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

9 comments:

  1. Thanks Joe. From the April 22 weekend update are both scenarios still possible and we could still be in a 2 or 4 wave? Thanks

    ReplyDelete
    Replies
    1. Welcome, but no. Not a wave 2, lower. The DJIA did not make a new higher high required to call the up wave a 1 wave.

      Delete
  2. You mentioned If the march high capped minor wave 3, would the If mean minor wave 3 could potentially be continuing or would have capped at another time. Thanks.

    ReplyDelete
    Replies
    1. There is a "very small probability" of Minor wave 3 continuing in the indexes that made new highs (the Dow did not). In the S&P500, it would have to be forming a diagonal vth wave of 3. But, at the present time two factors argue against it. First, such a diagonal would not be adhering to it's potential trend lines well, and 2) the recent down candle in one of the largest - if not the largest - down candles on this daily chart. This would tend to indicate that correction is indeed underway.

      Delete
  3. Hindenburg Omen was triggered in the first week of May, not sure if it's still valid?

    ReplyDelete
    Replies
    1. Like most divergences, they work 'some' of the time, but not all of the time or even 'most' of the time.

      Delete
  4. TJ
    Do you ever get frustrated with EW?

    ReplyDelete
    Replies
    1. In case it is not recognized, you are seeing a truly historic give and take between people who think "the stock market can never go down" - as with all the retail participation in the market right now and historic lows in mutual fund cash levels - and those who track the ebbs and flows with wave theory. The former group includes people who just "want to buy Apple forever" driving the NQ to new highs, and who think the Fed is always their back-stop.

      You can feel it day-by-day and see it in the measurements - deep 62 - 78% retraces in both directions with some index like the DOW not able to make new highs when the S&P500 does, and with other Indexes like the Russell not following either of these two indexes.

      This is not a frustrating time. It is a time to stay aware of the true nature of the situation as things will likely resolve themselves, and, when they do, it may happen quite quickly.

      Delete
    2. I think we are in a major monthly bollinger band squeeze to the upside that will continue for several months. I have worked with these squeezes and they are very predictable. I stated this back in the end of 2016 when your EW indications were telling you the top was near. So far there is NO reason to believe this will give up anytime soon.
      I don't look at those that say "the stock market can never go down." That is silly. The bottom line is the EW short term counts have not been helpful. They have actually been fairly unpredictable. You may say it doesn't matter whether it continues to go up, but your readers are going to eventually be disappointed that they missed out on 400 points of SPX upside when you were telling them a top is near at 2100.
      FOMO (Fear of missing out) can be just as strong emotionally as being caught on the downside.
      I would quote your references from your past posts, but many have been erased.
      I think you are smart and I like how you have explained counts with statistics and rules. But, it's not working consistently. I don't understand why you wouldn't be frustrated with your system. BTW - My system failed me in November and many other websites and paid services have been terrible in guiding us through this move, so you are NOT alone.

      Delete