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!


  1. This market should have no problem selling-off until October. It should't matter if Congress passes tax reform or raises the debt limit. It's already priced in.

  2. Market leaders did not show the weakness needed for a strong folllow through to the downside today. It's going to need to happen soon or I think we are going higher. Ugh.

  3. thanks for the clarity; beautiful work!

  4. Thanks Joe. As we are only 1% or so away from new ATH so it's far from out of the question we rally above Minor 3. what would be the implications of this?

  5. I believe it's a 98% chance we are in Minor wave 4. New all-time highs unlikely.

  6. Thanks.
    Today's price has confused me on the count. Can you please update.