Wednesday, June 21, 2017

Overlap and Gap Fills

Over the last several days, I have been "neutral" and just counting waves. Today, a good example of why, opened with a tiny gap up that was quickly filled when the API petroleum report came out and Crude Oil sank again. After the opening gap filled, the downward waves were sufficient to fill the gaps shown with the black circles in the chart below. Crude Oil got as low at $42.05 before ticking up towards the end of the day.

SP500 2-Hr Chart Potential Diagonal

We had warned to start being on the look out for the gap fills. Today's downward wave slightly extended the length of wave ((iv)) of the diagonal, and clearly overlapped the prior wave (a) wave up, just like we indicated the futures had the previous day.

So, today, we slightly modified the trend line up from the lows, and it now intersects wave ((ii)) and wave ((iv)) very well. Wave ((iv)) played with this trend line all day, falsely breaking it lower, then recapturing it by the close.

If the diagonal is to complete properly, then we should see three clear waves up as (a), (b), (c)  to make wave ((v)) of C - possibly where (b) is a triangle. Since wave ((iv)) has a slight throw-under of the trend line, this often gives the fifth wave a sufficient sling-shot action to slightly get it over the upper trend line. But, again, we want to emphasize, that since this is overall a very flaky (b) wave, it is not even necessary to make a higher high. The fifth wave of an ending diagonal is allowed to fail. Just keep in mind it is 'more usual' for there to be a throw-over of the upper trend line on somewhat increased volume.

By way of invalidation, we have still indicated the prior B wave as that location. However, wave ((iv)), down, may not go below 2425 and maintain the contracting diagonal shape, and that is because wave ((iv)) would become longer than wave ((ii)) - which is not allowed, by rule, in a contracting diagonal. So, technically that is new invalidation for a diagonal pattern.

If a diagonal should not complete with good form, we would then have to suggest the pattern ended at the location shown as ((iii)) with a slightly modified count. We remain open and flexible at this point in time.

And we hope you have a good start to your evening.

Tuesday, June 20, 2017

Downward Wave Began - And More

Per the S&P500 Cash Chart below, and yesterday's blog post, we were expecting a fourth wave down ((iv)) today. We got that, and a tad more. Here is the S&P500 Index 2-Hr cash chart with the triangle count. The same one we showed yesterday.

SP500 2-Hr Chart : Triangle Count

By a hair's whisker wave ((iv)) down today did not overlap wave ((i)) down in the cash market within this C wave upward. So, this count is still valid, and with some heavy lifting tomorrow, it is possible to complete a wave ((v)), upward either as a higher high, or as a truncated top.

But, the same is not true in the ES E-Mini S&P futures. Today, a wave ((iv)) did overlap a wave ((i)) up. So, whether we want to or not, that forces us to ask what might be going on. You'll notice that all along, we've been showing in bold brown letters Triangle / Diagonal Invalidation on the chart.

So, given that the futures have downward overlap in the last wave, already, while the cash does not, and given that we have two marginal higher highs, we must also consider our diagonal variety count of a top. It would look like this.

SP500 Cash 2-Hr Chart : Diagonal Alternate

Such a diagonal would really put a lid on things, and is a completely acceptable way to the end the (b) wave up. And we want to indicate, there was enough damage done to the market internals today that wave ((v)) in such a diagonal could easily truncate. But, as usual it does not have to.

This is once again a time for patience and flexibility, not ego or emotion. Let's let the market suggest what it is doing in the short term here. It seems to us that either way, the pattern is about to become very clear.

By, the way, within the triangle count, there is no way that a ((v)) = ((i)) wave will now get prices over the top. It would take a ((v)) = 0.618 x net of [((i)) through ((iii))].

In any event, we can see two sides to this same coin. Again, we are not bullish here - just neutral and counting waves until the situation clears.

I hope you have a good start to your evening.

Monday, June 19, 2017

Thrust From Triangle

Based on the intraday counting I did in the live chat room today, today looks like the very typical thrust from a triangle.

SP500 2-Hr Chart : Thrust from Triangle

That was anticipated, and, today, I also added some of the more significant gaps (in red circles) that could fill should there be a turn-around. The count at the present time allows for a wave four ((iv)) and then a wave ((v)) higher. That would finish this (b) wave up in the S&P500 with a structure - a triangle - which is common before the last wave in a sequence. And, while wave ((v)) of C can certainly make a higher high, it does not have to. It could truncate.

Although today was a nice pop higher, I remain completely neutral and am primarily "counting waves" until a top is in. Folks, I know some people are already counting the end of the bull market. And while I do expect a significant correction shortly, what did we just have? We had a "running triangle", didn't we? With a higher ((b)) wave, right? The problem for the outright bears is that a "running triangle" usually points to higher prices overall in the market. And, given the recent highs in the advance-decline line, it is more likely pointing to the overall diagonal scenario we suggested in the YouTube video: there is higher to go, but it will be a fight for marginal highs.

Today, the ES touched the upper Bollinger Band, but on a divergence from the slow stochastic. It is possible that tomorrow will exceed the band higher, and lead to a "turn-around Tuesday".

Daily ES E-Mini S&P500 Futures Touch Upper Bollinger Band

No one can say for sure, but it certainly a good possibility given the count as we show it.

Have nice night!

Saturday, June 17, 2017

The U.S. Dollar Index

I wanted to take a few moments to review the Elliott Wave count on the U.S. Dollar Index, and, using The Eight Fold Path methodology show you where there may be a 'trap' that others may not suspect. First, I want to show you what 'timing' says might not be a correct count. What Elliottician shows you incorrect counts?!! Then, we'll review with you the why's and wherefore's.

Monthly U.S. Dollar Index Futures

Yes, like many Elliott analysts you will note that prices are in a channel, and the latest large upward wave numbered 1 - through - 5 has stopped precisely at the 1.618 Fibonacci level. But, if your Elliott analyst has labeled the U.S. Dollar Index in this way, there are a few things they may be missing.

First, notice that there are only 110 candles in this entire up wave. Next, notice that the Elliott Wave Oscillator is not yet even within +10% of the zero line - where it might be for a fourth wave. It's getting there, but it is not there yet. Now notice that the movement from 5, at the top, is still quite choppy. If wave 5 were the Intermediate (C) wave of an up movement that is now completed, shouldn't dollar prices be absolutely crashing quickly? But, in the choppiness, they haven't even gotten below minor 4, yet, in the span of several months.

Now here is a first critical point. Do you notice that wave 2 is a FLAT wave, with a higher ((b)) wave, and, as shown, this wave, wave 4 would also be a FLAT, because the first wave down is a three-wave sequence, and then there is at least a 90% retrace on the downward wave. There is no alternation in this impulse wave, as this wave is constructed.

Then, here is a second critical point. How long in time is wave 4 compared to wave 2? Why, it is shorter isn't it? Is that the usual situation in Elliott Wave work? No, usually, most-often, wave 4's are longer in time than their wave 2's. One of the biggest errors many beginning wave analysts make is not giving their wave four's enough time to complete.


So, we don't know for sure, but what if wave 4 is just taking more time. Since, there hasn't been a complete crash of  the U.S. Dollar, yet, could the pundits calling for that crash be incorrect? Here is a chart, with wave 1 they way we called it for you on YouTube, as a leading contracting diagonal, and this makes even a longer wave 2, in time! Yikes!

Monthly U.S. Dollar Index with Better Alternation in the Impulse

At this point, a running triangle is the only way I could see to provide alternation for the flat second wave. A triangle in wave 4 always provides alternation for any wave 2 structure (and that's why wave 2 can never be a triangle in it's entirety). And, a triangle is the only way I can see to make wave 4 longer in time than wave 2. This might also provide the opportunity for the Elliott Wave Oscillator to bob and weave around the zero line a bit.

Of course, the larger significance of this is, if wave 5 is effectively able to break the 1.618 Fib ratio, then a full-on upward impulse in the Dollar might be possible. People opposed to this line of logic can have a point. There could just be from 2008, an (A), (B), (C) upward wave in which the (C) wave doesn't follow The Eight Fold Path Methodology - because, well, it is part of a corrective wave, and not part of an impulse wave.

To that line of thinking I would just add one item, although there are ways in the first chart to force a five count up for wave 5 - it does have a very "three-wave" look to it, and might still be part of a triangle. In any event, there still has been no downward overlap on the upward wave in 2009, and so we must be patient until the situation clarifies a bit. And clearly, this being a monthly chart, it could indeed take months.

But, along the same line, if the dollar bears don't quickly begin to see the downside they are expecting, they might just like to consider the line of reasoning above. Clearly, the Dollar had the ability to make big impulsive bars upward in 2008. Why not (so far) impulse downward in 2017?

And, we too, will also consider that any downward overlap for the U.S. Dollar Index on the 2009 levels would likely spell the end of the dollar boom.

Have a good weekend.

Friday, June 16, 2017

No Change to Short Term

The S&P500 Index 2-Hr Chart below is unchanged from that we showed you yesterday. There is still a potential of a triangle to help finish the upward wave in this index. Remember: if a triangle forms it often precedes the last wave in a sequence.

SP500 Cash 2-Hr Chart Potential Triangle already Validated

In very slow and quiet trading, the S&P 500 Index closed up by 0.69 at the end of the day, and the Dow was up +24.38, almost to a new all-time high. It is possible to count the waves since ((e)) and B as a 1, up, 2, down. But, we simply will not be able to substantiate that until there is a higher high wave -- we don't quite have that yet. And neither has Thursday's gap filled either. Still, the now slower trading may be indicative of a triangle.

The ES daily futures again closed above their 18-day SMA, and still have a positive bias, although the daily slow stochastic again closed under the 80 mark. So, something is going on, and it may be a sign of internal weakness. The invalidation level remain the same.

The Dow still remains well within the parameters of an expanding ending diagonal, and, as we noted the fifth waves can get quite aggressive - hence the near new all-time-highs again today.

GOLD has closed for the second day now under the parallel trend channel, we showed in a previous post (LINK) and has two full daily candles sticks underneath that channel, with gaps on the way down. It may be more clearly defining the C wave down.

Well, that's enough for today. Have a good start to the weekend!

Thursday, June 15, 2017

GAP down then higher

The Dow and the S&P500 both gapped down strongly at the open, and then ground higher for the remainder of the day. Because of the level where the gap stopped, from a measurement perspective yesterday's potential ending diagonal for the S&P500 did not invalidate. That count is still on the table as a way to gracefully count the end of the (b) wave higher in that index.

But, also because of exactly where that measurement stopped, we were also able to validate that another alternate for the S&P500 Index is now this triangle - also shown on the SP500 2 Hr Chart which was also published in the live chat room.

SP500 2 Hr Chart - B Wave Triangle Alternate

Because the ((e)) wave down overlapped the A wave, the potential triangle has the right requirements to follow the rules for a running triangle. And, at the end of the day, price just barely latched back on to the lower channel boundary. Interesting, is it not?

Today's down gap was not filled, yet, on either the Dow or the S&P. If it is, it would lend more weight to a potential triangle, but, still the potential triangle must prove itself by getting up over the ((d)) wave - and that still leaves open the possibility of yesterday's contracting diagonal, as well. Just tilt the upper green dotted trend line higher instead of lower.

We don't know if a slight higher high will be made. We can just see the potential for how it could, in two different ways. We can also see the possibility of a truncation, where shown, but not the reality of it yet. The blue B wave would be where the green ((c)) wave is now in that case.

In terms of invalidation, any movement below wave ((a)) would invalidate both the triangle and diagonal possibilities. The third and last possibility would be that if the ((a)) wave is violated that somehow the blue B wave would become a flat wave to extend the correction on A in time. But, there is no evidence for that, yet. So, it is only worth noting at the present time.

Because of making the C = 1.618 x A Fibonacci ratio as we pointed out yesterday, I am not bullish. Right now I am neutral and just counting waves to see if this overall (b) wave, up, can come to a nice clean end. Maybe yes. Maybe no.

And since there is the potential of a triangle or a diagonal involved, and thus far, has been little follow through except from the NQ's (see daily chart below), the market must set the tone. Not me. I just try to count what I see according to the rules and guidelines as I understand them.

Daily NQ (NASDAQ 100) September Futures

Today, the NQ's hit the lower Bollinger Band, and then rebounded off it quite strongly. This tends to emphasize one of Ira Epstein's key guidelines for trading, that "one does not sell new against a lower Bollinger Band, because that is where the Smart Money is likely taking some profits on their short positions". And that is because the probability of being outside the bands on any one day - on the down side in this case - is only about 5% of the time. I only am again paraphrasing Ira's guidelines as I do not offer trading or investment advice.

The NQ price is still below the 18-day SMA so the bias is still down. That is not the case with the ES, so there is a bit of a mixed picture still at this juncture.

Bottom line is: (b), up, is done, or has just a bit farther to go. Have a nice evening.

Wednesday, June 14, 2017

DOW New High - 2

Today, being FED day, the powers that be raised interest rates again, and began to tell us detailed plans for balance sheet run-off - all dependent on incoming economic data, of course. The Dow Jones Industrial Average made two new higher highs today and closed at 21,374. Where have you heard that number before? Well, it's the projection of C = 1.618 x A that appears in my February 26, 2017 YouTube video on a plausible Dow count that incorporates the fact that the NYSE advance / decline line was recently still at an all-time high. See the second chart below for an update.

Yesterday, we showed you a potential ending expanding diagonal on the Dow. The measurements there have already provided that an ending pattern is possible: the dreaded megaphone measures precisely in every detail following the standard rules and guidelines of Elliott Wave. Yesterday, we stated during live chat, "watch out here because these can get quite aggressive to the upside". And what do we have today? Higher highs on the Dow.

And, how about that S&P500 cash index? Whoops. The devil you say? No higher high today? Well, we showed you a possible ending pattern on the S&P500 2-hr chart, yesterday, and it appears to be getting better defined today. Here is the chart updated from yesterday.

SP500 2-Hr Chart : Potential Contracting Diagonal

Yes, price is still in the channel, but it is trading in the lower half of the channel. That is a signal that prices have currently lost some momentum, and a diagonal may be forming in this index.

Because the exact Fibonacci level has been hit today, it is important to show you the continuing count on the longer term Dow to this point in time, using the two-day chart.

DJIA 2-Day Chart with C = 1.618 x A

I know a lot of people are getting hyper about the length of the (b) wave in the S&P500 Index. One has to remember that index has a lot of representation from the once high-flying NASDAQ 100 stocks. (I say once because today the NQ could not even trade above it's 18-day SMA). Yet, the (b) wave absolutely does not look out of proportion on the Dow.

I reserve the right to say two things. First, the (b) wave up may not be over yet. We know that because there is nothing that says the Dow has already completed it's expanding diagonal. And there is nothing to say the S&P500 Index has completed a diagonal at all.

But, wherever this upward wave ends, I also reserve the right to say that Minor C of Intermediate (1) has ended here (as an alternate) in a wave that simply did not follow The Eight Fold Path Method upward. This would be exactly the same count as in the weekend video on YouTube.

But, it would be best if minute wave ((iv)), circle-iv, ended back on the lower channel line, in the area of prior minuet wave (iv) in terms of following The Eight Fold Path Method. So we will allow for that - especially since the waves would have a better look.

From the perspective of The Eight Fold Path, we have wave (iii) of minute ((iii)) on the peak of the Elliott Wave Oscillator, and wave (v) of minute ((iii)) on a divergence. We also have minuet wave (a) down on a wave in which the EWO goes below the zero line, and this would place wave minuet (b), up, on a divergence.

We'll see how this goes, and whether the Dow wishes to attain the lower channel line. Regardless, now is the time to remain alert and flexible. It is certainly possible that a gap up could help make the blue C wave shown on the S&P500 chart, and help make wave (3) have that higher high needed for a diagonal. Please note the labels on the S&P chart are for ease of illustration only. The Dow chart has the correct degree labels.

Have a good evening.

Tuesday, June 13, 2017

DOW new High

In the Friday, June 9, post we wrote, "Therefore, it is likely that the top is in for the Dow, too, but, as good Elliott analysts, we must allow that if the Dow want to clean up the count a bit, it could make another marginal new high - as an alternate - and form a nicer looking expanding diagonal wave upward from the wave 4 indicated. It could do this but certainly doesn't have to, and this option is not available in the S&P500."

The Dow carried on to fulfill that new high today. Below is the chart of the Dow, as we posted it in the live chat room earlier today.

DJIA 15-Minute When Wave ((v)) became longer than wave ((iii)

Following all the rules and guidelines, the market seemed intent on completing the Expanding Diagonal.  It certainly looks better. We now have wave ((v)) longer than wave ((iii)), wave ((iii)) longer than wave ((i)) and wave ((iv)) longer than wave ((ii); with wave ((iv)) overlapping wave ((i)), but not traveling below the low of wave ((ii)). They can all be counted as three wave zigzags, and from a timing standpoint, wave ((iv)) is longer in time than wave ((ii)).

This is often a very serious pattern. It certainly increases the "risk" in the market because one can not simply assume the diagonal is an ending one until the low at wave 0 is exceeded lower. Further, there is no way to be certain that wave ((v)) is not actually a longer wave ((iii)), with the current wave ((iii)) just (a) of wave ((iii)) because of the steepness of it's rise and the short length of time of the wave.

If wave ((v)) is being made, it is wave 5 of C of the overall (b) wave we have shown for weeks now. Price is only slightly past that point.

On Friday, we said we had also ruled out and expanding diagonal for the S&P500 because it's wave had traveled below the invalidation point (same as the '0' level on the above chart'). But, in real time, we just wondered, if the S&P doesn't truncate, what else could it do to make a completed wave pattern?

The chart we developed this morning shows that possibility. It would be a contracting diagonal, not an expanding one.

SP500 2 Hr Chart - Contracting Diagonal Possibility

In this case, the S&P500 must make at least one more new high. At least wave (3) must close above wave (1). Wave (5) can sometimes truncate, but it is more usual for it to make a higher high, too. The above chart was done well before the close. The S&P500 did travel somewhat higher by the close. It too would still end the (b) wave we have been looking for - perhaps on the FED announcement or shortly thereafter. And, this is reasonable because the S&P500 has not even made a higher new all time high over wave (1), yet.

For those of you who may have been counting on the (b) wave at the location we showed over the weekend, this is precisely one of the reasons why Ira Epstein teaches there is no shorting unless price closes below the 18-day SMA (see my paraphrase of Ira Epstein's guidelines for trading located at this LINK.)

And, while the slow stochastic on the ES daily futures did break the 80 level, lower, Friday, it re-gained it today, although even the first loss of it is somewhat of a sign of weakness. Regardless, the FED meeting is tomorrow, so we simply have to observe the results while we continue to count - always following the rules and guidelines. You can see when we do that, we can make statements in the live chat room like we did today: "In order for there to be an expanding diagonal, wave ((v)) should become longer than wave ((iii))" ... and, when it did, we were able to validate the potential expanding diagonal - also known as the dreaded megaphone pattern.

The good news is it was clear from the weekend post, we were initially expecting up movement today. We got what we expected, and more.

We don't make the market, we can't force the market to do anything. We can only count, trying to follow the rules and guidelines as closely as we can.

Have a good evening.

Monday, June 12, 2017

Gap Down, then Almost Gap Fill

The S&P500 gapped down at the open today, and traded lower to 2420. Unlike the NQ futures, which made a new daily low, neither the ES futures, nor the Dow cash, nor the S&P500 cash made a lower daily low today. Instead they went into a very choppy sideways movement until 1 PM ET, then drifted higher, and almost filled the opening gap at the close, but just didn't have the gas to do it. The S&P500 closed down -2.38, and futures volume picked up quite a bit as contracts began to roll over from June to the September contract.

It is possible the S&P500 is trying to extend a bear-flag correction, as in the chart below, with a double zigzag count.

SP500 5-Minute Bear Flat Extending

You'll note the down wave on Friday took 42 bars, and from a time perspective, we did not even reach 42 bars until mid-day today. So, if the correction finishes properly, it would make an outstanding wave for a second wave, because corrective waves should be longer in time than their impulses. Whether that wave will be 2, or B is undetermined at this time. We don't know if an impulse or a diagonal lower is forming just yet. Regardless, the point change was rather minimal.

We sort of anticipated that (being Monday), and so over the weekend, we prepared this monthly count on the London FTSE-100. We will present that now, and hope you enjoy it.

FTSE 100 Monthly

Because of the following three factors, if the London FTSE is also in Primary 5, it looks and counts much more like a diagonal than the US Indexes do (at this time). We have counted it this way for three critical reasons. They are below.

  1. Overlaps
  2. Length of wave (2), depth of Elliott Wave Oscillator (AO) at the point of wave (2) is deepest
  3. The Elliott Wave Oscillator currently diverges at the highs
Again, we are just trying to use objective criteria to reduce guessing in the count. We hope you approve.

Thanks and have a good evening.

Saturday, June 10, 2017

Same Conclusion

When one looks across the markets and not just at the Dow, we see it is possible to reach the same conclusion among many of them, now. We know that the NQ futures had been rocketing higher and made an all time high on Friday before reversing. But, as the chart below shows, similar conclusions are possible for the SP500, the DOW and the Russell 2000 - all on the same day.

Major Markets Synchronize Their Highest Prices Ever

What was nice to see was the Russell 2000 also make that highest high because it, too, now qualifies for the (b) wave of an expanded flat fourth wave. It had previously make three waves down in May, and now does not show an impulse up because of the overlapping middle wave.

GOLD as well may be in an interesting position. We had called the Leading Diagonal A wave perfectly in real time on 4-hour charts. The Daily chart is below.

Daily GOLD (GC) - Having Trouble Holding a Channel

Next, we noted at wave (a), the upward move was having trouble peaking above the channel as a third wave should, and, in fact, prices broke below the lower channel boundary at (b), and then tried to "ride" the lower channel boundary upward, and did so, for nearly a month. But, with the new higher high earlier this month, there was no overt sign of strength. Each of the higher highs, in April and June diverged from the Elliott Wave Oscillator (EWO).

And now, after a marginal higher high, price finds itself back to close on the lower channel boundary. We also note at no point in time has price reached a level where a C wave would even equal and A wave in length. See the Fibonacci Ruler to see where the 100% mark is.

Further we note the first down move from Feb '17 to Mar '17 was shorter in time than the A wave. Further, the second down move from Apr '17 to May '17 was not only shorter in time than the A wave, it was shorter in time than the wave we have labeled as the (a) wave up. But this down move is also longer in price than the first down move - ruling out an overall diagonal pattern at this point in the analysis. It is also telling that there is no apparent alternation in these down moves, which should tell the alert analyst, we are not dealing with an overall impulse wave up.

So for ease of example, let's say - and we're not locked in on label degrees yet - we had minor A, up, as the Leading Diagonal in Mar '17. Then we could have had three waves down to minute ((a)) down, i.e. circle-a, down in Mar '17. Then, we could have had three clean waves up to minute ((b)), circle-b, up, in Jun '17, which would now also qualify for a flat wave sequence. The upward move from Mar '17 does have a very obvious three-wave look to it now.

If prices break below the channel and print full candles below the channel, then it could form a minute ((c)) wave lower to make an over all minor B wave, lower. Now, this B wave would be longer in time than the minor A wave, and prepare for the C wave up. If a Minor B wave lower successfully occurs, then we would redraw the channel accordingly.

Why, you might ask, would GOLD prices and equity prices both decline at the same time? Well, there are certain circumstances where forced liquidations in equities cause people to sell some of their gold in order to fund their equity account. It happens. We'll see if that occurs this time, too.

I hope this helps and I hope you have a nice weekend.

Friday, June 9, 2017

End - Fibonacci - 5

In one sense the market did exactly what we expected today. The Dow went exactly to that 0.618 x net (1 through 3) level we have been showing you in previous posts. During live chat, I commented, "that I would be remiss if I didn't tell you that there are five closes at that 0.618 level, and the market knows it is there.". I even placed a tentative top at that level, which when the S&P 500 Index fell through it's invalidation level (that we also clearly showed you), meant, it was, in fact, most likely the top.

Here is the Dow's chart at the close of trading today. Everyone is going to hear stories now about the supposed flash crash on the FANG stocks. Gee, why did that happen exactly at the Dow level we've been pointing out for days? And, while just barely maintaining the divergence with the Elliott Wave Oscillator on the chart, below?

DJIA 15-Minute Chart with wave 5 at 0.618 times net (1 through 3)

Secondarily, the DOW also did something we were expecting, and that is a likely truncation at the top. But, the overnight futures did something on the British elections we were not sure how to interpret, so we started off the day, with questions about the diagonal count. At this point in time, a diagonal count has been ruled out for the S&P500 Index, because, today the S&P had an outside key reversal day down in the cash index and in the daily ES futures, as did the NQ futures. But, again, the cash S&P crossed below the wave 4, low.

Therefore, it is likely that the top is in for the Dow, too, but, as good Elliott analysts, we must allow that if the Dow want to clean up the count a bit, it could make another marginal new high - as an alternate - and form a nicer looking expanding diagonal wave upward from the wave 4 indicated. It could do this but certainly doesn't have to, and this option is not available in the S&P500. No, it is somewhat more likely the Dow has a diagonal down, and may only make a "deep retrace" of that diagonal before continuing lower. But, again, we'll be flexible as things clear up.

Further, with this fifth wave wrapped up or nearly wrapped up, we again indicate this is likely a (b) wave upward in the Dow, and a strong (c) wave down should follow. If you think we're kidding, here is what the NQ futures did by the close of trading today. Notice, that the slow stochastic has become un-embedded, and price is now trading below the 18-day SMA.

NQ Daily Futures at the Close - And Cross of Slow Stochastic Lower

 Well, that's it for today. Have a good start to the weekend.

Thursday, June 8, 2017

Continuation - 4

No changes to the current count. During the trading day, the Dow Jones Industrial Average made a new all time high as James Comey, former FBI Director was testifying. The new high was promptly sold off. The S&P500 Index did not make a new high. First, let's deal with the DOW. Here is the hourly Dow (YM) futures chart we've been showing you.

Hourly DJIA (YM) Futures with Higher High In Wave 5

In order to get to 0.618 times the net distance traveled in waves 1-through-3, the Dow should have gotten to 21,288. It did not, and it fell short. Therefore, it is possible there is more to go. The above sequence of waves from wave 4 has a very definite "three-wave" look to it. So, we suspect there is a diagonal forming - most likely a contracting ending diagonal. You will note that I referred to that possibility of a diagonal even yesterday - before it started to form!

Now let's look at the SP500 5-minute cash chart. Here is how this diagonal might be labeled at this time from the same wave labeled 4 in the Dow chart, above.

SP500 5-Minute Chart : Potential Contracting Diagonal

Usually wave ((i)) of a diagonal makes it over the prior high of wave 3 to show it's motive character. It did in the Dow. It did not in the S&P500 (so there is just a split verdict there, and that is not a rule but a guideline as I understand it). Next, wave (ii) downward made a very nice 78.6% retrace - which is characteristic of many diagonals.

So, that leaves us with the idea that wave (iii) must make a higher high than wave (i) in order to continue an ending contracting diagonal upward. This is the most likely case, as we are getting daily Doji candles here. The market narrowly avoided an outside key reversal-day down today.

As the Dow chart, above, shows, any movement below the prior wave 4 would invalidate an upward diagonal. If that should happen, consider an expanding diagonal downward from the point labeled as ((i)). Again, we think that is less likely.

It could be the market is trying to "walk us over" to the date of the Fed meeting, which is on June 14th. Hard to say. In any case, the daily ES price is still above the 18-day SMA, and the daily slow stochastic is still fully embedded above the 80 level. See my paraphrase of Ira Epstein's guidelines for trading at this LINK if unfamiliar with what that means, as I do not provide trading or investment advice.

By contrast, the slow stochastic on the US Dollar Index (DX) lost it's embedded status under 20 as of the close of trading today.

That's about it for now.
Have a good night.

Wednesday, June 7, 2017

Continuation - 3

The major change to the Dow chart below is the time frame, from the previous 10-minute bars to bars which are each 15 minutes. This was to allow 120 - 160 candles on the chart, per The Eight Fold Path Method. The overall count is not changed. Wave 4 occurred at 140 candles.

Price did indeed gap up today, at the open, surpassed the 21,185 level noted yesterday, then did a turn around to make new lows, extending the fourth wave, as we had noted clearly via the alternate count in blue, yesterday. This was the scenario where yesterday's up wave was only an ((x)) wave. The next ((z)) wave, lower, occurred in a clear three-wave sequence, with an ending (b) wave triangle stuck in the middle.

It is interesting that - at no time - did the DJIA close below the 31.8% retracement level. Notice, too, how the count of the extended fifth wave of 3 resulted in the retrace attaining the level of between the prior wave ((iv)), and the wave (ii) of the extension. That is, in part, some of the benefit of true Elliott Wave work. While some web-sites were projecting a "third-of-a-third", we said we'd prefer not to buy at the highest levels in history and to wait for a pull back. Well, such a pull back did indeed occur.

DJIA 15-minute Wave 4 Added a Wave But DJIA Did Not Close below 31.8% Retrace Level

So, the downward count to wave 4, is ((w))-((x))-((y))-((x))-((z)), either a triple zigzag or triple combination, but in any case triples are always terminal in Elliott Wave work. It should be noted that wave ((z)) ended on a nice divergence with the Elliott Wave Oscillator (EWO) when compared to the prior wave ((y)).

This same divergence, but using RSI(5), was also pointed out in the real time chat room on the hourly Dow futures, a copy of the chart posted, is also shown below.

DJIA (YM) Hourly Futures with Divergence on RSI(5) at the Low

Towards the end of the day (refer to the first chart, above), the Dow broke the ((x)) wave high, and is now likely in sub-wave ((i)) & ((ii)) of wave 5, up. That would be simplest. But, since a fifth wave is likely and wave 1 was not a diagonal, then wave 5 could be, but does not have to be. Therefore the ((A)), ((B)) in red on the first chart is for the case where the fifth wave becomes a diagonal.

One should note higher highs are possible (particularly with the ECB meeting tomorrow morning), and that would be very clean. So we hope that happens, but not from a monetary standpoint, only from a clean wave-counting point of view. If things get muddy, it might be because of the Comey testimony which will follow, and for that reason - and just the reason that we are likely in a (b) wave up - we are also prepared for a truncation.

Since we have cleared the ((x)) wave, and wave ((i)) of 5 at this level equals wave 1, up, this, in fact, could be the truncated wave. We think that is quite a bit less likely. But, it is possible. The next level to look for would be anywhere over the high, and up to 21,288 - which is 0.618 x net (1 though 3).

Stay patient and flexible. Things are proceeding well, so far.
Have a good evening.

Tuesday, June 6, 2017

Continuation - 2

All I have done with the Dow's 10-minute chart below is use MotiveWave instead, so that each wave label shows up crisply.

DJIA 10-Minute Chart - Likely Wave 4

The market opened with a gap down this morning, and immediately hit the 38.2% Fibonacci retracement level - as we have been projecting for a couple of days. After the initial decline, the market rose and almost closed it's opening gap, but did not. The S&P500 did eventually close it's opening gap. The Dow did not.

However, the rise was steep enough as to be out of proportion as a fourth wave with it's companion second wave from yesterday's initial decline. Therefore, in real time we relabeled the entire larger fourth wave decline, 4, as a w-x-y wave (all three wave sequences in the decline).

The first rise to 10 am could be labeled as (i) or part of an (x) wave. The Dow must gap up over 21,185 to start a third wave. If it does not, and makes a lower low, the down count could be continuing as the triple zigzag option shown in blue.

Have a good night.

Supplemental: Russell 2000 Count

Russell 2000 Current Elliott Wave Count

Monday, June 5, 2017


This is a continuation of the same 10-Minute chart of the Dow Jones Industrial Average we showed you on Friday (second chart down), using the Eight-Fold Path Method to count an impulse wave.

DJIA 10-Minute Chart Continuation of The Eight Fold Path Method

The market opened lower today, almost hit the 23.6% retrace level, then rebounded higher and stopped just short of the wave 3 high - twice! Therefore, we appear to have the the three waves down to an a:3 wave (of a flat or triangle), followed by a very nice looking three-waves up to the b:3 wave of the very same flat or triangle. Towards the close, price broke below the .b, down, wave of the b:3 wave.

Some key points to note are: 1) if this is wave 4, it is now longer in time than wave 2, and is growing more complex by the day. That would be very good alternation, and the time relationship would be typical of many Elliott Wave impulse waves. 2) The downward price retracement still has not hit either the 23.6% or 38.2% retrace level. It could do that, but, while likely, is not a requirement if a triangle forms from here. 3) Notice that price in wave 4 has finally attacked the lower channel line as per the method, and today, price is weaving around the blue EMA-34, very much in fourth wave fashion. This indicates good form & balance to this point, because every black numbered wave is on an opposite side of the EMA-34. 4) The Elliott Wave Oscillator is still within it's wave four limits of +10% to -40% of the peak reading in wave 3.

This chart simply suggests that after wave 4 wraps up, there should be one more higher wave set - provided it does not truncate. Let's hope we don't get a truncation so we have a clean spot to count from.

On this chart, invalidation would be any downward wave that overlaps wave 1. But, note that blue .ii is at the 38.2% retrace level, and black iv is at the 50% retrace level of wave 3. In practice, the latter should be used as a wave counting maximum for downward travel, without a new high, first. And, recall it certainly appears like the fifth wave of wave 3 is the extended wave in that sequence. That most likely means a triangle should not form here, because the retrace levels of the extension would likely come into play.

When we showed you the longer term chart on Saturday, we are trying to do nothing different than to apply these same rules and guidelines where applicable to the daily chart.

Hope this helps. Have a good evening.

Saturday, June 3, 2017

Reminder of the Larger Picture

The information below reviews why I think a wave downward is due soon, as part of a fourth wave in the Dow Jones Industrial Average. Such a downward wave would likely not end the bull market. This post recaps the information presented in the year-end YouTube video, but I want to again provide the scenario in writing, so that it can be referred to by link, and without have to re-explain it - as people get lost with all the different charts on the different sites.

As I stated in the year-end video, the biggest thing the stock market has going for it is that the NYSE Advance / Decline line is, as of Friday, at new all time highs, chart below.

NYSE $NYAD Adv-Dec At New All Time Highs

If this is the biggest thing the market has going for it, it is also the biggest reason NOT to call Primary 5 as being over yet. Robert Prechter insinuated in a newsletter a couple of months ago that he was wondering if it 'might' be over. Well, as far as I know, there is no bear market that has started with the $NYAD not diverging from price, and right now it does not. The $NYAD is at new all time highs right along with the Dow and the S&P. With that in mind refer to the chart below for the larger picture.

DJIA Daily Closes with RSI (14)

Assuming the Primary 4th wave (Circle 4) ended in February, 2016, as I called for, then there are potentially several ways to count the up wave, but I think several factors rule out the numerous possibilities and narrow it down to one. So, let's get to work.

If we are making a Primary 5th wave up, (Circle 5), then it should be composed of five Intermediate sized waves, labeled (1) through (5) on the chart above. With the $NYAD at all time highs, I do not think we are anywhere close to the fifth wave, (5), yet. In fact, I think we are only in the Intermediate (1) one wave up.

Most market analysts agree there was a peak in April, 2016, and a trough in May 2016. They have labeled these as 1 and 2. I disagree. I have labeled them as A & B, because if they were labeled 1 & 2, then the November, 2016 election low would "cut off" a trend line from Primary 4 (Circle 4) to their 2 wave label, violating a guideline that no part of wave 3 should fall below that trend line. Further, the B wave only retraced 38.2%, which is less common for a second wave. Not impossible, but less common. You see a 38.2% retrace for a second wave most often occurs when the first wave is the extended wave in the sequence. Clearly, if the April, 2016 high was wave 1, it is not the extended wave in the sequence since there is a much larger wave after it.

Rather, it's my opinion we are in an impulsive C wave up of Intermediate (1) of a likely ending contracting diagonal for Primary 5. The RSI (14) clearly tells us we have seen a third wave of some degree, but now price is diverging from it, and the Elliott Wave Oscillator is too, as I showed yesterday.

If we draw a potential channel around the C wave impulse, we see that wave ((iv)) or circle-iv has not yet touched the lower trend channel boundary. Price has fallen below the mid-channel line once, and has rebounded to it, but it has not yet attacked the lower channel boundary. Further, we noted that, in the Dow, C = 1.618 x A would be at 21,374 or thereabouts. So, there is still room to go to make that measurement. But I think one of the key reasons to label this upward wave a Minor C wave is that it has the common characteristic of a C wave - which is a lack of significant-sized pull-backs. Whether a crashing "take no prisoners" C wave to the downside, or a more rare C wave to the upside, they would still have the similar characteristic of not taking big pull-backs. Isn't that what we are seeing?

I have seen in re-drawing this structure with all of the intervening wave labels that I made a mistake on some blog posts in the labeling of the upward (b) wave, and the downward (c) wave, and wave ((iv)) or circle-iv. I had previously referred to this fourth wave as minor 4. It clearly can be seen that the correct degree of this wave would be minute ((iv)), and upward (b) wave is minuet (b), not minute ((b)). This was a mistake only - not a change in market view of any type - and the wave labels from the above chart will stand, and future charts will show the correct degree.

If after minute ((iv)) or circle-iv completes, we get the minute fifth wave ((v)) to complete Minor C of Intermediate wave (1), up, it is at that point, we should begin roller-coaster ride inherent in a diagonal that would cause the advance-decline line to diverge. In this scenario, there are four more waves for this to occur, in Intermediate (2) through (5). In many other Elliott Wave scenarios, there is only one more wave for this divergence to occur in. That seems unrealistic to me.

But keep in mind, that if a diagonal wave should be made, that price does not have to make explosive new highs. It only has to make marginal new highs. And that is the key to this count.

So, what about this closer in and potential minuet (c) wave down of minute ((iv)) or circle-iv? How could that happen? Well, is it possible that price will sell down into the upcoming Federal Reserve rate decision meeting, and then, when either the Fed does or does not raise rates the market will have a relief rally - either because the rate hike is over with, or because they do not raise rates? And then make a new high? It's just a thought. It doesn't have to happen that way. But, it is at least plausible since we have just seen new all time highs for this rally.

Anyway, you again have a recap of a scenario I have in mind for the larger Primary Wave 5. Since the S&P500 definitely did not make a triangle for it's Primary Wave 4 (we clearly demonstrated in the SP500 the count downward was a double zigzag W-X-Y), then it is possible the largest Primary 5 wave in history - potentially ending a Cycle and and a SuperCycle will end as a contracting diagonal. We don't know for sure.

But, in any case Primary 5 does not look to be over yet.

Have a great weekend, and thanks for following our thoughts.

Friday, June 2, 2017

Key Milestone Passed

We said yesterday, it did not look like the up wave was finished. That was entirely correct. While the futures dropped down initially on the poor employment report, that dip was bought, and new highs resulted. We still don't think the upside is finished.

However, the DOW passed a key milestone today. In this daily chart that we published in the live chart room, you can see that the DOW has now passed the 105% x wave (a) mark, needed, according to the Elliott Wave Principle, to initiate any expanded flat downward. The S&P500, of course, has already passed this mark. Previously, since the DOW was between a 90% - 104% retrace, then it only qualified for a regular flat, not an expanded flat. Here's the DOW's chart.

DJIA Daily - Dow Makes 105% Needed for Expanded Flat

After making this mark, the Dow spent some time finding resistance there. So, now the Dow qualifies in every way for an expanded flat. And, it is interesting that it diverges from it's daily oscillator.

Yesterday, when we were using the fifteen minute chart, we did not have enough candles available to have the benefit of the The Eight Fold Path style analysis. Here is the 10-minute chart of the Dow, which now has enough candles to make some decisions.

The Eight Fold Path Applied to the Intraday Dow

This count becomes quite a bit more objective thanks to the use of the EWO and the RSI. I want to emphasize that this count was not possible until late afternoon, until that wave blue .iv and .v (not shown) of black 3 were made. I could not count another 'five-up' until there was, gulp, another five up.

So, it's clear now - by placing iii of 3 on the maximum of both the EWO and the RSI - that we had an extended fifth wave in wave 3. The S&P500 actually reached a 4.236 x wave 1 Fibonacci extension.

Then, we started a sloppy sideways movement which has not yet retraced even 23.6% of wave 3. This is likely just part of wave 4, and it will likely retrace 23.6%, and possibly even 38.2%. It turns out that 38.2% is right at the location of that blue .ii within the fifth wave extension of wave 3, and that is a common retracement target when the fifth wave extends. We'll see. After wave 4 is confirmed complete (perhaps on Monday or early Tuesday), then a 5th wave up should try to bust the highs to complete this wave.

From an anecdotal sentiment analysis, wave service after wave service is turning more and more bullish - with many placing us in a wave 3 or a wave 5, of some type. Or, they have that as their alternate. Interesting. Many readers are now urging me to "go bullish", and are showing me the "error of my ways". Interesting.

From a wave counting perspective, I want minute wave (b) to be longer in time than minute wave (a). It is. From a corrective wave standpoint, corrections are most effective when they are confusing to count. For most, it is or has been. Interesting! And, from a time standpoint, it would be more usual to have minor wave 4 be longer in time than minor wave 2. Now, it has a chance to be. And, further, it would be super if minor wave 4 was a flat or a triangle to alternate with it's sharp wave 2. Now it has a chance to be that, too!

To say minor wave 4 ended at the down spike in May, is to ignore the time relationships between minor wave 2 and minor wave 4, and also to ignore the recommended alternation. Further, it would also violate all guidelines for a running flat in the Dow, since the Dow never made the 90% retrace level before that wave!

At this point, I would rather not do that. I hope you understand why. I just try to follow the rules and guidelines.

Have a good start to the weekend.

Thursday, June 1, 2017

Congratulations are in Order

At the close of trading today, some investors (not you, of course) paid the highest possible prices in history for the S&P500 Index, the NQ (NASDAQ 100 Futures, and ES E-Mini S&P 500 Futures). Interestingly, those in the Dow, the Transports and / or the Russell still seem to be balking. What's wrong with them? Maybe they will get a chance to pony up later. While there are no trading or investment recommendations made here, it's not my personal preference to pay the highest prices ever for something. You please do as you like, and make your own decisions. I just express an opinion.

On the wave counting front, due to overlaps, this upward wave in the S&P500 - if it is still a minute (b) wave can be counted like this.

S&P500 Index Daily - Possible Count for Minute (b)

As a reminder, we have three waves down to wave (a), and wave minute (b) has not yet attained the 138.2 x (a) level. For the most part the upward waves are both overlapping and in a channel. And each wave has a "three-wave" look to it. At least, so far.

As we said earlier, neither the DJIA, nor the transports have made even a new all-time high yet, although we suppose they would. Based on a short term intraday chart, the S&P500, and the Dow appear to have unfinished waves at the top, as yet. We'll be watching for that over the next couple of days.

Today was the first day of the month. We said to be on the watch for the inflows from pension funds, 401k's, company bonuses, etc., and they are likely, in part, what fueled the market today. We also said we wanted to see lower lows rather than higher highs before proclaiming the (b) wave over. We thought it was possible the fund flows were weaker in the summer. That did not happen today, but we were were prepared for it. (While some 'first of the month days' have been 35+ points, this one was weaker - only 19 points.) Yesterday's diagonal was simply an ending one in the downward direction (actually probably just a widening triple zigzag which has exactly the same structure), and not a leading one.

And we suggested, yesterday's downward wave could be a .b wave, as we have marked above.

If the minute (b) wave finishes properly, then the next expectation would be for a large (c) wave down of an expanded flat for Minor 4. If, on the other hand, price prints full candles above the rising channel shown, it would mean something different.

Well, now what for the rest of June? Certainly, a valid question. There are elections upcoming in Europe, and a Federal Reserve rate decision, too. At present, funds and certain classes of investors are buying without abandon in the absence of any return from rates of interest. All of this while price diverges from the indicator. So be it. Let's hope that they don't abandon the return of their principal in the upcoming weeks.

If you are interested in why we think the wave up 'might' not yet be finished, below, in the top panel is a 15-minute chart of the DJIA. (We were comparing it to the S&P500 in the bottom panel).

DJIA vs SP500 15 Minute Chart

Since price has not yet tried to attack the lower channel boundary, we think a wave 4 could move price lower to do that, and then make a wave 5, up. Also, in relationship to wave 2, wave 4 at this location would currently be shorter in time than wave 2. That is possible, but not the usual set of circumstances. Further, in real time, after price made the three-wave a wave down from wave 3, we said new highs in a potential b wave up could be made to make a FLAT or triangle wave 4 to provide alternation with the likely sharp wave 2. It did! By crossing over the top, the Dow and the S&P have certainly activated and met the 90% requirement for the potential b wave of a flat wave. Rules are rules!

Cheers and have a good night!