Wednesday, October 4, 2017

Risk Increases - 2

Market Outlook: Still in Minor 3
Market Indexes: Major U.S. Equity Indexes Higher, except DJ Trans & RUT
SPX Candle: Higher High, Higher Low, Higher Close : Trend Candle
FED Posture: Quantitative Tightening (QT)

I'm still in the process of counting waves towards a potential top. A completed wave count is not in evidence yet. Here is way the S&P500 Index is being counted on the 30-minute chart. (Please ignore the degree of the waves shown. I just used these symbols to illustrate a point today.)

S&P500 Cash Index - Half Hourly - Current Count

This count was constructed very simply by drawing in the parallel channel, recognizing which wave as wave 2 would not cut off any portion of wave 3, and requiring that the up gaps be in the third waves. In doing this, you can see a portion of wave 3 is above the channel as expected, indicating the high momentum at that location. We also made sure we had no rule-breaking overlaps.

This morning, we had a brief downward wave that counted as a three-wave sequence, and it overlapped  the prior wave .iii before upward movement made new highs. For the rest of the choppy day I used Ira Epstein's swing-line technique to help clarify the up and down trend moves. As a result, the upward b wave looks like a three-wave sequence. It occurred on a divergence with the oscillator shown, and also stopped within a parallel outrigger placed on the high of wave iii.

Price left the swing-line neutral to lower at the end of the day. As a result, if price heads initially downward tomorrow and overlaps the 2535 level in cash, then we might expect a "running triangle" to occur preliminary to, or in conjunction, with Friday's payroll employment report.

The triangle would be about the only structure that could provide alternation with the flat wave 2, and it could get over to challenge the lower trend line boundary. Of course, such a triangle is not proven yet. But, if such a triangle should get validated, then triangles usually precede the last wave in a sequence. A triangle like this would invalidate below the low of the a wave in cash, and above the b wave. If price gets above the b wave before overlapping 2535, a diagonal would be the next option. If price gets below the a wave, before exceeding the b wave, then an expanding triangle would have to be considered, but, so far, so good.

Futures volume was again extraordinarily low, and volume is somewhat diverging from price here.

So, enjoy the rest of your evening the very best you can.
TraderJoe

4 comments:

  1. Someone asked about tax cuts and I guess they assume it will prevent a market crash. FYI: Hoover and the GOP passed tax cuts at the end of 1929 after the market crash. Then they raised income and corporate taxes significantly in 1932. Whoever thinks the stock market will go up or down based on taxes, think again! The Revenue Tax Act of 1932 passed in July. The stock market made an all time bottom in June of 1932. Stocks rallied very hard and never made new lows again, even though taxes skyrocketed on corporations and individuals! Regardless what tax cuts get passed, the markets really don't care.

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  2. If the market didn't care I doubt russell 2000 would be up over 30% from Election Day lows. This is in less than a year.

    With the amount of technology involved in trading now can we really compare the market today with a period so long ago?

    You seem adamant there will be a crash but we are yet to even see weakness.

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    1. I don't see how technology makes a difference this time? Technology was to blame for the last couple flash crashes. In 1920 to 1921, the Dow fell 47% after housing and commodities crashed. In 2008-09, we crashed 54% after housing and commodities crashed. So, our crashes are more severe than the past. Technology obviously can't prevent a crash or depression. Stock valuations are at 1929 levels, that's a fact. I have significant amount of data that resembles the 1920s. Nothing compares to previous bull markets in the last 100 years! Period!

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    2. Ok good luck. Are you positioned for this crash? I think you will be wrong and there will no crash for years.

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