagonal. In fact, yesterday, my "opinion" of what the Fed would do resulted in a turn-around possibility saying that it was possible we had a truncated flat. But, when the Fed suggested only two more rate hikes this year instead of three, the better definition of wave iii, downward occurred. (Interestingly, in the live chat room I suggested that exact possibility later in the day).

Anyway, my purpose here has been served. I simply wanted to demonstrate a true 138.2% b:3 wave, as well as it's consequence. And that is now done. Again, this type of FLAT wave is called an Expanded Flat. It is not called by it's older name the Irregular Flat because there is nothing irregular about it. Expanded flats are one of the most common types of flats. They are seen often and regularly, so using the older name is a misnomer.

But, the lesson still is being absorbed, as long as I've been at this, not to mix opinions - of any type - with wave counts.

Here's hoping you have the best of evenings.
TraderJoe


Tuesday, March 7, 2017

Critical Conditions Met

Again, using the SP500 2-Hour chart (the same as yesterday), the critical conditions for a fourth wave have been met. The chart is now out to 122 candles, within the suggested range of 120 - 160 candles, and the Elliott Wave Oscillator (EWO) has retraced back to the zero line, and slightly under.

SP500 2-Hour Chart - Fourth Wave Critical Conditions Met

It can also be clearly seen that the lower trend channel line is being attacked to the down side, and we do not know that downward movement is over. (It's "possible" we are still getting an ending diagonal c wave lower or a more complex correction lower).  At present, minuet (iv) has traveled back to the area of sub-minuet wave iv, but has not closed the upward gap there, and the wave currently has a 23.6% downward retrace on wave (iii).

At this point, the only unsatisfactory aspects of a fourth wave are the amount of time taken and the "look" of wave (iv) compared to wave (ii). They look very much the same. Therefore, while we do not like to use alternates often, we must suggest that the down wave could still only be the a:3 wave of a larger fourth wave flat or triangle, so we have posted a flag regarding that on the chart.

Alternate or not, we are glad we began looking for a correction just as others began their "how high the S&P can go" postings.

Because fourth waves may not overlap wave (i), that will have to be the invalidation point for this fourth wave. Sometimes - high up in the wave sequence - fourth waves can get fairly deep.

Speaking of invalidation, if the market decides to pull a "fast one" and get out of hand to the down side, within the live chat room I did post a clear alternate count for a possible top. But, there are some things I don't like about it, yet: primarily the proportionality. And so I will leave it in the chat room for now and only show it should this fourth wave not work out as expected.

Why did I develop an alternate already? Because I am always looking for the count that would tell me where the current count is not correct. Keeps one on their toes.

Have a great evening!
TraderJoe