Monday, April 24, 2017

Swiss Cheese Continues - Count Modified Slightly

The weekend French primary polling results created another gap-up open in the cash stock market today. The cash market opened up at 2375, drifted down for a bit during the mid-day, and then drifted back up to 2376, and then back down to close at 2374. All-in-all, it was possible to count another small degree "five waves up" in cash. In our weekend update, and in Friday's real time chat, we had showed an Expanding Diagonal on the 1-minute chart, which we said could be a Leading Diagonal provided it's low was not busted. It wasn't!

A slightly modified potential downward diagonal still exists on the ES E-mini S&P500 Index Futures 8-Hr chart, as below.

ES E-Mini S&P Futures 8 hr Potential Diagonal

For this diagonal to hold, then 2388.75 should not be taken out higher before there is a new daily low. Because the potential wave ((iv)) is now higher than it was previously, then potential wave ((v)) does not need to travel as far lower to provide validation. But it would need to break below minute wave ((iii)) and also travel below about 2307 if a slight new high is made in the futures tonight.

The Dow's potential diagonal diagonal now looks like as is shown in the chart below.

DJIA Cash Chart - 2 Hr - Potential Contracting Diagonal

Again, a slightly lower low in each could allow both of the indexes to synch up towards the end of the month.

So, yet again, please remain flexible and patient as the whippy market behavior continues on light volume. Other items we discussed in live chat today were a) triangles, b) B waves up, and c) that wave Minor C of Intermediate (1) was forming a diagonal itself. But none of those seem to fit well with the Dow's count, above.

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?

Friday, April 21, 2017

Count Continues

In a rare weekend treat, here is the intraday SP500 5-minute chart in near real time as posted in the live chat room, this post is about 1:30 PM today. Yesterday, I posted that there may have been a fifth wave truncation in the c wave of (iv), on yesterday's eight hour ES chart, and the chart below shows what this looks like. Five tiny waves up off of the 5-minute channel that fail to make a new high as a wave ((5)) still within the upward channel.

SP500 5-Minute Chart with Truncation and Expanding Diagonal Downward

One of the reasons I called for the truncation, is we got the fourth wave, ((4)) within 78 candles (see the first circle on the Elliott Wave Oscillator). That does not follow The Eight Fold Path Method as fourth waves should typically occur within 120 - 160 candles in true impulses (not impulses which are part of corrections). Also, you will note that wave ((ii)) is not along the lower channel boundary which is another tell-tale sign.

Then, this morning, I started counting yet another slow, expanding diagonal downward that is perfect in every detail, with wave 5 longer than wave 3, wave 3 longer than wave 1, wave 4 longer than wave 2 (in both price & time!), and wave 4 overlapping wave 1, upward. This diagonal is likely a larger wave (1), downward. While I had no desire to start counting yet another potential diagonal down, the failure of the down wave to also follow The Eight Fold Path Method forced this count. Good thing!

The tiny diagonal lower has already proved itself, and a second wave upward might occur for the rest of the afternoon, or until the weekend. Such a second wave upward should not exceed the truncated fifth wave ((5)), above.

When this morning's downward diagonal was proven, it was also noted that wave ((1)) upward, was also overlapped in the downward direction, as shown, preventing any misunderstanding with a larger fourth wave.

It looks like the larger ES 8-hr diagonal is being set-up to complete properly, perhaps next week.

Have a great rest of the day!
TraderJoe


Thursday, April 20, 2017

Count Modified

First, here is the eight hour version of the ES E-Mini S&P Futures chart that I said I would publish today to reduce the number of candles. I said I would not change the count without informing you.  Now I am informing you. The count was revised slightly during live trading today because of the large price movement.

ES E-Mini S&P 500 8-HR Potential Diagonal Lower

Yesterday's lower daily low in the DJIA is where the new b wave of minuet (iv) is in the ES chart, above.

Today was likely the c wave higher. I called for a possible truncation in the fifth wave of the c wave in real time, and it may have done that, but tomorrow is needed to clarify whether a truncation occurred for certain. The advantage of another up wave today was that it made wave minuet (iv) larger in time that wave minuet (ii), something we discussed in the live chat room. That is the most common form of the expanding diagonal, that the fourth wave takes more time than the second wave. Note than minute ((iv)) also currently takes more time than minute ((ii)) in the above chart.

In order for both diagonals to complete properly, the futures price should still trade below 2304, as shown by the 100% line on the chart. Any higher high above 2363.25 (futures) will invalidate the interior wave (v) diagonal because in an expanding diagonal, wave (iv) can not travel beyond the end of wave (ii). And now, anything over 2375 (futures) will invalidate the downward diagonal as a whole.

So, I was considering that lower daily low for the DOW yesterday, and I had a thought that might wind up synchronizing the DOW and the S&P in time at the lows again. I presented the idea during live chat, and will also present it here. It is based on the question, "just why did the DOW have a marginal lower  low yesterday?"

DJIA - Two Hour Bars - Potential Contracting Diagonal

I can't say for sure but wave minute ((iii)) is a marginal new low, and wave minute ((iv)) currently takes less time than minute wave ((ii)) - as is usual for a contracting diagonal. I do not know that minute ((iv)) is over yet. Invalidation of a contracting diagonal in the DOW is above minute wave ((ii)).

Before the down wave is over, we might expect to see a triangle in the last wave - particularly of the expanding diagonal S&P500.

Well, that's enough for now, and remain flexible and patient as the whipsaws are likely to continue while the waves clearly do not follow The Eight Fold Path guidelines, meaning they are clearly not impulses.

Have a good night.
TraderJoe




Wednesday, April 19, 2017

Count Continues - 6

ES futures were higher overnight, but closed lower on the day, along with the cash S&P 500 index. The DOW actually make a new DAILY low today, lower than the March 27th low, but no gaps were filled as the result of it. First, here is a daily DOW chart showing that new daily low.

Daily DJIA - New Daily Low versus March 27th

Now, here is the count on the ES E-Mini S&P Futures as was posted in the live chat room today, as of the 4:15 PM settle. Notice the current count from the April 5th high forms the descending brown channel shown.


ES E-Mini S&P500 Futures - 4 HR

This count makes it clear, the invalidation point is now over 2350, basis the futures. Tomorrow, the only difference is I will be posting an 8-hr chart instead of a four-hour chart, so as to reduce the number of candles. The count will not change without my informing you. Price still has lower highs but needs the lower lows.

Target for the downward wave remains at lower than 2504 for the ES future, and the DOW's lower low helped make that case today.

Have a very good night.
TraderJoe

Tuesday, April 18, 2017

Count Continues - 5

The ES E-Mini S&P500 futures made a slight higher high in the overnight session, then traded lower before the cash market opened. So far, prices along the right hand side of the chart below continue to grind lower.

ES E-Mini S&P 500 Futures - 4 HR
The whippy price action continued into today, as prices followed down along the most recent internal diagonal trend line.

The half-hourly S&P500 cash index chart looks like "Swiss cheese" at the moment, with numerous gaps (shown in red) both above and below the market.

S&P500 Cash Index - 30 Minutes - Numerous Gaps

The cash index could not close it's opening gap today, and so a series of lower highs remains clear, but what is still needed is lower lows.

It's a time to remain flexible and patient to see whether the downward count resolves properly with a low below ES 2504 (futures) or an upward count begins. Another downward gap tomorrow should be taken as a sign the downward count may indeed resolve properly, as today can be counted as ((1)) down, as the first SP500 30-min candle downward, with a flat ((2)) upward. Invalidation of that downward impulse count would be over the 2350 level on the cash S&P. The diagonal would have to be examined in real time.

Other evidence that may be pointing in the downward direction is that the DJIA has greater than a 90% retrace on it's March 27th down wave. That would be very atypical of a triangle retrace - which is usually about 78.6% or less. So, at this time the down count still has priority. Is it possible this whole last wave will resolve as a larger diagonal lower? Yes, it is. But, an impulse lower is still quite possible too. Let's see how it goes.

Have a great evening.
TraderJoe



Monday, April 17, 2017

Count Continues - 4

ES futures dipped overnight, and then began a very low volume rally right into today's close. Regardless, the interior diagonal downward, shown on Thursday's post can be counted as a completed structure in both the S&P500 cash index and in the Dow Jones Industrial Average. It is an expanding diagonal in the S&P500 and a contracting diagonal in the DOW.

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

This downward wave is either sub-minuet wave i, of minuet (iii), of minute ((v)) downward. Or it is a minute ((c)) wave as an alternate. At this point, only travel over that 2365 level noted in Thursday's post can tell them apart, because in an impulse lower for minute ((v)), wave sub-minuet ii may not travel beyond the start of wave sub-minuet i. However, the downward wave in the ES and S&P formed correctly to this point, with all of the waves measuring properly for an expanding diagonal.

If the invalidation level at 2365 is exceeded to the upside, then it is 'possible' a very large triangle is being built as a fourth wave in an upward count, but this remains the alternate as of this time. Either way, we said to expect whippy market behavior and today was certainly no exception.

Cheers and have a good night. Sorry for the late post - there were some issues with the Blogger editor preventing uploading of charts until now.

TraderJoe

Thursday, April 13, 2017

Count Continues - 3

Just as, once again, many major market and web pundits were screaming "higher, higher" at you, with some making outrageous numerical calls to the upside, and just as outrageous Elliott Wave counts, their words have turned to stunned silence as this web-site took a much more cautious approach, stating for the last few days that if the ES futures level of 2375 was not exceeded, then it was most likely that an expanding diagonal was forming in the downward direction. (Remember to read double parentheses in text as a "circled" wave number on the chart.)

Here is the continuation of our downward count, and the predictions that it makes.

ES E-Mini S&P500 Futures - 4 Hour - Potential Diagonal Downward

So, first, for this diagonal to complete properly, it should make a new low below 2304 in the futures. The current geopolitical environment has started that process, with several lower low and lower high days since we first published this count in the post titled, "Outside Reversal Day Down" back on April 5th. However, wild gyrations within the diagonal are still possible.

The simplest way for the diagonal  to complete is now for each of the minute waves ((i)) through ((iv)) are "three wave" sequences. That could mean that April, 6th through April 10th is an ((A)) wave down and ((B)) wave up, as a flat wave, and the apparent expanding shape we are in now would be ((C)) of minute ((v)) to finish the overall diagonal. The more difficult way is if April 6th through April 10th is only wave (i) and (ii) of an over-all five wave sequence lower. Right now, the former scenario is favored.

Again, similar to the count on the Russell 2000, published previously, and repeated below, and the Dow count from the weekend video on YouTube, we think the potential diagonal downward is because, Intermediate wave (1) upward finished, and we are just starting Intermediate (2) lower, of the Primary 5th wave, overall.

Russell 2000 Cash Index - Likely in Intermediate (2) Lower

And, if the C wave was an ending contracting diagonal, as we called in real time in the chat room, then Intermediate (2) should trade lower than that B wave low, which started the diagonal.

Time will tell. But, the expectations are clear, and each of the waves currently fits properly down to the five-minute level on both the cash S&P500 Index and the futures.

From an invalidation standpoint, we drop that level to above 2365, basis the ES futures, which is now a few ticks above the high of the current ((B)) wave on April 10th.

Have a very good weekend. Let's hope it's enjoyable for all!
TraderJoe

Monday, April 10, 2017

Count Continues - 2

Another day, and nothing has changed within the downward count, as ES 2375 has not been exceeded upward. The futures opened higher, found resistance in that 2360-65 zone that we noted in Friday's post, then sold off below Friday's close, in the process closing today's opening gap-up, then settled lower at 2353.50 in the process, there is a likely label of minuet (ii), at today's high, as follows.

ES E-Mini S&P500 Futures - 4 Hr - Downward Count

It is highly plausible that minuet (iii) of minute ((v)) in the downward direction will follow. The invalidation for the downward count remains above ES 2375. A new low beneath the prior x wave would better confirm that minuet (iii) is in progress.

Today is the first time this year that the $VIX has closed above the 200-day simple moving average.

Hope this helps, and enjoy your evening.
TraderJoe

Friday, April 7, 2017

Count Continues

Lots of hours have gone by since Wednesday's post. Nothing has changed as 2375 (ES Futures) has not been exceeded to the upside. Today was the second day without it being exceeded - at least by the 4:15 pm settle. So, Ira Epstein might say, "a trap for the bears was not sprung by the outside reversal day down" that we pointed out in Wednesday's post.

ES E-Mini S&P500 Futures (4 hr ) - Potential Downward Diagonal

There has been lots of whippy action, but so far, resistance at 2360-65 has been containing prices on the upside. The daily futures have lower lows, but no higher highs, yet, and prices closed below the 18-day SMA (line in the sand) and so therefore have a negative bias. Clearly, this downside wave has not been following The Eight Fold Path Methodology for Counting an Impulse, as there are already 160 candles on this chart. And therefore, the downside move is likely not an impulse downward, hence the potential diagonal designation.

Again, there can be no discussion of upward alternates until the "key price marker" at 2375 is exceeded higher. That does not mean there aren't upward alternates. That just means there is no evidence for them unless or until that occurs.

Have a great start to your weekend.
TraderJoe

Wednesday, April 5, 2017

Outside Reversal Day Down

If you were watching the market today, you may have seen the higher prices earlier in the morning, and until just after the Fed released it's meeting minutes at 2 PM EDT. Then, prices reversed on that and potentially on two stories regarding the President and 1) Steve Bannon, or 2) Syria. So, we had a correct prediction for the beginning part of the day, but when we began counting fourth waves, the corrections just got too deep - all of which was noted in the live chat room in real time.

This leaves the daily ES E-mini S&P futures below the 18-day SMA, with the daily slow stochastic curled lower, as in the following chart.

ES E-mini S&P500 Futures and Outside Reversal Day Down

What's nice is an outside reversal day gives us a "key marker". As  the result of today's move, this favors the expanding leading diagonal downward scenario as shown on the next four-hour chart.


ES E-Mini S&P500 Futures 4-hour Expanding Leading Diagonal

Price stopped at the 78.6% upward Fibonacci retracement level, and it was noted when that happened in live chat, that this would be the best alternate for counting in the downward direction. The wave lengths are correct, and the EWO signature is "expanding" as well, and this fits the current structure. But still, all diagonal are potentials, and this one must make a lower low, and one in which minute ((v)) is longer in price than wave minute ((iii)).

For all those that have questions, yes, there are still possible upward alternate counts. One would be an expanded flat for a minuet (b) wave within a minute ((iii)) wave of an upward ending diagonal to 2401. The problem is there is absolutely no way to verify same until 2375 is exceeded to the upside before the low of 2317.75 is exceeded to the down side. So, upward counts become the alternate, and we will not speak of them until or unless 2375 is bested on the high side. This goes along with Ira Epstein's counsel that only if the high of an outside day down is exceeded in the next two trading sessions does it constitute a trap for the bears.

Because the momentum is currently pointing down, it is up to the market to prove the case for higher prices. Once again, with prices near the highest levels in history, extreme patience and flexibility are needed as the market tries to decide how to top.

Have a very good evening!
TraderJoe

Tuesday, April 4, 2017

Cleaner

The Dow Jones Industrial Average can be counted a little cleaner than the S&P500. This chart, for one, does not have a nastily truncated fifth wave of minute ((a)).

DJIA - 15 Minutes

The downward wave to minute ((b)) might be over, as there are five countable waves up in an expanding diagonal. I have left the data points on the chart to show that within this wave, wave ((5)) is longer than wave ((3)), wave ((3)) is longer than wave ((1)), and ((4)) is longer than wave ((2)), wave ((4)) overlaps wave ((1)).

There are other ways to count, but the chart suggests any higher high than minute ((a)) would likely confirm the minute ((c)) wave in progress.

The S&P500 may have an upward diagonal in progress, but today's highs have to be exceeded for it to work properly, yet.

For now, flexibility and patience remain the watch-words. Have a great night.
TraderJoe

Monday, April 3, 2017

Be Done?

Below is the S&P 500 2-hourly chart, showing that the (b) wave we contended we were in from the Friday and weekend updates. It is now "deep enough in price" to have completed today. But ...

SP500 -2 Hourly Chart
... now the question is, "has the (b) wave down consumed enough time to be completed?". Today, that (b) wave got down to the 50% retrace level. But, the (a) wave up took twelve (12) candles, and the (b) wave, so far, only nine (9) candles. Price did close marginally outside the descending channel, but there are no upward overlaps as of yet.

For this reason, some real patience and continued flexibility is needed here. The NQ futures did make another new all-time high today.

Have a good evening!
TraderJoe

Saturday, April 1, 2017

Zero-Based Budgeting

So I was literally 'playing around' using the Investing.com charting tools, and I asked myself the question, "If I had to review the daily chart from the Election low, and look at the various factors involved, from the perspective of The Eight Fold Path method, what might I find now that was not apparent before?" And I mean really, really take a fresh look. As a result the chart below was developed.

SP500 Daily Chart

The first thing I noticed was that all the daily candles after November are above the EMA-34 until the candles in March of this year. Using The Eight Fold Path Method, that has always tended to indicate "only one wave up". And so, I started to figure, "how could that be?" More on that later, but you can see some wave labeling that resulted from that thought.

The second thing I noticed was that this March pull-back to the EMA-34, "looks like" the largest pull back we have had, so far. And I asked, "how can that be? why now?". And, "just where are those deep second wave pull-backs?"

Thirdly, this dip resulted in the first traversing of the Elliott Wave Oscillator (EWO) below the zero line.

The fourth thing I wondered about was, "If the wave to the March 1 high is really a third wave, then why is it on a divergence of the EWO? The very hallmark of a third wave is a higher EWO.

And Fibonacci Fifth, none of us really had problems counting "five waves" to the January high, But that's where all the trouble began. So, then I began to wonder whether or not there was a Fibonacci relationship between the January, 2017 wave up, and  the March, 2017 wave up. And if you look at the numbers in blue, you can see in the above daily chart that (c) = 0.618 x (a) almost to the point!

All of this seemed too amazing to pass up, so building this chart from the "bottom up" has actually brought me back to the much larger potential diagonal count I published in my prior YouTube video. I showed the count using the Dow, and that count remains the same. Now, let's update it on the S&P500 Index, below, using the three-day time frame.

SP500 3-Day Chart Primary 5 Ending Diagonal

First, it should be clear from the wave labeling, I am not now expecting the Primary 5 wave to follow The Eight Fold Path Method. So far, it hasn't.

To be brief, it looks to me like we have finished minute ((i)) and minute ((ii)) of the Minor C wave of Intermediate (1), of Primary 5. Marginal new highs should finish minute ((iii)), and minute ((v)) perhaps in April. This can agree with a target of 21,374 on the Dow. But furthermore, explaining the up wave as "all of minute ((i))", agrees with the observation from the daily chart where the EMA-34 tends to indicate "one wave up". Maybe the mystery is solved!

Then an Intermediate (2) wave of five Intermediate waves up to Primary 5 would likely at least come down to the lower trend channel boundary and / or break it, before an up trend resumes. This means the topping process can still be grinding and labored, but it would provide the time needed to develop the technical divergences which are now only just starting to show up.

If Thursday's "Five Waves Up" wave was indeed an "A" wave, it may well be minuet (a) of the minute ((iii)) up wave, and the downward wave is minuet (b). I think the market may be doing it's darnedest to fool the majority of Elliott Wave counters.

Anyway, that is what a review of the daily chart indicates. It is not a change in perspective from the weekend video. It is an elaboration on it for the S&P500 index.

Cheers! And Have a Great Weekend.
TraderJoe

Friday, March 31, 2017

Lower Low Day - Twice

Yesterday, in a very short term five-minute chart, we showed you some of the benefits of using our fully disclosed methodology, called The Eight-Fold Path, to count a minute ((a)) wave up. See the previous post, entitled, "Five Waves Up", and / or click on the featured post entitled, The Eight-Fold Path Method for Counting an Impulse wave.

In the post yesterday, we called for at least some downward movement today, as a result of the count and an anticipated "window dressing" day, and, today, there were two lower lows than yesterday, and the S&P500 closed down -5.34 points, and still not the end of the world.

We will show you one more five-minute chart, as things were left at the end of the trading day today.

SP500 5-Minute Count from the Truncation High

So, yesterday I had noted that, from the truncation high, we had "three waves down, and three waves back up to over the 90% level" which likely meant more down side to come. The open was the expected gap down, and then price began trading sideways all day. Today's high broke yesterday's secondary high, shown as ((w)), but did not break the truncation high - clearly indicating the truncation was the correct call. The truncation high survived by -0.01, and then prices headed lower again at the end of the session.

Of importance, wave ((iii)) downward has broken below both the A wave downward, and wave ((x)) downward at the end of the session. So, as far as I can tell, today's high was just a larger B wave upward. The intraday count was tortuous and whippy, causing a couple intraday re-configurations, but because of the various lengths of the waves involved, this wave simply can not be considered as any part of a triangle. So, that leaves the conclusion that a C wave lower should finish, possibly Monday,  before any more upward movement begins.

You might say something like, "who cares about a five minute count?". And, just so you know, in general from here forward they won't be shown. But, my purpose in showing this chart is not just to provide you with some idea of what occurred today, but it is also to clearly show you a wave that does not follow The Eight-Fold Path Method. No part of this wave yet follows the method, and this is one way that can help distinguish corrective waves from impulse waves.

Now, it may come to pass that the C wave down will follow the method - as an impulse wave - but it doesn't have to. First of all, there is absolutely no evidence of a fourth or fifth wave yet. None. Second, predicting the future is an exercise in probability. There could be about a 25% chance that the C wave down will form an ending diagonal, instead of an impulse. But there is also about a 5% chance that the down movement is, in fact, over. (In that case, the entire movement from the truncation would just be counted as a larger W-X-Y, with yesterday's low as W, today's high as X, and today's low as Y.)

Don't think much of a 5% chance - think it is too low to ever see the results of a 5% chance of something? Well, here is an example where you can see a 5% chance more times than you might think.

ES Daily Chart : Probability of Closing Outside of a Band ~5%


By the way Bollinger Bands are constructed using two standard deviations, if price movement were at random, then the chance of closing outside of either band is only 5% on any given day. Yet, there it is! And it is repeated numerous times over. There are more example on the chart, than I have highlighted. Can you find them?

The point is to learn to use probability as best as you can, and to use it to your advantage. Wave counting almost demands it. Remember, Monday is the first day of a new month and a new quarter. And that sometimes, often times, not always, means inflows from mutual funds, 401k's, retirement plans, stock dividend reinvestment, and/or company bonuses. Let's see how it goes.

Tread lightly and enjoy the start to your weekend!
TraderJoe

Thursday, March 30, 2017

Five Waves Up

Here is the update of the very short term chart, as we counted it in the live chat room this morning up until about 12:40 pm ET.

SP500 5-minute Chart

As you can see a very clear five waves up was made to today's high. Wave ((v)) of 5 ended on a very slight truncation of -0.06, and on a clear divergence with the Elliott Wave Oscillator, but several times through-out the day I had said, "now I don't care if wave five of five truncates", and it did! It wasn't possible to call the truncation that until there was downward overlap of wave ((i)), which did occur, but at least we were on the lookout for it.

As an aside the NQ futures made another new all-time-high today.

So we now have "five waves up" and it sure looks like a larger degree minute ((a)) wave. The truncation sure makes it suspicious, and the retraces are not very deep at all - lucky to see 38%.

Here is what the waves look like from the high on the SP500 2-hour chart. I'll discuss the alternate and invalidation after the chart.

SP500 2-Hour Chart

Price did break the channel on the two-hourly chart with five-waves up. However, the up wave has some of those characteristics of an "A" wave that I mentioned.

So, the two best options are that a 4 ended at 2322 on 27 Mar, and we are either in minute ((a)) up, in what could be a triangle or an ending diagonal wave. Or, that we made a minute ((i)) wave up today, and we are going straight to the high to finish that wave 5, up, in an impulse fashion.

Unfortunately, the invalidation level for both of those scenarios now drops all the way back down to the 2322 low. Only if the 2322 low is exceeded to the downside first (before a new all-time high) would it be possible to put an expanding diagonal downward back on the table. That is because we currently have "five waves up", and that must be respected until we can no longer count that way.

The daily EMA-34 is at 2350, and price finished over that, so the daily trend remains up on the until it does no longer.

After we counted the likely ((v))th wave truncation to end wave 5, today, we got a small-degree three-waves down, and then a rebound in which price only returned to about 92% of the high and failed to make a high over the truncation level or over the prior high. But, it did exceed the key 90% level for the possible (b) wave of a flat correction. So, it wouldn't surprise if tomorrow had some down movement in it, although (b) waves can be quite wily, and this one might not be done. Even though the (b) wave up did appear to finish in the cash market, and a possible (c) wave begin in the downward direction, the after-hours market may have it's own ideas.

Here is just a reminder than tomorrow is the last trading day of the month and the quarter, and so there might be some "window dressing", which tends to create some volatility, and then Monday would be the first day of a new month and a new quarter that has the possibility of the usual inflows from pension funds, 401k's, dividend reinvestment plans, and company bonuses.

Until then, have a very good night.
TraderJoe

Wednesday, March 29, 2017

Short Term - The Eight Fold Path Method

So, for a large part I'm going to show you the SP500 5-min cash chart from the live chat room today and just let you look it over with a few exceptions. Right now The Eight Fold Path Method says to look for a first "five waves up", and so that is what I am doing. This "first five waves up" to 5, if it completes properly, would either be a minute ((i)) wave, or a minute ((a)) wave on intermediate term charts.

SP500 5-Minute Cash Chart to Minute ((i)) or Minute ((a))

Wave 1 of this chart was counted as a contracting leading diagonal, and it was a "good call". There was a short wave 2, and then a significant wave 3 occurred on a steeper angle - the trend line of which was not broken. Wave (iii) of ((iii)) of 3 occurs on the maximum of the Elliott Wave Oscillator, and wave ((v)) of 3 occurs on a divergence and on either the 100% x 1 wave or 127% x 1 wave depending on exactly which peak of 1 is used for the measurement. In either case, it is exactly on a Fibonacci relationship, exactly as The Eight Fold Path Method suggests.

Today I called for a triangle wave 4 which ended precisely on schedule - to the five minute bar. Since then the high of ((b)) wave was broken to the upside, and the first wave of 5 labeled as ((i)) is a contracting leading diagonal. Here's one part of the count that I really want to cover.

Since wave 1 is a contracting diagonal, then wave 5 should not be a diagonal in it's entirety. This is a wave guideline, not a rule. It derives from the principle of alternation. I have already counted wave ((i)) within wave 5 as a contracting leading diagonal. This is OK. It is still just a sub-wave of 5, not all of wave 5. The day may have ended with wave ((ii)) of 5 complete or near complete. If so, there should be a gap up for tomorrow as wave ((iii)) of 5.

Part of the rationale for suggesting a gap up for tomorrow is that wave 5 would be quite short relative to the other waves in the sequence if it were to end here (let alone constitute a truncation).

Further, if for some reason there should not be a gap up tomorrow, then based on where the prior fourth waves are located, I have clearly delineated a Market Reversal Warning at 2348 - 50. This is because there is an ever-so-slight probability of a truncation at the high - since the Dow did not make a new high either. Let's see if we get that gap up. If so, and wave 5 completes properly, then we would expect at least three-waves down in the form of ((b)) wave, or a ((ii)) wave since that is the usual expectation after five-waves up.

In this example wave ((iii)) is a lower degree than ((iii)) and both are lower degree than ((iii)). If we complete a "first five-waves-up" tomorrow I will update the intermediate term charts then. The daily trend is still up until proven differently.

Have a great night!
TraderJoe

Tuesday, March 28, 2017

Three Equal Alternates - 33% Each

When the probability is roughly 50:50, I will tell you that. At this point in time, even though upward price movement has started, the probability is roughly 33% each of three equal alternates. Going all the way back to my weekend video, I have been considering the very strong possibility of an ending contracting diagonal for the Primary V wave. I showed this DOW chart, below.

DJIA - 2 Day - A,B,C of Intermediate (1) Up of Primary V

The completion of an A,B,C up for Intermediate (1) would mean that we are now in Intermediate (2) down which would need to form as Minor A, B, C, downward. That is one clear alternate. The chart below of the Hourly S&P500 Index shows the current partial count for a Minor A wave down as an expanding leading diagonal.

SP500 Hourly Count for a Potential Minor A Wave Down of Intermediate (2)

For this count, there are five minuet waves, (i) through (v) to the minute ((i)) wave of Minor A. Then, there are three minuet waves, (a) through (c) up to minute ((ii)) at just about a 78.6% retrace. And then, there are five minuet waves, (i) through (v), down to minute ((iii)) in a wave than is longer than minute ((i)).

Today's up wave may have completed or been part of the minute ((iv)) wave of such a diagonal, and it is already longer than minute ((ii)), as required by the rules in a potential expanding diagonal. If minute ((iv)) ended here, it would technically be ok, but it wouldn't have the right look, and it could easily go on to form another 78.6% retrace upward.

Then minute ((v)) would also need to form as five waves, and be longer in price than the minute ((iii)) wave.

But, diagonals are somewhat rare structures and we must keep that in mind.

So, countering the downward diagonal idea is the upward idea that wave C of the Dow's 2-day chart above has not completed yet. There are two ways that can happen.

In the first of these two, minute ((i)), ((ii)) and ((iii)) in the above chart are just minuet (a), (b) and (c) of minute ((a)) of a larger triangle, for a fourth wave.

SP500 4-hour Chart - Wave 4 of C As a Triangle with Wave 5 Yet To Come

Such a triangle could help equalize the net distances traveled by waves 2 and 4, because in a triangle the distance measured as "net" is from 3 to ((e)), not from 3 to ((a)), and a triangle could put wave ((e)) back inside the blue box.

While this is possible, it, relies on a triangle, and triangles are a bit more rare, too. But, also there would be two very sideways looking structures. Still, there would be a "clear indication" from a triangle that a "last wave up is dead ahead". This is the second alternate.

Finally, it would be possible just to assume that the March 27 low is the low of wave 4, as a-b-c. And while that would break some wave guidelines, it would not break any wave rules. All it would mean would be that wave 4 would be deeper than expected, and outside of the usuall guidelines for the Elliott Wave Oscillator in an impulse. Well, given how high up we are in the wave structure, such a case is not impossible. The simple zigzag downward for wave 4 would provide good alternation for the sideways wave 2, but, then, it would be shorter in time, than wave 2. Not impossible, but odd. And that is the third alternative.

So there are two of three alternates that spell higher prices, and one that spells lower prices first. At this point in time each alternate has it's advantages and it's disadvantages. But as I said, speaking for me only, I do not wish to get caught up on The Slope of Hope, waiting for a fourth wave that doesn't materialize properly, so I am letting the market tell me - day by day - which count is correct. I am personally neither bullish or bearish : just neutral, patient, observing and counting until the alternates fall by the wayside.

This is a clear example of The Fourth Wave Conundrum, as I have termed it, and is probably the single-most reason why most people dislike Elliott Wave work. Many people (me included) would probably just rather have the correct answer to the puzzle be apparent, rather than work for it. But the market has a different idea. That's just the nature of Elliott Wave work.

For now, have a good evening, and as alternates get killed by various invalidations, we will let you know here.

Cheers!
TraderJoe






Monday, March 27, 2017

Ending or Leading ?

With this morning's new lower daily low in the Russell 2000 Index, there are a clear "five waves down" in the shape of an hourly diagonal, with good form, as shown in the chart, below.

Russell 2000 Index Hourly - Diagonal

Now the question becomes is this diagonal a Leading Diagonal? Or is it an Ending Diagonal? If it is an Ending Diagonal it would be a "C" wave of a fourth wave in the Russell.

If it is a Leading Diagonal, it would be A or 1, of a larger downward wave.

Strictly from the chart at this time, it is impossible to tell which it is. And while there is no reason to go screaming from the roof tops at this time (or ever, actually), it is clear today in the S&P500 was a lower-low, and lower-high day. There is no clear turn around in the S&P. And until there is, a fifth wave count will not be started.

Now is a time for me to evaluate how to avoid getting caught on The Slope Of Hope. The S&P500 breached the 2335 level this morning, and the only way now to continue to form a fourth wave from this location is to form a triangle to equalize the net travel between this as a wave four, and the prior wave two shown in the Wednesday 22 March post. The Slope of Hope in this case means waiting and waiting for a fourth wave that just doesn't develop.

On the S&P500 4-hr cash chart, the Elliott Wave Oscillator has now traveled lower than The Eight Fold Path guidelines, and this is a significant warning signal.

There remains nothing wrong with this two-day Dow chart & count that was shown in my weekend video.

DJIA - 2 Day - Three Waves Up to Intermediate (1)

We're not going to know for sure for a while yet, but if the downward wave gets much longer, then it becomes more and more difficult to give credence to a fourth wave.

For this reason, I will remain patient and flexible until there is a bit more clarity, but I am not looking for support levels in the market. Rather, I am looking for the market to clarify the count.

Cheers and enjoy the evening.
TraderJoe

Saturday, March 25, 2017

Health Care & It's Alternate


I follow stock market wave counts because like most of you I am sometimes interested in things economic, and how they effect us - until they get boring. With that .. here is ..

A Brief History of Health Care

During the 1920s, individual hospitals began offering pre-paid services to individuals, leading to the development of Blue Cross organizations in the 1930s. The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929.

There weren't even insurance companies until the 1920's. Good health care then was largely for the well-to-do, and middle-class. Somehow, sadly, we actually survived several thousand years without insurance companies, and now, of course, some politicians and corporate types couldn't possibly do without them. And, if there is any factual basis for the TV Drama, The Knick, minority populations and immigrants were ill-treated in such a pay-your-way system. Ill-treated is probably kind; I am sure deep in my bones it was actually much worse for the poor than anyone can describe or picture.

Then in July 1965, Congress enacted Medicare and Medicaid under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. And, the United States of America became an insurance company for people of age. And, under Medicaid a certain portion of the poor were then covered, also reducing discrimination in health care.

Later, in 1980 President Ronald Regan defeated then President Jimmy Carter and discarded the proposed Mental Health Systems Act which would have continued funding to local mental health treatment.

And in 2010, President Barrack Obama signed into the law the Affordable Care Act to expand the number of people who could be covered under an insurance plan of some type, and provide a basic suite of essential services, including some level of mental health care.

State of the Art

So, now we find ourselves with a health care system which is largely centered in hospitals and doctors offices, using miraculous imaging technology, advanced surgical tools, and medicines developed by large drug companies - many of whom support candidates friendly to their industry with very large donations to their various campaigns and causes. We still have private insurance companies and we have the federal government also insuring health care for some.

The Result
No matter your opinion, the facts are that somehow this invented-on-the-fly system of health care and health care insurance, along with improvements in food sanitation & disease prevention, has resulted in dramatically reduced infant mortality and increased life expectancy in the United States - from roughly 47 years in 1900 to roughly 79 years today in 2017. It's hard to argue with the result. We're doing pretty well, and now the issue seems to be, "do we want to continue as is or change things?"

Change Imperative
If we're going to change, as a group, we should have pretty good reasons for doing so. And this is where things can get sticky - because then our oughts & shoulds will likely become involved.

Economic Lesson
From a purely economic perspective, the Medicare experiment has taught us that the Federal Government can indeed run a health care system and do so quite well for a select group of people. Whether we as a nation can afford to do that remains to be seen. But, we know this works.

Experience

There are many people who's economic experience it is that, "getting a good job with good benefits" was one reason to try to grow up well, learn, follow-the-rules, and become a good citizen and employee. Health care coverage was an incentive to undertake socially acceptable conduct. It is also within our experience, that, over time, there has been some reduction in discrimination against minorities and immigrants. But, we must admit some people prefer to still show this behavior. It's their choice. No one requires them to do it, and yet the law of the land is one of non-discrimination.

Still, for numerous reasons, just as some health care was getting better, one of the major providers of health care benefits began slowly and insidiously to pull a switch on us. We might work for a corporation for benefits, but then they began charging us for the health benefit, too! At one point, many employers stated, "We don't want to be in the health insurance business. That's not our main mission and we are mission focused." The employers paid us, but then they told us to pay them back!

We also can not deny, that for all the money we might put into a child's health care, it can almost all be literally wasted if - one day on the streets of Chicago or literally any other city - that child's life is ended in a gang murder. What's the point of a vaccination for that victim?

And, there has been another recent trend that shows up in the data. For some reason, with the best health care in the nation in 2014, "Adult Obesity rates exceeded 35 percent in four states, 30 percent in 25 states and are above 20 percent in all states. The lowest rate was 20.2 percent in Colorado. [Behavioral Risk Factor Surveillance Survey, 2015]. While in 1985, no state had an adult obesity rate higher than 15 percent; in 1991, no state was over 20 percent; in 2000, no state was over 25 percent; and, in 2006, only Mississippi and West Virginia were above 31 percent."

So for all this health care, we were getting heavier and heavier, though the trend has leveled off to some degree and is declining in some cases.

And, we also now know that in the U.S. it is an objective fact that we are paying more for health care per person than in Canada or the U.K. at least.

Reasons To Change

Clearly, with a generally rising trend in life expectancy, from the perspective of a lay person, the only reason to change is to make things better. There are three reasons I can see why we might want to change the system.
  1. To reduce inefficiency, and therefore allow us to better afford health care
  2. To reduce the non-medical trauma to a patient dealing with the bills
  3. To further promote wellness in the population, in general, and in each person in particular
An Alternate 

Part 1 - Insurance

It would be hard to argue that separate insurance companies must introduce some inefficiencies by fact of sheer duplication, different billing codes, even just different addresses or phone numbers that patients or care-givers have to memorize, deal with, etc. let alone that there is an entire industry that makes a profit providing the insurance. Somehow that profit must come at the expense of the patient in their cost of insurance, cost of care provided, governmental rebate, or some other method. Where else would the profit come from? With single-payer, an industry (that has served us well in the past) would be wiped out.

The people in this industry would likely be greatly opposed to losing their jobs. But what if they were intentionally re-deployed into health care - to further reduce the cost of providing care. They don't have to be doctors. But what about nurses, therapists, home care givers, health educators, etc? They would actually do a function - and not just shuffle paper and answer irate patient calls as to why their benefits were denied.

This answer, or an answer like this, in some form goes a long way to addressing the first two reasons for change. What if a health care bill recognized this shift in industry? Folks, the leather tanning industry just isn't around to the same degree it was before. Industries change. Can we recognize that? Is that "excessive government interference" or is it "forward-thinking"? Does it have to be single-payer? No, but a massive streamlining must occur - for our sake.

No one really wants choice of insurance, per se - what they likely want is choice of doctor, and choice of quality, affordable care.

Part 2 - Wellness

Regarding the third reason, most people are not going to like this difficult discussion. Given that life expectancy has increased. The question now is what is our quality of life during those years. Clearly, for the child gunned down in a city, that child wishes his attacker had better mental health and did not use the gun in the first place.

(When I watch Congress and the President, I can only dream of what could be different if mental health levels were substantially improved. I do not say that jokingly.)

We must create a new mental health care system in the United States. We must do it together, and we must do it for a reason. Law enforcement can not stop a murderous act before it happens. Only mental health care can do that. Who needs mental health care? I contend everyone does! From the time a child is verbal and can enter school, there should be mental health check-ups just as certain as there is physical education or vaccinations. Think of the societal problems that might be alleviated if people were more rational and their emotions were more in control.

We need to further switch from spending money on insurance to mental health care. If a child needs physical support, he or she also needs mental and / or emotional support. How can we just assume, that everything going on in a child's heart or brain is serving that child well? How we monitor, and how we intervene is a great discussion this nation should have. But we need to get something done here, and we need to get it done quickly.

By substantially improving mental health, we may eventually be able to reduce the cost of incarceration, and law enforcement over a longer period of time.

Part 3 - We can all become Physician's Assistants

Physicians are talented, well-educated, and they deserve to be well compensated for that education and skill. But who says that doctors, nurses and the hospital staffs are the one's who are primarily responsible for our wellness?

Who said that a person in 8th grade should not be taught how to care for themselves? When I was in 8th grade, they sure taught me about the Jain Temple in Kuala Lumpur. But did they ever teach me the importance of, or ways to control, the insulin level in the temple that is my body? No. Both of these are facts. Which would be more valuable to me? I don't think the contest would even be close.

We must get much more and better information and practical experience with satisfying nutrition, stress reduction, avoiding the ravage of tobacco smoke, dealing with addiction as a disease, ways to limit alcohol consumption, and the need for exercise. And we must get it from the time we are young.

In this category if we are going to be the physician's little helpers, then since health workers are paid, we must find a way to incentivize healthy behavior. It would be our payment. We do it partially now - non-smokers enjoy lower insurance rates. But is there some non-insurance way to incentivize lower risk individuals? How can we find a way to actually reward and reinforce the better behavior so that it continues? We must find such a way, and discuss it, until we implement a program in which we decide WE are going to reduce health care costs, not necessarily by haggling for drug prices, but simply by being healthier.

I hope you understand what I am trying to say, here. I would be very interested in your thoughts and contributions.

Thanks for listening.
TraderJoe








Friday, March 24, 2017

Three Waves Down from the ATH

As best I can tell, there are - at this point in time - only three waves down from the all-time high at 2401. They are 2354.54, 2390.01, and today's low of 2335.74, as shown on this chart below.

SP500 - Hourly - Three Waves Down So Far

Wave ((C)) is slightly longer than Wave ((A)). Within wave ((A)), wave (5) is an expanding ending diagonal - which has a much better look and feel than the prior w-x-y count, and it does count properly.

Note that this count puts wave (3) of a third wave, which is only a ((C)) wave as shown above, on the low point of the Elliott Wave Oscillator. (So far, this wave in it's entirety does not follow The Eight Fold Path Methodology - but there was no expectation that it would have to). Since the wave does not yet follow the method, a bearish 1, 2, 3 from the high must only be an alternate at this time.

So far, the 2335 level is holding, but there is no firm evidence to conclude downward movement is over. Trading above wave (4) of ((C)) would go a long way to providing that evidence, as it would also again overlap the ((A)) wave down.

We showed in our last blog update how this could form a fourth wave, 4, and that option still remains open for a bull count. For a bear count, more waves would be needed with either a longer decline below 2330, and then an upward wave that does not overlap the ((A)) wave, OR, a few more waves that will make a diagonal in one of two fashions. But there is not good evidence for a bear count of this type, yet.

From the standpoint of the daily chart, below, price is for the first time touching the EMA-34, and so there is some rationale for that fourth wave here.

SP500 - Daily - Contact with EMA-34

But at this rare height in stock prices, the market will have to demonstrate whether there is or is not support at this level.

My opinion is neutral and remains flexible and patient.

Have a good weekend!
TraderJoe

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


Tuesday, March 21, 2017

Critical Juncture

In the live chat room over the last several weeks, I have been posting this chart of the Russell 2000.

Russell 2000 - 2 Daily - Completed Minor A, B, C

If you study this wave from an Elliott Wave perspective, you'll see that it is easy to count five non-overlapping waves up to the Minor A wave high in September 2016 with a good pattern of alternation to the waves. This is followed by a B wave to the election low, and, now a completed Minor C wave up to an Intermediate (1) wave at the high, as an ending contracting diagonal which has really excellent form.

This can be the first wave of an ending diagonal wave in the Russell as the Advance / Decline line now begins to diverge from the averages, and the Russell leads the way down.

And, there is now a similar potential in the Dow Jones Industrial Average as in the chart below.

Dow Jones Industrial Average - 2 Daily - Completed Minor A, B, C

This is one of the few ways that we can count the Dow, and still maintain a pattern of alternation in the C wave, up. This is the same chart as was published in my prior video - although we were looking for the end of the C wave, then. The Dow did make it over 21,039, and appears to be stopping short of that C = 1.618 x A wave.

It is already possible to conclude that minute ((v)) of Minor C is over. There is one possibility for a fourth wave in this area, but the problem is it is difficult to find a further pattern of alternation in minute ((v)). The only way this would be possible would be if minuet (iv) within minute ((v)) became a much longer triangle in time, but, we have already had a triangle for the minute ((iv)) wave. So, I have no confidence that will happen yet.

I will be patient for a few more points but is it should be apparent to even an untrained eye that the first risk could be down to a trend line drawn between waves 0 - B and ((ii)). Being patient does not mean I am looking for further upside. It means the market must now disprove the hypothesis that the Russell 2000 has made an ending contracting diagonal at the highs. It has the potential to travel back below it's B wave - which is the start of the diagonal.

From the standpoint of The Eight Fold Path, the high of the EWO on the SP500 2-hr chart was 30-1, and we said, as a fourth wave, the EWO should not travel below -12 which is where is it right now. This would seem to indicate that below prices of 2335, and / or lower, the The Eight Fold Path Method would indicate we are not following the guidelines for an impulsive wave, and it will have done it's job here too. So, one possible chance for a stick-save, but I certainly am not waiting with bated breath.

Have a good evening, and be careful.
TraderJoe