Monday, August 7, 2017

Triangle Appears Completed

Market Outlook: Topping, but breakout of triangle so far.
Market Indexes: DJIA, SPX, ES, NQ, RUT, NDX: Higher

On the lowest volume in years (see the ZeroHedge article at this LINK) the S&P500 Index broke out of it's potential triangle - that we have been counting out for you here - and exceeded the ((D)) wave higher. Here is the SP500 Cash Half-Hourly Chart.

SP500 Cash - Half Hour - Now Above Wave ((D))

We have been watching and noting various volume levels in these markets for years, and this is the lowest ES E-Mini S&P500 Futures volume since 2001! So, at nearly half the average volume, even for a light summer day, it can not be explained by casual observations like "summer vacations", or, "summer doldrums". There is a phenomenon going on here, and we think it is worthwhile to try to understand it.

More than likely, it is more explained by the perception of "risk", and the desire to be prudent as the key Fibonacci levels are being reached.

Having exceeded the ((D)) wave, and the 78.6% upward Fibonacci ratio, it would be entirely possible to label this wave as a fifth wave truncation - which would put the Dow and S&P back in alignment. Such an assignment would make even more sense if the ((E)) wave of the triangle was exceeded lower, but it hasn't been yet. So, we will wait to see if the five waves up we counted is all of a fifth wave or just the first wave of a fifth wave.

Either way, risk is increasing, and the daily Bollinger Bands are narrowing in on price. So, we should note that even though we were able to label a triangle days ahead of today's break above the ((D)) wave, there are still things the market could do to make like difficult. For example, as an alternate, price could travel to between 90 - 100% of the prior all time high and make just a ((B)) wave before turning lower in an elongated ((C)) wave.

We need to take wave labeling a day at a time right now. But, we don't like what we are seeing in the markets from the viewpoints of 1) volume, 2) impulsiveness, and 3) sentiment. That is just what it seems like - but it's based on objective facts and statistics. As just one example, even though market indexes were uniformly higher today, down volume on the NYSE exceeded up volume, and the number of advancing issues trailed the number of declining issues. These are example of the types of divergences we expect to see as significant market highs approach.

Stay tuned and have a good start to your Monday evening.


  1. I think you are really smart, TJ. I just wish you would put your intelligence and energy toward something more helpful. EW wave counts have been embarrassingly useless this entire year. I could point out an EW website that has done quite well with counting this years S&P, but that group failed miserably on precious metal and currency counts. Therefore, I can't trust him either.

    1. If you took into account institutional buying, sector strength, current leader strength, etc... I bet you could provide me a lot more insight on market direction. I thought I had a good system, but mine left me in the dust in November. I was hoping yours could help me more.

    2. There is nothing more mathematically 'robust' than the market fractal of 5-3. This has been proven by noted mathematician Benoit Mandelbrot, even after RN Elliott's empirical observations. All prices follow it: stocks, corn, cotton.

      I don't know what kind of 'mood' you got yourself into today, but when I comment on overall volume being low, that necessarily includes institutional volume (at least those that report it any way). Sectors and leaders come & go. $Trans down, $Trans up. BKX down, BKX, up. Shake out those cob-webs, or the market will do it for you.

    3. Ha, I recall you calling a top and ignoring institutional buying volume back in December. I think I could prove it, but you erased all of your past data from that month.

      I love to hear how you speak of Mandelbrot and Elliott's work. The problem is the wave count analysis on the website is too often incorrect.

      I am serious when I say I think you are very intelligent. I would just love to see you put less focus on the wave counts and try more focus on something else. It would be fun to see. I know I don't have the answer.
      Now on to something more positive. In my opinion, today's action may just be the turning point you have been waiting for. I saw a lot of failure today on many stocks that would support your wave count.
      Good luck. I'm still counting on you even though it may not look like it.