Thursday, March 9, 2017

Risk Increases

Happy Anniversary! A Fibonacci Eight Years to the Day. I remember a trader in one chat room telling me the bull market would never make it this long. Hard to argue 'yet' that it's over.

And please, calm down. Nothing happened  to the diagonal I counted yesterday. It is still here in one of two forms. But something very, very, significant did happen today and that leaves the market potentially vulnerable to a larger set back. First, let's look at the SP500 2-Hr Chart. The best we can tell is that our diagonal stayed in tact, but two extra waves were added on to it. So, now we have a w-x-y wave downward.

SP500 2-Hour Chart

We think this was the result of two things. First and foremost, we think that people were "bailing out" in front of the employment report tomorrow. And, so that caused part of the downward movement. But more importantly, during the live chat room, we noted that the Russell 2000 (symbol $IUX) fell out of a larger diagonal downward. Here is the chart of the Russell posted today.

Russell 2000 - 2 Day Chart

That means the Russell could have easily completed Minor A, Minor B and Minor C, upward, with a Fibonacci ratio of C = 0.786 x A; and short of it's top line trend target. It is very likely that when the so-called "Smart Money" saw that one, it caused them to take a giant step backward. This is just not the way an impulse wave trades.

As a result of noticing this, we "sat back and let the market do the work" of counting today, and we arrived at the close with this alternate for the S&P500 15-minute chart.

SP500 15-Minute ALTERNATE : Running Flat

So, in this case, we still have the diagonal. But it is a Leading Diagonal and not an ending diagonal, counted only slightly differently internally. Notice the measurement we took at the end of the day. The downward wave is 1.618 times the (a) wave upward. That means the market is potentially also vulnerable to a sell-off from the employment report. The market is leaving it's options open!

We could still be in a fourth wave, as per the SP500 2-Hr chart. But, if we have one of those days where the market tanks 20 or 30 points on an employment report - without taking out that (a) wave first - then it would be explained by the potential running flat. (By the way, yes, the diagonal could be minute ((a)) as well as minute ((i)), and minute ((ii)) could equally well be minute ((b)) of a much larger structure).

If the current (a) wave is exceeded higher, the "running flat" alternate likely gets tossed because then it wouldn't be "running". But I was very surprised at the close to see that the market left that option open. Certainly, if the (b) wave lower is exceeded, something is likely going on (which is likely not a triple zigzag because the x waves would be grossly out of proportion) and which may be a third wave or a "C" wave of some type.

If upward gaps start getting filled instead, then the downward move is likely just the double zigzag, and the upward wave may be part of a new "B" wave up, or the fifth and final wave up in the SP500. It's very hard to see now how the Russell would do that. The reason the "running flat" is the alternate is that it would be a very short wave in time compared to the length of the first wave. That gives it less odds of occurring. On the other side of the ledger, the EWO in the original count is coming within a hair's breadth of that -12 level (at -10.2) which is the lowest guideline for the fourth wave in this case.

If it were me, I would try to tune in to the employment report tomorrow and see how things are going. Hopefully, the original count stays in tact.

Meanwhile, have a very good night's rest. Because, regardless, we remain patient and flexible.


  1. TJ, with the futes ramping before NFP which is unusual, you can eliminate alt count

  2. Joe, from your experience, is it common to have the x and y waves of the w-x-y to be so out of proportion to the w wave?

    1. No, not too common. But, it is what it is for two reasons: i) the extreme overlaps in the diagonal force it to be counted that way, and ii), we can not find a good fourth wave just prior to the bottom.

  3. Hi I think the IV is finished
    We start the V now