Sunday, September 24, 2017

Dow - One Million!

This is no joke. In today's issue of Barron's Magazine, famed investor Warren Buffet began talking about Dow 1,000,000. Granted he is referring to one-hundred year's hence in 2117. This is happening, of course, as our weekly bullish sentiment indicator is stuck at the level of 60.4 - a second week in a row over that level. While, we offer no opinion on Buffet's price level, it sure seems a bit frivolous to me to try to be making a prediction one-hundred years in the future. A lot of things could happen between now and then.

For our part, we would rather address serious Elliott Wave counters, and ask from the chart below, "why is it that an expanding triangle can be counted perfectly at this level?" You've seen part of the chart in several near-real time posts before. Here is the rest of the chart.

DJIA Cash - 15 Minutes - Expanding Triangle

Why is it that this pattern was able to be counted out for you in such detail, including the complex double-zigzag of the triangle, before the rebound began, and importantly, the predicted 'throw-under' of the (a) to (c) trend line, just as we said Neely penned was most usual?

Why did this all occur - and with you having notice on this web-site in advance of the last moves? Is the market trying to tell us - just as many web-sites and pundits are still projecting much higher highs - that the last high in five-waves may be dead ahead (even if it fails)?

The answer is that I don't know for sure. I do know that expanding triangles are exceptionally rare birds. So few of them have been seen that there are very few samples to study to have high reliability in their predictions when they occur at the end of impulses versus the end of corrective waves.

So, while we are grateful to have discovered this pattern and counted it out, this will certainly be a moment for me to learn and to be flexible as to result. As we have showed before, there is one way to count the entire bull market as complete with this next move up. There are other ways for it to continue, but we will be in better position to judge over the next several days. The one thing that is usually true is that a triangle usually precedes the last wave up in a sequence.

We will also point your attention at this time to the 4-hour cash chart of the NDX, and this potential wedge count - which could easily turn into a diagonal.

NDX Cash - 4 Hr Chart - Potential Wedge

We do not necessarily go around looking for wedges, diagonals, and/or triangles. But sometimes we need to find them because that's what the market is actually doing, instead of using arbitrary or pre-ordained methods of wave counting - especially when the Elliott Wave Oscillator shows a declining level of momentum on each peak. You will note that with a tighter wedge line, there is a way to count the pattern as over. But, we will give this one some time, yet, and see if it wishes to make that classic 'throw-over' of the upper trend line.

So, again, either way, patience and flexibility are the key.

Have a very good rest of the weekend.
TraderJoe

Friday, September 22, 2017

Mid-Day Update

See yesterday's post. This may be updated later tonight.

DJIA Cash - 15 Minute Chart - Expanding Triangle

The potential expanding triangle seems to be developing well, with a new low below the prior c wave, suggesting an a wave down in the 'complex' leg of the triangle. Neely suggests that 'usually' the lower trend line of an expanding triangle is exceeded lower. Let's see if that occurs. And don't forget there is a gap to the left of the chart.

And here is what the hourly looks like. The attack of the lower channel boundary is definitely under way - just as predicted.


DJIA - Hourly - Attach of the Lower Channel Boundary

The S&P500 has not decided yet if it is in a larger triangle or the flat we outlined yesterday. A flat might have the edge, but either would be acceptable.

If you're starting your weekend early, have a nice one!
TraderJoe

Thursday, September 21, 2017

Inside Day

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Major U.S. Equity Indexes were lower
Today's Candle: Inside Day, Lower
FED Environment: Quantitative Tightening

With today's inside day, the S&P500 Index still best counts as a potential triangle. It may break down to a FLAT, as an alternate, but that is not certain, yet. I will show the last SP500 15-minute chart for this wave at the end of the posting. Instead, I said yesterday that I wanted to have a look at the Dow Jones Industrial Average. So I did that this morning in the live chat room, and I want to show you the first chart posted.

DJIA Cash 15-Minute Chart : Potential Expanding Triangle

So, it appeared to me that we were having a contracting triangle in the S&P500, or possibly a FLAT wave there, while we are having the potential expanding triangle in the DJIA. Here's how the chart of the Dow developed as of the end of the day.

DJIA Cash 15-Minute Chart: Development as of the Close

The first three waves down were the first three waves down of a very grinding Leading Diagonal a wave down. And, from there, in a perfectly timed call, the b wave up, or part of a b wave up began.

So, with five-waves down from the (d) wave high, confidence in expanding triangle went up to about 80%. So, how would this expanding triangle fit into the overall hourly wave count on the DOW? To help answer that question, we generated this hourly chart of the DOW early in the day.

DJIA Cash - Hourly Potential Channel

So, that if an expanding triangle, and it's (e) wave can attack the lower channel boundary, then a last wave up may follow the lower channel boundary attack.

Now, Neely indicates that a fifth wave following a limiting expanding triangle does not have to make a new all-time high. That would be a fooler, wouldn't it?

We are still labeling the overall up move as (w), (x), (y), (x), and (z), the triple zigzag B wave OR as the same expanding ending diagonal. So, in short, nothing has changed. Here is the S&P500 Index cash chart on the 15-minute time frame, as we promised, above.

S&P500 Cash 15-Minute Chart : Potential Triangle or FLAT

For the triangle, an (e) wave should cross under 2098.50, or so, but stay above the (c) wave. For the FLAT wave, it would be acceptable to trade under the (c) wave.

Other than noting that gap above the market at the (d) wave, we'd like to wish you all a good start to your evening. (The Dow does not currently have such a gap).

Best regards,
TraderJoe

Wednesday, September 20, 2017

Quantitative Tightening (QT) Begins

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Mixed with SP500, DJIA and RUT higher; NDX Lower

The Federal Reserve announcement today, that the Fed will being to roll off the balance sheet beginning in October to the eventual (data dependent) tune of $600 Billion per year, put a little kink in the original potential ending diagonal - if you follow the rules.

If you did not read the prior post - posted this morning - you are encouraged to do so. First, there was one higher high this morning, as anticipated. But additional higher highs did not occur by the close. They could happen tomorrow. Instead an awful lot of three-wave sequences occurred instead - both lower and then higher.

Here is the S&P500 short term chart. It is getting messy as all get out. But that's OK with me. I'll just follow the rules until we get an understandable pattern. Because of the the depth of the correction made on the FED's announcement, it did change the overall pattern to that of either a barrier triangle or a larger diagonal - perhaps one that will play out on the hourly chart, instead of the fifteen minute chart.

S&P500 15-Minute Chart

Without higher highs, we are now counting the potential triangle (in green). With additional higher highs, we can consider a larger diagonal, and only with a lower low than green (c) can we consider a very ugly flat wave.

Again, the market is taking it's time to figure it out. That's OK. We will too! I also want to take some time to see how the DOW compares to this S&P chart. It may tell a little different story. Stay tuned.

Have a good start to your evening.
TraderJoe

Before the Bell - Sep 20

I thought it might help to have a healthy dose of objectivity with the morning coffee this morning, so this chart might prove instructive. The point of this exercise was to look for elements of the wave count that it would be hard to argue with. So, here is the daily chart of the S&P500 Index.

S&P500 Cash Daily
The very first element that seems hard to argue with is that, when measured in this manner, wave minute ((iii)) would be at the 1.618 Fibonacci extension from wave minute ((i)). Besides just being a measurement, one can count how many daily closes there are on the 1.618 level providing temporary resistance at that level, which makes it more difficult to argue against it.

The second point that seems very hard to argue with is that there is overlap at the 2405.77 price flag. And that's just because, there is! From an interpretation standpoint, then, looked at in the cold light of day, that wave fits 'best' as a second wave because wave fours should not have overlap.

The third element that seems hard to argue with is that if you draw a line from 0 to ((ii)), then a wave ((iv)), as drawn, sits on that line and had a slight break of it.

And, the last element that seems hard to argue with is that the DOW made a lower low at 0, than the S&P500 did. That's because, it did! So, that seems like where the bottom is, in a slight truncation for the S&P500.

From that, one could interpret that this wave count provides FLAT and SHARP alternation for waves ((ii)) and ((iv)). That is the interpretation that seems most straight-forward to me. That leaves only a fifth wave up - no matter how it is counted. Even if it is the expanding diagonal fifth wave.

But, you don't have to agree with that interpretation. You could also possibly still have a FLAT for wave ((ii)). Then, you could have a very ugly TRIANGLE for wave ((iv)), ending in the beginning of September to provide alternation. This possibility was suggested by reader mblcta, and I want to give him credit for it. There is only one issue with that interpretation as I see it. And that is the fact that such a triangle would have awful proportions - just like a similar one in the DOW would. But then, from there, one expects a more simple impulse as the last wave from the triangle.

The major point is that, in either interpretation, a fifth wave at minute degree is most likely. Not some cascading series of third waves. And, particularly, in the second interpretation, the triangle would likely mean that "the last wave in the series in dead ahead".

This likely means one should at least be planning on the market returning to the fourth wave of the previous degree at a minimum after this up wave completes. It could go much lower than that, depending on what wave label one has placed at the March 2017, high. Either way, one comes out with a similar answer.

Have a good start to your day.
TraderJoe

Supplement: Added this chart after the bell. The a wave occurred on schedule and with a minor new high. We now have two smaller fractal diagonals most likely inside a larger diagonal. The upper trend line has now been tilted up.

S&P500 Index - 15 Minute Chart

Tuesday, September 19, 2017

Some Clarity Today

Market Outlook: End of Minor 5 (60%), Still in Minor 3 (40%)
Market Indexes: Mixed to higher

I am posting this one just a bit early today to get some things done and ahead of the FED meeting tomorrow. This is being posted slightly before the close.

The market as measured by the S&P500 Index opened with a small gap up that was quickly and completely filled. About mid-morning, the potential failure wave high from yesterday's five-minute chart was exceeded marginally, then prices reversed a bit, and reversed again - all for small point loss or gains.

Based on that I decided to back off to the 15-minute chart to review the wave internals. The chart of that review is below.

S&P500 Cash - 15-Minute Chart

So, the above count is predicated on the most recent bar or bars making a new high above the brown (iii) wave. If that happens in any form then we may have the a wave of a wave (iii) of yet another diagonal. And, yes, it would likely be yet another Leading Diagonal within a larger diagonal.

Over on the left-hand-side of the chart, you can see the original diagonal I had counted out on the 5-minute chart. It turned out to be an a wave, itself, the a wave of the first wave, (i), of this diagonal. Remember, there was a retrace wave within that 5-minute b wave - even though that has disappeared on this larger time scale.

The fifth wave of a leading diagonal for this a wave may not fail. It must make a higher high than the wave (iii). If it does, we're good and it will give us a measuring tool, because wave (iii), up, may not exceed the length of of wave (i), up, of the larger potential diagonal. It could do this today or early tomorrow, but it must happen - or something else is occurring - like a regular triangle. But, so far, all the waves are counting properly, and it looks like this potential diagonal would then last into the FED meeting.

Remember, within (iii), there would first need to be a b wave down, then a c wave up, for (iii) that must cross the high. That would likely happen between now and tomorrow.

For students of Elliott Wave, it is very interesting to note how many "flat" b waves there are within the zigzags of these diagonals. They are waves which can literally cause a wave counter to scratch their head, and say, "whuh?" over & over & over. Further, if this happens properly, it is amazing to see how the smaller diagonals would be smaller fractals of the larger diagonal. To an Elliott analyst, that is a market almost screaming for reversal. But, it all has to play out properly first ...

For now though. Have a good start to your evening.
TraderJoe

Monday, September 18, 2017

Failure?

Market Outlook: Minor 5 Complete versus Minor 3 Continuing (60 : 40)
Market Indexes: Most major U.S. equity futures closed higher after all-time highs in DJIA, SPX

Not me. The market may have failed. It was quite clear to me from the overnight prices that the diagonal sketched out for you on Friday was, in fact, a diagonal. It turned out to be a smaller leading diagonal, not an ending one. Thus, we opened with a small gap up. Not every diagonal is an ending one. (The alternative is that it was a triangle).

A continuation of the five-minute chart is shown below - just as shown in the real time chat room.

SP500 5-Minute Chart

You can see the end of Friday's diagonal on the left. But, then, when you start looking for the companion wave iv, for the gap wave iii, you are left with really only two choices. Either we have had a triangle, and a failure at the high, as shown by wave v? or everything since the high of iii is a very large wave iv, that missed downward overlap by 0.25 points!

If there was a failure at v? then that is the location of the z wave or of wave (v) of the hourly ending expanding diagonal shown over the weekend. In that case, wave v would have had a higher closing high, but not a higher intraday high.

And if it is wave four at the 14:30, low, then there should only be one more wave up.

The market can't have it both ways. It must pick a path. If there is a downward count started, it can only be counted as an expanding diagonal as shown in the above chart. But, then, lower lows are needed. And, if lower lows are obtained, then a wave iv becomes invalidated!

A worse situation occurred in the hourly NQ futures where a downward overlap of a previous first wave did occur.

The charts are getting quite messy and quite ugly. Even the Dow had a "double top" for some reason today. This does not seem like "standard impulsive" wave formation. Something quite different seems to be going on. And keep in mind, even though an upward gap opened up this morning, all of the gaps are to the down side. With today's movement in almost all indexes, there are no gaps above the market! That is some food for thought.

Have a good start to your evening!
TraderJoe




Sunday, September 17, 2017

Sunday Sentiments

Here are a few charts to have a look at this Sunday, intended to be more thought-provoking than necessarily definitive. And so there are a few questions to ask oneself.

Proprietary Sentiment Model

Why did the percent bullishness leap by more than four full points last week - in one week alone, and what does it mean for market direction? Is the possibility of a 'revenue neutral' tax reform plan really that bullish for individuals and companies? And has or hasn't the market fully discounted such a tax plan - if it happens - anyway? Isn't that what the supposed 'Trump Rally' was premised on?

NYSE McClellan Oscillator - Daily

Why is the McClellan Oscillator diverging with Friday's new all time high stock prices? While not a highly reliable indicator in itself, the pattern is certainly interesting at this point in time.

Daily Bullish Percentage of the S&P500

Why is the percent of stocks in verified bullish uptrends on point-and-figure charts double-diverging from Friday's all time high prices? This doesn't mean more stocks can't turn bullish, but the statistic is interesting at this point in time.

ES E-Mini S&P500 Commitment of Traders

Why are the number of long positions owned by "large speculative' market players - those that are usually "trend followers" at a new recent high? Meanwhile commercials have switched to net short.

Finally, people ask about the Wilshire 5000. Here is a chart below with a possible count that would synchronize the major indexes.

Wilshire 5000 Daily - Potential Expanding Diagonal
People see the recent August decline, and how it is a larger decline that overlaps other waves and  they tend to 'give up' on counting it. But the Wilshire is the only major index in which waves (2) and (4), as shown, do not have higher b waves and may be considered zigzags allowing the count of a potential expanding diagonal. So, in this case, waves (1), (3) and (5) would all be three-waves in nature.

Now, the information in the first four charts is just that. Information. The potential count in the last chart is an 'intentional effort' to synchronize some major indexes in time. Is this chart and it's message correct? Heck if I know today. But, it appears to be a valid way to count. And, the key point about the Wilshire - like many 2000, 3000 or 5000 stock indexes is that they will likely be "downwardly biased" by the weaker stocks in the index. Meaning, "near a top some stocks must rotate into a more weak position". This evidence can be seen in bullish percentage chart above. That's what would be the 'cause' of the (B) wave in the Wilshire.

Is a bearish view on U.S. equity markets correct at this exact point in time? Nothing is for certain. But the above information gives a rational person something to consider, instead of only letting their animal spirits roam. And, oh, yeah, there sure are a lot of down side gaps, and none currently above the market. All-in-all some warning signs to ponder and hopefully to keep one open-minded and flexible.

Have a good rest of the weekend.
TraderJoe

Saturday, September 16, 2017

Did The Bull Market Just End??

So, it can't be denied that the people I first learned anything about Elliott Wave Counting from, Robert Prechter and the folks over at Elliott Wave International, are publishing a count, below, in the Dow Jones Industrial Average which has an awful lot going for it. Since they taught me the most about counting waves, it would be almost criminal not to bring you their ideas, supplemented with a couple of my own.

Here is their overall count.

DJIA Three-Day Chart of Intermediate (5) with count as per suggestion of Elliott Wave International

To which, I will add my own thoughts that I have counted out for you in near real time the possibility of an Ending Expanding Diagonal in the Hourly DJIA and, now, with yesterday's move over 2499, the S&P500 Index, as well. The count from Minor 4 is on the chart below.

DJIA Daily - Count from Minor 4

To be fair, these counts have an awful lot going for them. Here are a Fibonacci-five important wave characteristics noted. 1) The high of the RSI-14 would be on Minor wave 3, and there is a divergence to Minor 5. 2) The lengths of the waves and lack of overlaps work out properly in this context, and in particular wave 5 is nearing the length of Wave 1, and within wave 5, minute wave ((v)) is approaching the length of minute wave ((i)). 3) You can see even just visually that within Minor 3, then minute ((iv)) is a smaller wave in point size than minute ((ii), and you can see the same is true within Minor 5. 4) Although the overall wave does not channel particularly well, there is no escaping the fact that Minor 5 channels beautifully. 5) There are two potential ending diagonals at two different degrees of trend : the hourly has the expanding diagonal shown in red, above, and the five-minute has the contracting diagonal shown in yesterday's post.

From a time perspective, Prechter has done studies showing that an end to the bull market in 2017 would provide a neat cycle top on several degrees of trend. We do find that timing work, at this point in time, quite compelling.

We want to be quite clear that we picked a pretty big bone with EWI when they did not recognize the Primary Vth wave as we did - because the DOW still hadn't channeled yet, on a time scale from 1982 which it has now.

But, there can be no doubt. Five waves up can indeed be counted. Sentiment is running hot as I have shown in previous posts.

So, besides the overall wave not channeling well, here are a Fibonacci three points detracting from this count. 1) the NYSE advance-decline line has recently made new highs; that is usually a sign a bull market is continuing, 2) while you can find alternation between the wave two's and four's, it is not as obvious in shape as it might be. Minor 2 has quite a high B wave, and Minor 4 has a much lower B wave. But, it is true in both of the cases of the fourth waves  that they are shorter in time than their second waves. That would be an odd curiosity, but it doesn't break any rules. It is actually possible to consider that as a valid form of alternation. And, finally, 3) the market has again just made new daily highs, without showing significant weakness.

The major issue I see is that if the current channel breaks down, or if what people propose as wave fours become longer in points than their companion wave two's, then the above count may be dead on the money.

Another minor irritant would be that the waves don't exactly follow The Eight Fold Path Method, but for the very last wave in the sequence - this high up in the order of waves - maybe it is actually indicative of the character of Primary V - to drag everyone into the long side of the market almost without respite or recourse, and not make the 38.2% retracements expected in the fourth waves.

For now, one can only speculate. The key point is I was indeed expecting five-waves up from the February 2016 low, and they may have now occurred. I do not want to ignore the possibility that it may be happening in front of our eyes, especially when diagonals have just been properly counted.

I know that a lot of you will also point to some particular index and point to problems with it. I do understand. Yet, Elliott's work was based on that average of the thirty stocks, and again I just ask that you consider that other averages and the leverage in the futures may be introducing complications due to the number of stocks in the index, the weighting of various sectors and / or the inclusion of derivative products.

So, remain flexible, as I currently am. As an experienced wave counter, I can see this possibility clearly, but I can also see a longer third wave scenario. And I would present that one if, and when, it becomes just a bit more clear - like if the current diagonals do not work out for some reason.

For now, have a very good weekend!
TraderJoe

Supplemental: I am adding this ES futures daily count to show that - counted in this fashion - there are no issues with overlaps or waves which are not the correct size.

ES Futures Daily Count - Can Agree with Dow Jones Count

Wave (iii) is longer than wave (i), and there are no overlaps of wave (iv) with any part of wave (i) or wave (ii). In this count all of wave (iii) is above a line from wave 4 to wave (ii). And, within wave (iii), there are no issues with the overlap of wave iv triangle with waves i or ii. Wave .i is the single first candle up, from wave (ii), and wave .ii is the 50% retrace of that candle shown as the wick. That also means there are no problems with overlap by wave .iv triangle.

Friday, September 15, 2017

Exact Accounting - Part 2

Market Outlook: Still in Minor 3, probably a (b) wave up.
Market Indexes: SP500, DJIA new All Time Highs
Today's Candle: Higher High, Higher Low, Higher Close

Yesterday, we stated we were likely making the last several wave of five waves up within ((C)) of the z wave of a triple zigzag. Today, in a rare special treat, I will provide the chart that was done "live and in real time" in the chat room. Five waves up; wave for wave, on the five-minute chart of the cash S&P500 Index in a contracting diagonal.

S&P500 Cash Index - 5 Minute Chart

There it is, and unmistakable. Wave (v) is shorter than wave (iii), wave (iii) is shorter than wave (i), wave (iv) is shorter than wave (ii) and overlaps wave (i), and each of the waves can be clearly counted in a zigzag.

Wave (ii) had just over a 68% retrace. Wave (iv) had a 50% retrace. The proportions and trend lines are near perfection. The S&P500 Index hit 2,500, and had a slight characteristic throw-over of the upper trend line.

The pattern is there. There is nothing to be made up. Nothing to be contrived. No alternates. No bent rules or guidelines. For this ending contracting diagonal to work, then wave (v) must remain shorter than wave (iii) on Monday, and the diagonal should be fully retraced - below the point marked 0 - in less time than it took to build it. IF the pattern should not work, it's not because the pattern isn't there. It's not because an analyst can't count waves. It's for some other reason, perhaps like a news story. The DOW can also be counted in a similar manner.

Again, what you do with the pattern is up to you. We do think it highly suspicious that the market ended on an all-time high when we have just had two back-to-back natural disasters. That's all we can say for now.

Until later, have a very nice start to your weekend.
TraderJoe



Thursday, September 14, 2017

An Exact Accounting

Market Outlook: Still in Minor 3, probably in a (b) wave higher
Market Indexes: Mixed, DJIA & SP500 new All-time High
Today's Candle: Doji

Here is an exact accounting, wave by wave on the hourly chart of the cash S&P500. It is the best I can provide. No wave has changed overall since the bottom. This morning's single wave down of -6 points was likely the C wave of a fourth wave - shown as (4) and in the vicinity of the prior wave 4.

S&P500 Index - Hourly - Cash

I hope the chart really speaks for itself. We are likely now making very, very small degree waves up from (4) to (5) of ((C)) of z at this time (today's new all time after the opening gap was closed makes that quite likely). The waves are getting so small and compressed up here it is truly getting difficult to count them. It is worth noting there is very nice alternation between waves (4) and wave (2) in the current ((C)) wave of z, up.

Hope this helps, and do have a good start to the evening.
TraderJoe

Wednesday, September 13, 2017

The Dreaded Megaphone Pattern

Market Outlook: Still in Minor 3
Market Indexes: Major Equity Indexes eeked out gains, except transports and utilities
Today's Candle: Higher Low, Higher High, Higher Close

I am pretty much going to let this chart speak for itself. Because, in the Dow Jones Industrial Average cash chart, a wave (v) is now longer than a wave (iii), and wave (iv) is longer than wave (ii), and wave (iii) is longer than wave (i), with wave (iv) overlapping wave (i), but not traveling beyond the low of wave (ii), with all three-wave sequences, then the pattern of an expanding diagonal - or megaphone - may be seen.

This one even has trend lines that look the part! In other words, the wave pattern almost has exactly the right look. If wave (iv) took a little longer in time than wave (ii), it would be perfect.


DJIA Cash - Hourly - Triple Zigzag or Expanding Diagonal (Megaphone)

There is no doubt that the above structure - as shown in black - is a triple zigzag. The issue is this: usually - most often - ending expanding diagonals usually occur 'over' their wave ((iii)). This one occurs inside it's wave ((iii)). So, there are three possibilities now. First, triple zigzag B wave. Second, ending diagonal. Third, leading diagonal. And, usually, the fifth wave (v) of an ending diagonal almost always occurs over it's wave ((iii)).

The pattern is there. The question is what to do with it. We'll leave that up to you. We will note that the ES futures are right up against their upper daily Bollinger Band, but the slow stochastics are now embedded for the third day.

The pattern of the EWO is quite amazing; the peak of wave z, is taller than the peak of wave y, which is taller than the peak of wave w. And the trough of wave (iv) is lower than the trough of wave (ii). This is the usual and customary pattern of an expanding diagonal on any time scale.

The only thing we can say is that if wave (v) were to conclude above the high of wave ((iii)), and there is a quick retrace, then the ending diagonal pattern gains considerable credibility. For this to happen, the downward wave must travel below the start of the diagonal at ((iv)). If this does not occur, then the pattern is either the B wave or a leading diagonal.

Even as I write that last sentence, having a leading diagonal at an all time high in the market makes me gulp, gasp, and shake my head, tsk, tsk. But, I've been fooled before. Let's see how it goes.

Have a good evening.
TraderJoe


Tuesday, September 12, 2017

New Cumulative $NYAD Highs

Market Outlook: Back in Minor 3
Market Indexes: New SP500 All-Time High, Not So Yet in DJIA, RUT, NDX
Today's Candle: Higher High, Higher Low, Higher Close

Some Elliott Wave web-sites have been calling for the end of the bull market. A major Elliott Wave service did not / was not counting the end of the bull market since Primary IV as a motive wave or typical Elliott Wave structure. Yesterday, we said our count had another wave up in it today. It did. It may have more.

To be objective, I was looking for Minor wave 4 to go immediately to the lower trend line of the channel, either in a double zigzag or barrier triangle. It did not, and I was incorrect. So, let's back up and look at a study we have shown before. That of the New York Stock Exchange Advance / Decline line. This one is weekly from the February 2016 low of Primary IV.

$NYAD Weekly

I have noted numerous times that as long as this index is making new highs, it is not likely that the market has topped yet. I have also noted that the most recent downward wave - no matter it's shape - was a corrective wave. I have also noted that new highs were not only possible, but likely. They did happen - quite a bit sooner than I anticipated.

So now, let's also use The Eight Fold Path Methodology to better define which wave we are in. First, as always, the first step in the process is to determine the time frame that provides 120 - 140 candles on the chart for the wave of interest. That time frame is the two-day chart - which currently has 125 to 127 candles for this wave. The chart is below.

S&P500 Two-Day Chart

Next referring to the position of the Elliott Wave Oscillator (EWO), it is clear where the low of the second wave is. And, it is clear where the low of the fourth wave is. They are circled on the zero line. It is also clear the EWO can be interpreted as being in the fifth wave up. It is green, and above the line, and on a divergence with price.

This count puts minute wave ((iv)) in the vicinity of the prior minuet wave (iv) - wave four of one lower degree. Next, we have drawn in the channel as best as possible. You'll see the current wave is not in a perfect channel, and so, we may still have Neely's wedge working.

And, we said yesterday, we are still working on a triple zigzag in the upward direction. Unfortunately, until we know more, we do not know if the triple zigzag is a potential expanding ending diagonal for wave minute ((v)) of wave Minor 3, or if it is just the minuet (b) wave of minute ((iv)) as a flat. Either of these are certainly possible.  Next, let's put the EMA-34 through the chart.

S&P500 Two-Day Chart with EMA-34

From the EMA-34 you can see that every numbered minute wave is on an opposite side of the EMA-34 for form and balance. So, this count is potentially correct. But, right now minute ((iv)) has only three waves down, and often, not always, fourth waves take a longer time than their second waves. So, the position we are showing for minute ((iv)) may only the minuet (a) wave of minute ((iv)), and this is the minuet (b) wave up.

Again, it is nearly impossible to tell - because of The Fourth Wave Conundrum - which happens at every degree of trend!

Two things are for certain. The first is that "at the present time" the upward triple zigzag is not the suggested length yet: it's fifth wave is too short for an expanding ending diagonal (megaphone). But, and I need to emphasize this, the final wave is not too short for just a triple zigzag. There is a small possibility it could have ended in a contracting diagonal fifth wave of c, this afternoon.


S&P500 Cash Index Hourly Chart & Potential Triple Zigzag


Ideally, according to the above hourly chart of the S&P500 Index, one would want the (z) wave, as currently shown, for (b) or wave v in the expanding diagonal to be longer than 2499 in order to meet the strict definition of an expanding ending diagonal - or megaphone.

The second thing that can be seen is the pattern does not have the right look for an expanding diagonal or megaphone. Normally, in an expanding diagonal, the fourth wave - or the second (x) in this case - would be longer in time than the first (x), which would be the second wave of such a megaphone pattern. So, even if the wave lengths should become correct, the time signature is not.

Bottom line: this could just be the (b) wave of minute ((iv)) to provide better alternation with the minute ((ii)) wave, when it is counted as a sharp and not as a flat. Either way, we are, right now, back in Minor 3.

Well, that's it for the night. You can see why Elliott Wave counting requires a lot of perseverance and the ability to face some uncertainties, because the way waves are inherently structured there are some times multiple possibilities at once. Let's see how it goes.

For now, have a very good evening!
TraderJoe









Monday, September 11, 2017

Some new all-time highs, Some not

Market Outlook: Still in Minor 4
Market Indexes: ES Futures, SPY new all time highs; SP500, and DJIA not.
Today's Candle: Higher High, Higher Low, Higher Close

Today's hurricane relief rally produced some new all-time highs as listed above. The ES S&P500 Index futures made a new high - just by one tick; the cash market did not. This tends to limit the number of possibilities going forward. First, let's look at the four-hourly chart of the ES futures.

ES Four-Hour Futures

On the above chart, you can see the marginal new high. The primary purpose of the day's action was to close the gap from September 1st - shown by black circle on the chart. This was accomplished by opening the gap up this morning shown by the red circle on the chart. As we stated earlier, gaps on the futures tend to close more quickly than those on cash. So, now, we have no gaps above in the futures market, and only gaps in the downward direction on the futures chart.

Because of overlaps and the lengths of the waves in the futures at the current time - as well as real time counts from the chat room - we can only claim that the upward wave counts as a triple zigzag, upward. Keep in mind  that once a triple zigzag ends, it is always terminal in one sense or another.

Now, the three-waves down shown as (A), (B), (C) on the above chart can very likely be the minute ((a)) wave of a barrier triangle. This would make sense, since the major indexes did not make new highs today. That would make the triple zigzag upward as the minute ((b)) wave of the same triangle. So, we will post that count on the S&P500 Index Cash Hourly chart, below.

S&P500 Cash - Hourly - Minute ((a)) and Minute ((b)) of Barrier Triangle

In barrier triangles, the ((b)) wave should not make a daily close above the 0 mark. As long as that doesn't happen, then we are still in the barrier triangle. The ((c)), ((d)) and ((e)) waves are shown only for direction, not length of the waves necessarily. The eventual outcome of a barrier triangle is usually a brief, sub-standard length thrust out of the triangle. This is because the market expends it's energy banging up against that upper barrier.

Given the FLAT wave minor 2, the barrier triangle is the only likely alternating count with it. That's why it is the most preferred scenario at this point in time.

As an alternate, it is possible to get a zigzag-x-flat, with the minute wave ((a)) as the zigzag, and today's up move as the "x" wave. But, in that case, it would be best if the cash index did not make the new high.

Only in the case of closing new highs in cash would we conclude that the waves of the triple zigzag are the five overlapping waves of an expanding diagonal fifth wave that ends Minor 3, and that the downward wave lengths were not long enough for Minor 4. (If this later scenario was correct, then there might be downward overlap problems with it that we will look into again tomorrow, but it is the reason this is our least preferred scenario.)

In any event, the count is so sloppy we know we have been in The Fourth Wave Conundrum of one degree or another. On the very short term five-minute chart, one additional up wave in this series seems likely, as the Elliott Wave Oscillator (EWO) on this time scale is sitting right on zero. Such as wave might make a false breakout and fail temporarily. I say temporarily because even a barrier triangle allows for new highs in the cash market.

Well, regardless of where you are, I hope this helps.
Have a good start to your evening.
TraderJoe

Saturday, September 9, 2017

Backing and Filling

Market Outlook: Still in Minor 4

There remain no changes to The Eight Fold Path Method chart shown below. Over the last week some backing and filling has occurred - a bit more of which is possible.

S&P500 Index Three-Day Chart - The Eight Fold Path Method

From our experience with The Fourth Wave Conundrum, we know that everyone wants to know what the internal count is. The fact us there are three equally valid ways to count the internals at this moment, and that is what we are working on in the live chat room. It has been tedious, and filled with numerous twists and turns for not a lot of point gain or loss.

Still, overall, I expect Minor wave 4 will touch the lower channel boundary, and the Elliott Wave Oscillator will drop down into the -10% to -40% range of the peak high value.

Regards,
TraderJoe


Tuesday, September 5, 2017

Vacation Over

Market Outlook: Still in Minor 4, Lower
Market Indexes: Major U.S. Equity Indexes Lower, DJ Utilities Higher
Today's Candle: Lower High, Lower Low, Lower Close

Equity markets as measured by the S&P500 Index closed Friday at 2476, and took off the long weekend. When they returned, supposedly partly because of the North Korea situation, but later supposedly aggravated by the White House insistence on repealing the Dreamer Act, and the prospects for a budget fight, the cash market gapped down at the open to 2466, rebounded about 6 points to 2472, then fell part into the mid-afternoon, reaching 2446 by 1 PM, and then started a corrective looking rally into the close to finish the day at 2458. When you see the Dow's hourly chart, below, you will see it was clearly another case of "open a gap to close a gap".

So that we don't confuse things, we'll start in order from the beginning with The Eight Fold Path Method first. Here is the three-day chart that we have shown here before numerous times.

S&P500 Three-Day Chart with The Eight Fold Path Method

 As you can see the Elliott Wave Oscillator (EWO) is still red, and declining overall. It should attempt to hit +10% to -40% of the prior Minor wave 3 high, and price should still attempt to hit the lower channel - one way or the other.

From last week, we showed you this up count on the cash S&P500 Index, for what counted at that time as an X wave. We had  to wait and see if prices would ever exceed that high, and they did not. So, our counting was dead on and held by that 0.25 points!

S&P500 Half-Hour Chart - Count of X Wave Upward

The above chart is not complete as of the end of the day, but we posted it in the real time chat room to show that wave (1) downward had been overlapped, and later again (not shown) to show that the ((A)) wave had been overlapped eliminating the variations that could have - but didn't - result in an impulse wave upward.

So, since the wave above did NOT retrace 90% (it only retraced) 85%, and three waves down precede it, the best count we have is the (a), (b), (c), (x), (a) ... count: the potential double or triple zigzag lower. In fact, the DOW only has a 78.6% retrace, and we'll show that chart below so you don't think we are playing games with 5%.

DJIA Cash - Hourly - With 78.6% Retrace Only

Remember, for a FLAT, which this is not, the rule is that the 90% level must be made. This didn't make it, so this is not a flat wave. The only good question that a serious Elliottician can ask, is "is it possible that (a), (b), (c) are actually the first wave of a diagonal, with the (x) wave as the second wave with one of those retraces that is characteristically between 62 to 85%?" And the answer to that question is an emphatic YES! But then, such a downward diagonal, which would likely be Minute ((a)), would have to form properly in every detail. So, that hasn't happened yet. Let's see if it does, or if we only get double or triple zigzags, lower.

OK. Now for those of you who read our "Sunday School" post about the overnight markets, this is how we updated that chart in the real time chat room.

ES E-Mini S&P500 Index Futures - Half Hour Chart - Overnight Session

Clearly, from our update, after the b wave flat, we were expecting a c wave up as the opening bell rang. When that occurred, without filling the gap, and when the b wave was broken lower, it was clearly game on for a decline.

Once again, with backing-and-filling, we do expect the lower trend line on the three-day chart to be attained.

For now, have a very good start to your evening!
TraderJoe






Monday, September 4, 2017

Sunday School

Well. Not that kind. In sort of a rarity on this site, I thought I would document the overnight Sunday session of the ES E-Mini S&P500 Futures to see what they have to teach us. The cash market on Friday could barely move 11 points, but like an invisible bear in winter woods, the futures have this funny way of making big kills - yet not leaving any tracks in the snow (in the cash market, that is).

At some point, the seasoned trader must ask, "do the even futures matter?" Well, certainly they mattered to someone on election night because the futures were first down 100 points ($5,000 per contract), and then, after the halt, they were up 100 points, nearly as fast. But, how about now?

Certainly someone sold something in the overnight this Sunday night. The futures were down - at the lows - about 13 points on the supposed news of North Korea's A-bomb test. Hmm. Not even as much as they were down when a missile flew over Japan. A chart is below.

ES E-Mini S&P500 Futures - Half Hour

However, as the chart shows, anyone who "sold the news" and didn't wait for some kind of pull back would be under water (as the term goes). While those who took a chance on the X wave are in small profits.

There are a couple of interesting things to me. The first is just how quickly the market makers are currently able to stop a decline. One down candle per A-Bomb, I guess. Then, secondly - much as I showed on the Russell 2000 futures, there is a perfect diagonal that has formed from those lows. There are five waves up, the fifth is shorter than the third, the third is shorter than the first, the fourth is shorter than the second, the fourth overlaps the first, and they are all three-wave sequences.

Perhaps, that is an 'a' wave up. That remains to be seen by exceeding that high. In fact, I was very interested to see if that high was exceeded by the end of the session, but it wasn't, so possibly a 'b' wave down is forming.

And that is all very interesting, but the real question is, "what, if anything, does it mean for the cash market?". Why are so many (low-volume) trading hours being expended on this price movement, and the overnight still has another session to go from Monday night into Tuesday morning. Finally, we'd like to note that because the futures do trade 'nearly' around-the-clock, when they do form a gap, the gaps tend to fill quite quickly - usually more quickly than in  the cash market.

The reason I raise this topic is I have been questioning for many, many months whether to even bother to count cash anymore. Cash is a 'calculated, non-tradeable average', except in ETF form where it is clouded by the effects of dividends included in the SPY for example. And, if the futures can go down 100 points on election eve, and then right back up on election day, while cash does (gulp!), um, nothing, then of what relevance is the cash market?!

I think it is true that cash puts a damper on the futures market. It is harder to rig the cash market. And, ultimately, it seems the cash Elliott Wave count must work out. But, yet, it may turn out the futures market has some benefits for wave counters that the cash market may not. For example, what would the Elliott Wave count be in cash if the futures gap, above, closed immediately? What would the Elliott Wave count be in cash if futures prices continued to make lower lows? Remember, nothing since Friday afternoon is even included in the cash Elliott Wave count, yet.

As far as I can tell, this is an undeveloped topic - as far as typical day-traders go. Yet, inquiring minds might like to look into different scenarios to more fully develop Elliott Wave theory. One thing we know for sure, is that while Ralph Nelson Elliott did have overseas markets and gaps to contend with, he did not have to wrestle with this topic of the futures. Lucky him?

Have a very good continuation of your weekend, and your Labor Day, if you are in the U.S.
TraderJoe

Friday, September 1, 2017

The Fourth Wave Conundrum - Part 2

Market Outlook: Two Ways to be in Minor 4, Lower; One Way to Be in A Fifth Wave Up
Market Indexes: S&P500, DJIA, RUT, higher; NDX, lower.
Today's Candle: Higher High, Higher Low, Higher Close

The S&P500 had closed on Thursday at 2472. Prices gapped higher this morning on the soft jobs report, and on the "first of the month money" we said was often likely in previous posts. This is the typical new month inflows from pension funds, dividend reinvestment plans, company bonuses, etc. Prices then traded up to a high of 2480.38, and then started a slow fade on some profit taking late in the day, closing at 2476.55.

First, let's look at the big picture. If we take the weekly chart of the S&P, all that prices did on a low volume day like today was "grind" against the 1.618 extension. Here's a chart.

S&P500 Three-Day Chart with Extension

All day, prices just bucked up against that extension, and even given the soft labor report, and the first of the month couldn't bust it (today).

During the day, I set a limit on how I was counting the potential (x) wave higher. The good news is that level was not busted. It held by a quarter of a point. Here is how I was counting the potential y wave of the (x) wave. Remember, it should count as a-b-c to y. Right now, it does.

S&P500 Cash - Half-Hour Chart - Y Wave as ((A)), ((B)), ((C))

You can see the Fibonacci rulers. ((C)) = 1.618 x ((A)), in red, and (5) less than (3), less than (1), in blue. The problem is with (3) shorter than (1) right now, any movement over 2481 will invalidate the count and force an impulse count higher for this wave. Again, right now. It's OK.

Well, so here we are on a long weekend. And the futures will be open many hours when the cash market isn't. I can't guarantee this pattern won't bust. I can only objectively say, "it held today". It's kind of a real cliff-hanger, but it certainly is possible for the market to gap up seven or eight points on some weekend story or some foreign news. It's also possible for it to gap down. My market metrics are not good enough to tell for sure which will happen. Are yours?

And so, we must play the game of wait & see. The only thing we can say, is that - in terms of length - this up wave is greater than 1.27 times the length of the up wave from 21 Aug. That slightly favors an impulse count instead of the double zigzag. But, the EWO has headed lower, and that favors some continued downward movement towards the zero line. And the NQ futures did make a new all time high today, but closed lower. As you can see, not a lot to go on. In some ways, it feels like a game of chicken.

The Dow did fill it's first gap up - as I showed on yesterday's chart. But, while the S&P now has no gaps above, the Dow has one more such gap at 22087.

The two possible down counts for the S&P are (a), (b), (c), (x), with a further (a), (b), (c) to go. Or the 'possibility' of a leading diagonal, if this up wave breaks the ((A)), ((B)), ((C)) shown and turns into a clean impulse. That's because wave (2) in a diagonal must be an a, b, c zigzag from 21 Aug.

The DOW can be counted downward as just ((a)), and ((b)) at this time. The Dow has not retraced 78.6%, yet, but is beyond 61.8%. The problem with counting the Dow as (a) down, is that within the downward wave, there is no 1.618 extension. And so, the downward Dow wave counts better as a zigzag - like the S&P.

But, if the high in the DOW and the S&P breaks, then "most likely" we are into Minute ((v)) of Minor 3 still - one last gasp to finish Minor 3 before starting the larger Minor 4, down.

Even though we are into a resistance area here, people may have their 'opinion'. They may be bullish or bearish. We may break the all-time-high or not. But it's likely few people can conclusively state 'which' will happen, and why, from a wave counting viewpoint. This is the very essence of The Fourth Wave Conundrum.

For now, have a very good start to your weekend.
TraderJoe