Thursday, November 30, 2017

Getting Closer

Market Outlook: New Highs Occurring after Hourly Triangle in SPX
Market Indexes: All Major U.S. Equity Indexes were higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

From yesterday's post, we were clearly expecting a fourth wave and higher waves overall, and we asked you to keep at least one eyed peeled on the pesky legislators in the U.S. The market, as measured by the S&P500 index closed yesterday at 2,626. Overnight there appeared signs of more agreement on a Senate vote, and the futures were higher overnight. The cash market gapped up +7 points to open at 2,633 and, when Senator John McCain voiced his support for the Senate tax plan the market shot up to 2,658.

When the gap up occurred on the open, the presence of a rare "running fourth wave" was quickly surmised, and we will show that on that futures chart below.

ES E-Mini S&P500 Index - 2 Hour Futures - Rarely Running Flat wave (4)

Here in this two-hourly chart, the whole wave from the end of the triangle ((e)) wave is being shown. We did this because the Fibonacci ratios on cash were making no sense, and then quickly it became apparent that wave ((3)) was headed for the 1.618 Fibonacci extension, which we called, and it made in real time (and then some!). For the rest of the day, prices traded down under that 1.618 level.

The running fourth wave was valid in both cash and futures as it's y wave crossed back under the high of wave (3), insuring it was corrective to it. The reason it is a running flat, is that in a regular flat the y wave would have closed under the w wave. It this case after a more than 1.618 wave x, it's y wave closed much higher than the w wave.

So, now we have the waves in a clear channel, and it should be clear with the new higher high on the Elliott Wave Oscillator (EWO) that a higher high is still possible. We can, of course, go into a fourth wave at any time. On a lower time scale, there 'could' still be one higher high within this wave ((3)), up. Time will tell. I would not expect wave ((4)), whenever it starts, to be done until the EWO comes back down to within about +10% of the zero line.

How high can this market go? Well, when we find the end of a wave ((4)), we'll have to add the distance of wave ((1)) to it, as an initial target. For now, we have to monitor the shorter term charts in the live chat room.

Please note that after the cash close, the futures made a lower low than cash did.

That's it for tonight. Again, keep your eye on the U.S. legislative process, as they try to pass a tax reform that balloons our deficit, gives money away to the corporations, penalizes the poor by removing their health care rebates, and continues to steal money from middle income retirees by keeping interest rates artificially low on the one hand, while they tell us this is good for us on the other hand. It's so good many wealthy businessmen don't want anything to do with it!

Well, have a good start to your evening. Write your legislators if you care. I have.

Wednesday, November 29, 2017

A Matter of Degree - 3

Market Outlook: New Highs Occurring after Hourly Triangle in SPX
Market Indexes: Major U.S. Equity Indexes Mixed after SPX, DJIA, DJTrans new all time highs
SPX Candle: Higher High, Higher Low, Lower Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

Sorry for the late posting. Technical difficulties. The market as measured by the S&P500 had closed yesterday at 2,627. There was a small gap and a new all time high at 2,635 - meeting the objective for the thrust from the triangle. Then, some of the markets reversed, with the NQ hit the hardest, and down -130 points at one point in the day. Today's new all time high capped the third wave ((3)) on the chart below, and the sharp down move has likely put the wave count into the ((4))th wave. Wave ((3)) came very close to a 1.618 extension, but, suspiciously, did not quite make it.

S&P500 Cash Index - 15 Minutes - New ATH

Again, this is judging by the location of the gaps and the heights of the Elliott Wave Oscillator. There does not appear to be a good diverging peak for a fifth wave yet. Because wave ((2)) is a drawn out flat, then wave ((4)) should be a sharp or triangle for the best alternation. Wave ((4)) by rule may not overlap wave ((1)) for an impulse count. So far, so good. If wave ((4)) invalidates then we will look at alternate structures, but we do not need to do that now, so let's keep it simple.

From a slightly longer term perspective, the ES E-Mini S&P500 Index futures had their second daily close above the upper Daily Bollinger Band, so the odds of another day outside the band - by rule of thumb - drop to about 3%. That is certainly not impossible, but the probabilities begin to drop with each additional day outside the band. The daily slow stochastic is still embedded, however.

Have a very good evening, and keep one eye peeled on those pesky legislators in the the U.S.

Tuesday, November 28, 2017

A Matter of Degree - 2

Market Outlook: New Highs Occurring after Hourly Triangle in SPX
Market Indexes: Most Major U.S. Equity Indexes higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

We said yesterday, that there were two very good equal-and-opposite counts to have to monitor. One was a-b-c, up, which implied a down day, and the other was a diagonal wave (1), up, and retrace, which implied an up day. We also said as a direct result that the gap direction had to be monitored. Initially, the futures were lower over night, and then they were higher. The gap direction was up, the diagonal count won out, and prices headed higher into the close.

Here is the fifteen minute chart on the cash S&P500 Index out of the four-hourly chart's triangle ((e)) wave.

S&P500 Cash Index - 15 Minute Chart

Today's wave cracked above the channel, and is greater than wave ((1)), so we must allow that this is a third wave up ((3)). In the count, we have tried to keep the degree proportions between the waves similar. So, (3) of ((3)) approximates (3) of ((1)) - as best we can do it. The implication of this chart is that eventually, a fourth wave, circle ((4)) would come down near the prior wave (4) to make a better parallel channel.  But, first, confirmation of the end of wave ((3)) is needed.

Here is an hourly chart of the Dow, for comparison. The Dow never made a triangle.

DJIA Cash - Hourly Chart - Lower C than A is a FLAT

The Dow only made a FLAT wave, not a triangle, with wave C lower than wave A - which breaks the rules for contracting triangles. So, in terms of degree labeling in the upward count, if you check the point values, we have 3 < (3) < ((3)) as they proceed up the chain, and we have 1 < (1) < ((1)); so this seems to fit as it should. There are no overlaps in the Dow's upward wave count, and here again, the confirmation of a turn would be needed.

Well, that's it for tonight. Have an excellent start to the evening!

Monday, November 27, 2017

A Matter of Degree

Market Outlook: New Highs Occurring after Hourly Triangle
Market Indexes: Most Major U.S. Equity Indexes lower; DJIA, DJU Higher
SPX Candle: Higher High, Lower Low, Higher Close - Outside Candle, Doji
FED Posture: Quantitative Tightening (QT)

After spending much of the weekend reviewing the subject of degree violations on here, and to some degree in the chat room, I ran a test in the chat room today to see if anyone took it to heart. I posted a chart which had an obvious degree violation and thought I'd wait to see if anyone would notice it or mention it. As you probably guessed ... it was crickets by all.

The chart with the obvious degree violation is this one (five minute chart of the SP500 Index).

SP500 5-Minute Chart with Obvious Degree Violations

Even though I was expecting a fifth wave up today the chart above is clearly wrong, because waves ((i)) and ((iii)) are indicated to be of a lower degree than 1, but are way longer in price than 1, itself! This is impossible under the wave principle. It violates the very meaning of the term degree. One might just as well not be plotting waves if this principle is not applied. Still, no one even 'flinched' or said anything. OK.

Before we go too long, here is the chart corrected for the proper wave degrees, and it still results in both a correct chart, and a correct prediction.

SP500 5-Minute Chart With Degree Violations Corrected

Now notice that all of the nano waves ((i)), ((ii)), ((a)), ((b)), etc. are smaller than the minuscule waves 1 and 3, for example.

This is the big problem we're having on the daily and weekly chart of the ES and YM futures. And I have to do a lot more work to resolve it at the election low, and following.

Today, price did make another new all-time-high, and then made three-waves down to the 62% retrace of this wave only (not of the whole impulse wave out of the hourly triangle). The waves we were left with once the channel ended can be counted in entirely two different ways - so it will be another gap dependent day tomorrow.

The first way to count out of the downward parallel is an an entirely legal a-b-c up corrective sequence, with waves down following it. This is because within a possible c wave, wave ((4)) does not overlap ((1)). And because diagonals are more rare, this is how it was first counted.

SP500 Cash Index - 5-Minute - Corrective Count Out of the Channel

The second way to count is,however, as a contracting leading diagonal up wave, with a downward retrace wave following it.

SP500 Cash Index - 5-Minute - Possible Diagonal out of Parallel

Here is another one of those clear cases where exactly the same internal wave structures can justify two slightly opposite counts : granted this is on quite a small time frame. In this case, it's because wave (4) above does overlap wave (1), and there are no flat waves in the structure.

So, it's a case where we must let future structure dictate the eventual count.

Regardless of the short-term indecision in the market, there is no reason to count with degree violations, particularly price degree violations. Those are as illegal as wave 2 traveling beyond the start of wave 1, but they are apparently less noticeable to people. I'm sure I have made several unintentional ones in the past, and will also monitor myself to insure they don't creep in again.

There is a lot to learn - even on a relatively unchanged day.

Have a good start to your evening!

Sunday, November 26, 2017

How Does It Fit?

I thought it would be helpful to post how the recent triangle and the pop out of the triangle best fits on a slightly longer term chart of the cash S&P500 Index, using the fully disclosed methodology of The Eight Fold Path for Counting an Impulse.

Below is the four-hour chart of the S&P500 Cash Index. For the most part I am going to let the chart speak for itself, but there are few points I wish to emphasize.

S&P500 Cash Index - 4 Hr Chart - The Eight Fold Path Method

So now with at least 120 4-hr candles on the chart (remember, you show between 120 - 160 candles for the wave of interest), the first item that becomes apparent is way over on the left hand side of the chart. In order to avoid a degree violation then the prior waves must be inside a triangle. That is as a result of the fact that ((ii)) is larger than wave (e). Therefore, they can not be nested 1-2-i-ii by the very meaning of the term degree. Next, when you chose these locations for (i), and (ii) you can see that wave (iii) has very, very close to a 2.618 relationship to these waves. This is as expected. You are looking for a Fibonacci reason why the market chose 'this peak' as wave (iii).

Next, we note that wave iii of (iii) is on a peak of the Elliott Wave Oscillator (EWO), and wave v of (iii) is on the divergence, as shown. Next we see the triangle wave (iv) has the classic wave four signature under The Eight Fold Path Method in that it travels to between +10% to -40% of the peak value in wave (iii). In terms of alternation, we note (iv) as a triangle, alternates with the sharp (ii), and iv, as a large flat, seems to alternate with the sharp ii. That also makes each of the fourth waves longer in time than their respective second waves.

Further, after applying the channel guidelines in the method, we note that wave (iv) did indeed attack the lower channel boundary, and then price had a quick rebound. So, we would expect we are in wave (v), and that wave (v) would show a divergence on the EWO. In terms of a price target, a (v) = (i) target would be a reasonable. That level is around 2,630. So, it is possible that the thrust out of the triangle only becomes a sub-wave one of (v) if needed to reach this point. If so, then there would be a second wave pull-back.

I need to say that reaching this target is not a foregone conclusion. Price is grinding along the underside of the channel now, and may be too tired. We'll see.

Have an excellent remainder of the weekend.

Friday, November 24, 2017

Shortened Holiday

Market Outlook: New Highs Occurring after Triangle
Market Indexes: Most Major U.S. Equity Indexes higher; DJTrans lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Today (Friday) was only a partial day of equity trading in the cash markets. The NYSE closed at 13:00 ET today. In the process, some very interesting things happened. First, the $VIX made a new lower daily low today. A daily chart of the VIX is below.

Daily $VIX makes lower daily low today

Further, the S&P500, and it's ES futures, along with the NQ futures made new all time highs today. The DOW did not. Interesting.

On the hourly S&P500 Index chart, the new all time high puts us into a fifth wave, as below.

S&P500 Index - Hourly Cash Chart - Higher All Time High

On this holiday day, I am, today only, going to post how the wave that broke out of the triangle is being counted in the live chat room on a five minute chart of the S&P500.

S&P500 Cash Index - 5-Minute Chart - From the Live Chat Room

If you study this chart in detail, there is an awful lot that can be learned about Elliott Wave analysis*.

First and foremost was a contracting leading diagonal wave (1) that was called in real time. All of the measurements of that contracting diagonal fit perfectly. Wave 5 was shorter than wave 3, wave 3 was shorter than wave 1, wave 4 was shorter than wave 2 and overlapped wave 1 without traveling beyond the end of wave 2. And each wave is zigzag sequence: within the diagonal there are no flat waves. This leading diagonal predicted a strong third wave ahead of it. That was correct. Next, a flat wave (2) was properly identified - again in real time. The flat consists of A, B, C where the B wave is higher than the (1) wave. This wave (2) consumed 52 5-minute bars and was longer in time than wave (1). Next is the strong wave (3) which has greater than a 2.618 extension over wave (1).

Notice that no part of wave (3) breaks an imaginary line from the point marked ((C)), the origin of the wave, through the point marked (2).

Once wave (3) had made a satisfactory count, then a lower swing low was made, and we were able to count a zigzag correction as A, B, C, where the B wave missed making a new ATH by an incredibly small margin. But, it's as if to provide alternation, the B wave could not make that new high. So, we pointed out the excellent alternation between waves (2) as a flat, and wave (4), as a zigzag.

Note, too, that wave (4) consumed 71 bars, and was longer in time than wave (2), and challenged the lower trend channel boundary - just as it is expected to do. Notice that wave C of wave (4) can not be counted as anything other than a contracting ending diagonal (because of internal overlaps). And all of the measurements of that contracting diagonal fit perfectly. Wave ((v)) was shorter than wave ((iii)), wave ((iii)) was shorter than wave ((i)), wave ((iv)) was shorter than wave ((ii)) and overlapped wave ((i)) without traveling beyond the end of wave ((ii)). And each wave is zigzag sequence: within the diagonal there are no flat waves.

Then Wednesday, we had a short stubby first wave up, 1, followed by another one of these long loopy flat waves for 2. Today provided wave 3 in the five non-overlapping waves shown, and the likely start of wave 4. A critical point about the count on wave 3 today is that the gap up could not be counted as "three of three". If you look at the low that precedes the gap, price is at the very bottom of the bar. Therefore, it was - correctly - surmised that the gap was only wave ((i)) of 3, and there were more waves to follow: which there were.

Once wave 3 was completed, the smaller up channel was re-drawn from the wave 1 terminus, to the wave 3 terminus, so that part of wave 3 is above the channel. This is as it should be. This is wave 3 showing you where the highest momentum of the wave was. So, to alternate with a flat wave 2, then wave 4 again should either be a sharp or a triangle that starts with a sharp. So far, so good.

You can see from the wave traveling outside of the channel, the lower RSI(5) peaks, and the angle of the various waves that momentum is now being lost!

This five minute chart has a lot to teach one about counting longer term waves without having to purchase someone's proprietary (and often wrong) tutorial. If you can obtain the tools and have a real interest, you can do this for yourself, following the rules and guidelines as they have been already defined. And you can do it on any chart from the 5-minute, to the hourly, to the daily, to the weekly.

* when working quickly in the real time chat room I did not keep the degree labels consistent with the hourly chart, and did not change them to keep the chart "just as done in real time". That's ok, degree labels can always be changed after the market closes.

I truly hope this example helps you and others out. If so, please help pay it forward, and let others know.

Have a good weekend,

Wednesday, November 22, 2017

Less than 38% Retracement

Market Outlook: New Highs Occurred after Triangle
Market Indexes: Most Major U.S. Equity Indexes consolidated prior gains
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 Cash Index had less than a 38% retracement today in a day of light volume consolidation. This is likely a fourth wave. A chart showing the retrace is below.

S&P500 Cash Index - Hourly - Less than 38% retracement Today

The alternation pattern provided is excellent, since wave ((2)) had a higher b wave within it as a flat, and the ((4))th wave did not have a higher B wave, but also took more time than wave ((2)). So far, this seems well within normal parameters. For an impulse wave, wave ((4)) would invalidate if it were to overlap wave ((1)).

Have a safe and excellent holiday!

Tuesday, November 21, 2017

Triangle Validated and Confirmed

Market Outlook: New Highs Occurred after Triangle
Market Indexes: Most Major U.S. Equity Indexes were higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

You probably know already that the S&P500 Cash Index did, indeed, make new all-time highs today. This occurred on the completion of the proposed and validated triangle, higher.

As measured by the S&P500 Index, the market closed yesterday at 2,582 and overnight the futures were much higher. So the market gapped higher at the open to 2,589. When price surpassed the (d) wave of yesterday's triangle, it was clear the triangle had both validated and completed. The updated hourly chart is below.

S&P500 Cash Index - Hourly - Validated and Completed Triangle

Prices then climbed to 2,601 before falling back slightly to close at 2,599 and change. The above triangle was validated when the (e) wave crossed back over the origin of the running triangle, and the triangle was confirmed as a triangle, and completed when the new all-time high was made this morning. It was entirely appropriate to consider the potential expanding diagonal as corrective.

For form and balance, the EMA-34 has been added to the above chart, and it can be seen that every triangle leg is on an opposite side of the EMA-34.

For comparison, the ES E-Mini S&P500 Futures chart is below. You can see how it has a much better formed (e) wave - because of the news story in the overnight regarding the loss of a coalition in the German government - and yet how it had even a more likely w-x-y-x-z, downward for the (c) wave as that shape does not look much like a diagonal at all.

ES E-Mini S&P500 Index Futures - 4 Hr Chart - Deeper (e) Wave

The only people that you will hear deny this triangle are those that didn't patiently count it's every twist and turn. The thrust out of the triangle came as no surprise, but does not appear to be completed yet.

And, the triangle poses a special little problem to the outright bears - such as certain Elliott Wave services - because it is another running triangle. We have not seen a good "interior" triangle yet (one who's B wave does not exceed the origin of the triangle) but perhaps we will if  the market properly forms the wave ((4)) shown.

Keep in mind that with these higher so-called breakout highs, the ES volume again shrank to only 1.1 MM contracts, and breadth was only 2:1, not the 3-to-6 : 1 which is more characteristic of massive impulses.

One interesting thing to note: as it stands right now, wave ((3)) of the thrust out of the triangle is only 1.27 x wave ((1)). That could mean that wave ((5)) will become the extended wave in the sequence. Doesn't always happen, but it could.

Well, that's enough for this evening. Have a very good start to yours and best wishes for safe holiday travel if you are heading out on the road, on the rails, the water, or in the air!


Monday, November 20, 2017

Usual Expectations - 3

Market Outlook: A Challenge of the High is Underway
Market Indexes: Most Major U.S. Equity Indexes were higher; NDX lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

All parameters for the potential triangle in the hourly S&P500 Cash Index remain in place. The chart is below. The futures were somewhat lower overnight, on news out of Germany, but not a single tick of that made it into the cash session today. Interesting!

S&P500 Cash Index - Potential Hourly Triangle

There remains a slim possibility the triangle ended on 17 Nov with the crossing of the (0) point, the high of the prior third wave. We expected today to be higher. It was. Tomorrow, too, could be slightly higher yet, maybe a close a gap, and still be a B wave within a continuing (e) wave of the triangle.

The invalidation point for the downward (e) wave, is the high of the prior (d) wave to the up side, and the prior (c) wave to the down side.

It seems more likely that (e) wave would continue, as this would help provide a better look to the triangle, and it would likely help better serve the overall purpose of a triangle which is to waste time and travel sideways.

The alternate count remains the Expanding Leading Diagonal (shown as the w-x-y-x-z, here) until or unless the high at (b) is violated.

Have a good start to your evening.

Friday, November 17, 2017

Usual Expectations - 2

Market Outlook: A Challenge of the High is Underway
Market Indexes: Most Major U.S. Equity Indexes were lower; RUT higher
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

Let's continue where we left off yesterday. The market, as measured by the S&P500 Index, closed yesterday at 2,585. While other sites and analysts took the bullish case hook-line-and-sinker, we took a different approach and said to monitor the gap direction. Prices gapped lower at the open to 2,582, and traded down to 2,579. In the process, they confirmed the case we stated yesterday that to begin any new down count, the prior wave 4 would have to be exceeded lower in less time than wave 5 took to form. That occurred on the open, the continued five-minute chart is below.

S&P500 Cash Index - 5 Minute Chart - Wave 4 Beaten in Less Time Than to Build Wave 5

The blue arrow shows how much time it took to beat the wave 4 low, the green arrow shows how much time it took to build yesterday's wave 5. So, we started a downward count. We counted five waves down, including a gap in wave (3), and monitored almost all day as a triangle formed wave (4). Without wavering, we expected a new low out of the triangle, and that occurred in the last thirty minutes of the day, making a complete five-wave sequence (:5) down to the 2,577 level. And, the gap was not closed for the balance of the day.

On this chart you will see two boxes: the first is the "height" or number of points of wave (2). We contended that the purpose of the triangle was to help equalize the net distance traveled by wave (4). Since wave (4) is measured by it's E wave, the net distance traveled thus became remarkably consistent. If the wave movement ended at B, the A wave retrace would have been "too large" in terms of net points traveled, for a fourth wave compared to wave (2). We waited, and waited, and then the thrust out of the triangle occurred and made the new lows of the day. Please note the down movement "may" not be over. Wave (5) could further subdivide. In fact, after the cash market closed the futures did continue lower still.

As far as I can tell, this is now the five waves down to an ((A)) wave, of a larger correction. What larger correction?

Shortly after the open I published in the live chat room, this chart of a potential much larger triangle in the S&P500 Cash Index - Hourly. It is a 78% triangle in both directions with waves (c) and (d) both 78.6% retraces of their prior waves.

S&P500 Cash Index - Hourly - Potential Larger Triangle

It is entirely possible to count a-b-c down to the (a) wave of the triangle, and a-b-c up to the (b) wave of such a triangle. Both of these would be the "simple-legs" of the  triangle, and then the potential diagonal downward would better count as w-x-y-x-z as the "complex" (c) leg of the triangle followed by yesterday's :5, :3, :5 upward to another "simple leg" of the triangle, and then, we were expecting an (e) wave downward to also be a simple leg. In a running triangle such as this, it is required, that the (e) wave, cross down over the origin of the triangle at (0), the prior third wave, and it did that at the close.

So, there is now a validated it or not. Could the (e)  wave go lower? Absolutely. Does it have to? No. But, keep in mind that so far we have a five-wave down count in this last leg. So three-up, and five more down should at least be expected next. And, keep in mind, some seven leg triangles have been documented in the annals of Elliott Wave history that would add an (f) and (g) leg if the market needs more time to make it to an important event or news announcement, let's say. The only reason we mention that is this triangle - while is has the right look - may be a bit stubby, yet. Hard to know how it will finish.

Now, is  that Leading Expanding Diagonal down from the top dead? No, it most certainly is not. But, again, this is exactly what I have been trying to communicate to you is the very essence of The Fourth Wave Conundrum: exactly the same valid wave structures can result in different interpretations of the current count.

That's fine with me. I'm used to it. As I said in my YouTube channel video, it is in the fourth wave (or diagonals) that people want to know what the count is. They think things like, "don't make excuses; just tell me the count, what the target is, and how many more points up or down. I need to know what the count is because I'm being whipped around like crazy". Sorry. That is the reason I coined the term. I can show you in detail how to count. I have done that above and on numerous charts. What can not be done with high probability is state what direction the next break out will be. So, we are patient and try to do our best job counting each wave. We leave the fortune telling to others. In short, the above triangle could break up or down.

What makes the Leading Expanding Diagonal slightly less probable now than the triangle is the fact that, as a diagonal, it did not make a new low below (a) of the triangle. Why not? Well maybe it is not expressing true Motive character - the ability to get prices really moving in one direction or the other, downward in the case of the Leading Diagonal.

If you're a savvy trader, you might say, "the trend is friend until it is not". And that might add odds that the next break will be in the trend direction (or up in this case). And often that works, until the last time.

Well, that's enough for me today. Have a very good start to your week.

Thursday, November 16, 2017

Usual Expectations - So Far

Market Outlook: A Challenge of the High is Underway
Market Indexes: All Major U.S. Equity Indexes were higher; NQ futures new ATH
SPX Candle: Higher High, Higher Low, Higher Close - White Soldier
FED Posture: Quantitative Tightening (QT)

In yesterday's post we wrote, "The retrace downward at the end of the day, today, was to the 62% level so a further up leg is possible to near the level of the B wave of (5), if the gap direction tomorrow is up." It was. And price exceeded that B wave location, quickly eliminating at the open that wave (5), lower would sub-divide. (Wave 2 of a C wave may not travel beyond the start of the B wave).

The market as measured by the S&P500 closed yesterday at 2,565. The futures were higher overnight and price gapped up at the open to 2,573, then climbed to 2,590 intraday. As soon as we saw the B wave exceeded, we drew the confluence of these two Fibonacci levels on the chart.

S&P500 Cash Index - Half-Hourly Chart - Fibonacci Confluence

We took the extension from yesterday's intraday high and low (in blue), and the retracement of the entire move upward (in green). These were the only two Fibonacci levels that agreed: a 78.6% retrace, and a c = 1.618 extension. Those two measurements also were in the area of the (4)th wave of one lower degree.

For the day, this upward location held price rather well, and it started to back off a bit into the close. But, we did not get confirmation (yet) of a lower wave beginning. Let me explain with reference to the 5-minute Neely-style chart below.

S&P500 Cash Index 5-Minute Chart Neely Style

Yesterday, I was able to count "five waves up", shown as the :5 (which is a structure label, not an Elliott wave progress label). It literally just means "five waves up" that meets the definition of an impulsion. Then, I was able to count "three-waves- down" as A,B,C to the location marked :3. Again, this is a structure label that only means "three-waves-down" that meets the definition of a corrective structure. And today, with the gap up, it was possible to count another five-waves up, again, as :5

But, the gap was in a very odd location - it could not be counted as a "three-of-three" gap. It could only be counted as a "1". So, when you include alternation, it seemed like the best count was as a sharp for wave 2, and a flat for wave 4. This would mean that was 3 was shorter than wave 1, and so wave 5 would have to be shorter than wave 3.

In the chart above, you can see the 5 = 3 location. Somehow price never crossed it today, and the rule of wave three not being the shortest has, so far, been met. Very interesting.

BUT in counting in the downward direction, while we got some overlaps, we did not, by the close, meet a key Neely guideline for beginning a downward count. That guideline is that to start a down count, the down wave should beat the wave 4 label, today, lower, in less time than wave 5 took to form. Now, there is nothing magic about the close; this guideline could be met on a gap downward tomorrow. But, so far, it hasn't. So, the gap direction again becomes key tomorrow.

As long as this guideline is not met, then all we have in the upward direction so far is :5, :3; :5 in which the second :5 is 1.618 x the first :5. That means there "could" be another five up tomorrow. Or, there doesn't have to be and an upward corrective wave could be over for this index. This is simply the way Elliott Wave labels are assigned, as I understand it, in the Neely method. So I wanted to show a relatively clear example.

But, once again it places us in the position of having to monitor the gap direction tomorrow for further clues. This is not always the case, but we are still in The Fourth Wave Conundrum hopping around and opening and closing gaps. Today's gap up open helped close two of the gaps shown in black circle on the half-hour chart, above. But, now there is a gap both above and below the market.

Suffice it to say, the usual expectation of a 78.6% "deep retracement" after a diagonal wave has been met. And the question is "what's next"? Will an impulse form upward, or will price movement in the downward direction resume? It is very, very difficult to find a set of market metrics that can predict the overnight gaps when the market is not clearly in trending mode. Anyone who has better clues on that score, please let us know!

As you can see, sometimes not being able to clearly predict the very next wave is not a matter of whether a person can count or not. Sometimes, the market must leave the situation unclear enough so that there is enough uncertainty to make a market. If there weren't uncertainty, the market would cease to function because it would become one-sided. 

In the meanwhile, thanks for all your comments yesterday. I may not have gotten to all responses yet, but I will. It was a bit overwhelming to not to get anything for days, and then to see so many. I truly do mean, "thanks", but, also, I hope you will help spread the word about the blog. I'm not advertising, and so word-of-mouth is the best.

Thanks again for helping, and have a good start to your evening.

Wednesday, November 15, 2017

Another Lower Low Day

Market Outlook: A Top of "Some Degree" appears in Place
Market Indexes: All Major U.S. Equity Indexes were lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 Index closed last night at 2,579. The futures were lower overnight, and the market gapped down ten points to open at 2,569 and continued lower to 2,557 which was fully -20 points lower, validating a count we had started yesterday in the live chat room and referred to in the blog post yesterday. When the market bottomed at that level, a sharp rally was mounted back to the 2,573 level, but not closing the opening gap.

Yesterday, I said I would share with you the downward count we developed in the cash index if it came to fruition. That count is shown in the S&P500 Index Cash Half-Hourly chart below.

S&P500 Cash Index - Half Hour Chart - Downward Count

This morning we got validation of a properly formed expanding diagonal in the downward direction. Wave (5) is just longer than wave (3), Wave (4) is longer than wave (2), but does not cross above wave (2)'s high, wave (4) overlaps wave (1) in the upward direction and they can all be counted as zigzag sequences lower.

By showing you the yellow (5) flag in an even lower location, it should be clear that it is possible that the diagonal continues lower. In order words, the C wave of (5) could sub-divide, with the current C wave location only the first wave of C. Time will tell.

As we indicated, the EMA-34 is currently headed lower. That has been telling. The retrace downward at the end of the day, today, was to the 62% level so a further up leg is possible to near the level of the B wave of (5), if the gap direction tomorrow is up.

So again, either we have a diagonal to the all-time high ending a fifth wave up, and a diagonal downward, starting a down trend, or the upward diagonal is just a (b) wave, and the downward diagonal is the (c) wave of a flat.

The VIX made a higher high today going all the way back to Aug 21, but it's daily slow stochastic is not yet in over-bought territory. And the daily ES E-Mini S&P500 Future today hit it's daily lower Bollinger Band, but it's daily slow stochastic is not over-sold yet, either.

Today we discussed a slightly different count in the ES E-Mini futures (versus cash above), because the futures make their high at a slightly different location. The two counts are currently "compatible" but they are not the same. The advance-decline line, and up / down volume continued to decline.

Right now, I am monitoring the speed of the decline (price points per number of days) to determine it's significance for longer term charts. But, so far, so good.

The daily chart that shows the best possibility for a (b) wave high - instead of a fifth wave top - is the NQ daily index. However, price has traveled low enough today, that it is time - and advisable - to include the invalidation point on the ((iv))th wave of this daily chart. Here is that chart.

NQ Daily - Last Chance for a Non-Overlapping ((iv))th Wave

I have to admit, I am quite disappointed that people are not contributing by commenting on the blog. Further, I see that readership lately is down. If readership was up, and commenting was down, I'd think you were just satisfied with what your are seeing. With both down, it makes me think I should back off considerably  as people are not spreading the word regarding what is here, and neither are they paying significant attention to it either.

Well. Have a good start to your evening. Time for me to relax, too!

Tuesday, November 14, 2017

Small Point Losses

Market Outlook: Topped (more probable today) or still topping
Market Indexes: All major U.S. Equity Indexes were lower; DJUtil higher
SPX Candle: Lower High, Lower Low, Lower Close - Hanging man or Hammer
FED Posture: Quantitative Tightening (QT)

The market as measured by the S&P500 index closed yesterday at 2,585. Overnight the futures were lower, and the market gapped lower at the open today down to 2,578, then traded lower to 2,566 before rebounding, in the process creating a lower low day than yesterday. The rebound appeared to occur in three choppy waves: 2580-2572-2580, so far, to the 62% retracement level.

Because of the lower low day, the potential red wedge count alternate today lost "the right look", as below. It no longer looks like a wedge. Therefore it will be eliminated in the next update.

S&P500 Cash Index - Daily - Red Wedge Lost the "Right Look"

Therefore in the ES 4-Hr futures, we published this potential ending diagonal after the market opened. This diagonal would correspond to the blue wedge in the daily cash chart, above.

ES E-Mini S&P500 Index Futures - 4 Hr - Potential Ending Diagonal

The clear alternate for this count is the B wave of a flat or triangle, but until there is more price movement, it is difficult to assess. We have started a downward count in the live chat room, but it has not proven itself yet. If or when it does, I will let you know.  As always, for such a diagonal to prove itself, price must exceed the start of the diagonal at iv in less time than the diagonal took to build.

Meanwhile, you can feel the tug-of-war as the daily E-Mini S&P500 Index futures traded on both sides of the 18-day SMA, "the line in the sand", closing slightly above it at the settle.

Please note that while a triangle did not technically invalidate by the end of the day, it's "look" is strained a bit also at this time. That is because the upward b wave would look extraordinarily long in comparison to the other waves. But, a triangle could develop more proportionality and I will keep monitoring for it.

In the mean time the 4-hr EMA-34 now has a downward drift to it. So that is something to keep an eye on as The Fourth Wave Conundrum still requires the same commodities: patience and flexibility.

Have a good start to your evening.

Monday, November 13, 2017

Small Point Gains

Market Outlook: Might have topped or topping
Market Indexes:  DJIA, SPX, NDX Higher; RUT slightly lower
SPX Candle: Outside Candle Higher
Fed Posture: Quantitative Tightening (QT)

The futures were first higher overnight, then lower in the morning. The cash S&P index had closed Friday at 2,582. They gapped down about six points this morning to open at 2,576, and traded down to 2,574 before quickly reversing to chop their way higher, filling the opening gap, to close at 2,584 or up about 2 points. While they did whip around (as might be expected in a diagonal or triangle) the overall point gain on the close was very modest. In the process of closing higher, the cash market did close Friday's gap down, but not Thursday's. The chart is below.

S&P500 Cash Index - Daily - Potential Red Wedge Still in Tact

While the cash market did make an "outside day higher", the ES E-Mini S&P500 Futures did not. But, as of the settle anyway, the futures did, for the first day, lose their embedded slow stochastic reading if it holds into the close of trading. The only day the futures could get it back would be tomorrow.

The red wedge in the cash market has not been invalidated.  We provided the invalidation levels in a previous post. But, we want to be clear, as of this time ...

There are two other plausible or possible counts - other than an ending contracting diagonal - right now, 1) an overall triangle dating from the 23-October high, and 2) a downward expanding diagonal from the high. This is precisely The Fourth Wave Conundrum that happens at every degree of trend, and we will have to take our clues from gap direction. Nothing says upward price movement is over yet, and careful monitoring of the over-night is temporarily needed. (For the triangle - just start a line down from the highs).

Again, the DJIA has already invalidated any further contracting upward diagonal - as it's fourth wave would be too long for it's second wave - and it's MACD is not looking very healthy. You might like to review that one. The Dow has not invalidated a larger triangle.

Also, the summation index on the Nasdaq is not looking very healthy, as per this weekly chart.

NASDAQ Summation Index Weekly

The slow stochastic looks rather ominous here. And while it could hitch up, it tends to be rather smooth in it's movements.

It's just another reason why patience and flexibility are needed at this time.

Have a good start to your evening.

Sunday, November 12, 2017

It's Time ... For Time

A lot of people try to comment on price levels in the U.S. stock market. Great. Me too. But fewer people comment on time relationships in same. I think some people are a little less comfortable dealing with time and how it is expressed in the wave principle. So here are some charts for you to review.

Plus or minus .. give or take .. the stock market often expresses it's time relationships in simple Fibonacci numbers. The current "big picture" is first. At present, each of the turns may represent a simple Fibonacci number (1, 1 ,2 ,3 ,5 ,8 ,13 ,21 ,34 ,55 ,89...and so on).

Fibonacci Numbers of Years in the U.S. Stock Market

And, similarly, within the wave up from 2009.

Fibonacci Number of Years in U.S. Equities

In this case, in particular, the first corrective wave, (2), is longer than a year, and the second corrective wave (4) is shorter than a year, but both adding up to about two years. Plus-or-minus, give or take, making the whole sequence eight full years - almost approaching nine.

What I then found interesting, as we may be in that (5)th wave up, is that the current expression of time is another simple Fibonacci number.

Fibonacci Number of Months in U.S. Equity Markets

We are twenty-one (21) full months from the February, 2016 stock market bottom. (The first full month would have ended in March, 2016.) If a turn were to occur here, would it be a coincidence? Inquiring minds would like to know.

Enjoy the rest of your weekend.

Friday, November 10, 2017

Taxes - What the "Powers That Be" Don't Get

Corporations are legal 'entities' that are allowed to be greedy. If the kindergarten teacher sends a note home with Billy - that he won't share the crayons with the other students - then his mother wacks him upside the head when he gets home.

But when CEO William comes home, many years later, and says that he's taking the whole family out to celebrate his mother's birthday - made possible because of the profits he led his company to over the last year, and bonus received, then the mother misguidedly beams with pride at the successful lad.

Profits are the excess of what the customer paid to purchase  an item over what the company paid for the raw materials, labor, distribution, and retailing, etc. - pure and simple. Not many are against making reasonable profits. Otherwise, there would be little incentive to open a business or remain in one.

The problem is when CEO's and Corporations get so greedy that they forget why they are in business. Some think it is to maximize shareholder wealth. Some think it's all about their company reputation. Some think it's all about their bonus. There are precious few CEO 's that will work without a bonus. What? Only get paid for the job I do? Nothing extra? It goes on & on. The result is that may CEO's can make 50x, 100x, 200x, 300x or more what their first line workers make - like the worker doesn't have to get out of bed and provide breakfast for the kids, too. Sickening.

Further, because of the high-priced Corporate lawyers, many Corporations don't have to currently pay Federal income tax, at all.

Here is how USAToday reports it, "There are 27 companies in the Standard & Poor's 500, including telecom firm Level 3 Communications (LVLT), airline United Continental (UAL) and automaker General Motors (GM), that reported paying no income tax expense in 2015 despite reporting pre-tax profits, according to a USA TODAY analysis of data from S&P Global Market Intelligence."

Clearly this situation seems unfair to most taxpaying Americans. They pay their taxes, and the best lawyers can prevent companies from paying any taxes.

First and foremost, Americans want to see the greedy Corporations and the wealthiest of the lot not to be able to escape paying their income taxes. The taxes are needed to fund the infrastructure that allows the companies to be successful in the first place. They use it. They should help pay for it. This, I think, is what most of us mean by a "fair" tax. It's one applied to all but the poorest, according to our means to pay. So, this is the first thing that must be fixed.

Second, unfortunately in the U.S., determination of what is "excess" compensation falls - you guessed it - to the IRS! The Internal Revenue Service monitors to see that "in comparison" the reported wages make sense. Huh? It results only in a never-ending upward spiral of CEO pay. This clearly results in the increasing income disparity we see among the 1%. I contend that the tax system can be used to make bonuses less attractive than straight-forward compensation. For example, bonuses could be taxed at a much higher rate than wages - this would make them less attractive, until they are taxed out of existence. It is precisely items like this that most people - if they have an honest discussion about it - want to see fixed via the tax code.

Third is simplicity. Simplify Corporate taxation so that all companies use exactly the same accounting rules, and arrive at the same result. Lawyers not needed = companies become more profitable and competitive. Then, apply a rate that helps make the companies globally competitive. But, eliminate many of the unfair practices compared to the worker. One such glaring example comes to mind. Why are companies allowed to "buy-back" their own shares? Doesn't this amount to trading on inside information? Only the company gets to time it's buy-back with the knowledge it has which no one else has. And why are such costs (as all business costs are) tax deductible? No, it seems that if a company wants to buy-back it's shares (supposedly for some strategic reason), it should actually pay a penalty for doing so. The reason is quite simple - if the company has too many shares outstanding, then it must have somewhere made a mistake. That is the very definition of "too many". And mistakes in business should be dis-incentivized, not rewarded.

Along the lines of income tax simplicity, most individuals recognize the sheer nonsense that is going on. Why are your social security benefits taxed, at all? If it's a benefit - just reduce the benefit by the amount that would otherwise be taxed and save all of that needless calculation and paperwork! This is only the tip of the tom-foolery iceberg.

Why do you pay in withholding taxes to the system, only to apply for a refund at the end of the year? This is crazy. Let's take it away, and try to get it back. Huh? This is what insane people do when they are not banging their head against the wall. Please stop. Isn't there a fair way to have an employee just state what their situation is in the year, and have the taxes paid by deduction and be over and done with it? No financial calculations - not even the post-card. Just a status update. I'm married with four children, and I own a home, with a mortgage of X, and pay property taxes of Y. The taxing authority just then calculates the appropriate deductions during the year. No audits - because it is THEIR fun with the numbers, not yours.

I could go on & on. There are many, many more examples of idiocies in the system. And there are just as many ways to make a taxing system more simple and fair. All one has to do is think a little outside of the box. Unfortunately, all of our government leaders seem to be stuck glued inside that box! At least for now.

Today was an inside day, with the market down slightly for the week.
Have a good start to your weekend!

Thursday, November 9, 2017


Market Outlook: Possibly Topping this Week
Market Indexes: All major U.S. equity indexes were lower.
SPX Candle: Lower High, Lower Low, Lower Close - Hammer Candle ?
FED Posture: Quantitative Tightening (QT)

If you did not read the special post this morning, you are encouraged to read the prior post HERE before reading this one.

The market as measured by the S&P500 Index had closed yesterday at 2,594 in what we suggested was a "b" wave. It may have been. The futures were lower overnight, and the market gapped lower to open at 2,584, and traded down to 2,578, then up to 2,587 before turning tail and dropping to 2,566 (fully -28 points lower), before turning around to trade back up to the 2,587 level the lower edge of the gap.

During the day, we gave precise price points for the levels that would cause the daily S&P500 Cash Index or the ES E-Mini S&P500 Index Futures to lose their short-term daily diagonal shape. Those levels are 2,562.96 in the cash index, and/or 2,558.75 in the December futures. Neither of those levels were hit today before the markets rebounded into the close. Today's downward retrace was just shy of the 62% mark of the prior swing low. Both of those levels remain in effect for tomorrow.

So, we now have the case in these two indexes where the fourth wave of the daily contracting diagonal could be at today's low, and one more zigzag up is needed to complete the wave sequence. Here is the simplified picture on the cash index.

S&P500 Cash Index - Wider Diagonal or Topped?

However, the DOW has broken it's near term diagonal pattern, and therefore may have topped. It is also possible for the above sequence to have topped as well - but since it contains more influence from the NASDAQ 100 stocks, we are giving the S&P500 more time.

The blue wedge line above shows the diagonal that may have topped with a truncation. The red wedge line shows the continuing potential diagonal.

The Dow Transportation Index continued to make lower lows, as in the chart below, and closed a prior mid-point gap that is shown with the black circle.

Dow Jones Transportation Index - Gap Closed

Because the NQ futures "may" still be in a longer fourth wave, we must allow as an alternate to all indexes that the "wedges" are difficult to count (b) waves. There's no problem with that. That is the usual alternate for a diagonal. A quick look at the NQ futures, below, will explain why.

NQ Daily Futures - "Possible" Flat or Triangle Wave (4) ?

One thing is clear, this was the largest down candle in the NQ since back in the JUL - SEP 2017 triangle. It literally seems like just a question of how the wave finishes. A triangle here would be superb. But .. only time will tell. So patience, calm, and rationality are still needed.

At the lows of the day, the daily ES E-mini S&P500 Index futures were both trading below the 18-day SMA, and had lost the embedded slow stochastic status. Both of them were regained before the close. As Ira says, "it's not over 'till it's over".

Have a very good start to your evening.

EMU - Fifth Extension Terminal

EMU = Early Morning Update, Before the Thursday Opening Bell

Over the course of the weekend, I outlined how because of price and/or time degree violations, the Weekly ES E-Mini S&P500 Index futures could be tracing out the larger pattern known as the Fifth Extension Terminal (or Expanding Ending Diagonal).

I'm sure many of you "rolled your eyes", and said, "yep, sure it is". Again. I am only trying to correctly observe the rules and guidelines to finish a Primary 5th wave, in whichever way that happens. And I am trying to show that you don't need to break the rules or re-invent completely impossible bogus patterns (such as one site's irregular zigzags) in order to complete Elliott Wave counts.

Elliott Wave International may have one way of seeing the market terminate here - which does count correctly. So, we must respect that view. But again, that pattern doesn't channel well, and it may contain a time-degree violation in the cash market and a time & price degree violation in the futures market.

However, yesterday afternoon in the real time chat room, I was able to call a smaller degree Fifth Extension Terminal in real time, and, since I got confirmation on it early this morning, wanted to provide this example to you in near real time at the moment of confirmation. The example is on the NQ Futures - 30 Minutes in the chart, below.

NQ Future - 30 Minutes - Fifth Extension Terminal

The pattern was called in the chat room at the end of wave a of (v). And what is vital about this type of pattern is how violent the fifth wave is. It is, after all, the extended fifth wave. The extended fifth wave is where the pattern takes it's name from. Now Neely says this pattern can often be a "C" wave, most usually, or a fifth wave. And in this case it might be the c wave of a B wave. We can't be certain yet.

But, what we can be absolutely certain of is that a valid diagonal was able to be called in real time. And we know that because you are seeing this chart at the near moment of confirmation. The down move out of the diagonal, completely retracing it, occurred in less time than the diagonal took to build! Thus, the diagonal was fully and completely confirmed.

Now I know what some of you might say. Well, it's some other goofy B wave - like a triple zigzag. But, we know that simply can not be be the case in this instance, because there is a rising pattern - likely an a wave of a larger B wave - appearing as the wedge lines before this wave. Therefore, this pattern must, in, fact, be a terminal, an ending pattern. And triple zigzags are always a pattern into themselves. Further, and very importantly, triple zigzags usually, "most-often", occur in a channel. And the central feature of this pattern was there was no way to draw a channel!

Once again, here is just another view on how the stock market could top - following the same logic - if it does not top with this diagonal following the Elliott Wave International count.

ES E-Mini S&P500 Index Futures - Potential Fifth Extension Terminal

Again, the very specific rules for the pattern are: Wave (5) longer than Wave (3), Wave (3) longer than Wave (1), Wave (4) longer than Wave (2), but Wave (4) does not break below wave (2)'s low, Wave (4) overlaps Wave (1), and each wave is a zigzag pattern.

Have a very good start to your day.

Wednesday, November 8, 2017

Likely B Wave

Market Outlook: Possibly Topping this Week
Market Indexes: NQ futures made a new ATH; not Dow, S&P, RUT or Trans
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

There are two ways to interpret today. Either the today was the low of wave (iv) of the diagonal we have been showing on the ES 4-hr chart, with a slight truncation, or today's high was b up of (iv) down. The latter interpretation is preferred right now, as new higher highs were not made today.

Here is the cash chart.

S&P500 Daily Cash Index - Wedge

There was downward overlap, and the ES 4-hrs did cross the EMA-34 in whippy action. We'd expect the whippy action inside a diagonal. That's fine. A lower low before a higher high would make a more proportional count, but we must also not forget that there could be a truncation at the high of a significant wave, as well. Time will tell.

The Dow Transports actually continued to make lower daily lows, as below.

Dow Jones Transportation Index - Daily - Lower Lows

For now, have a good start to your evening.

Tuesday, November 7, 2017

Near Round Trip

Market Outlook: Possibly Topping this Week
Market Indexes: DJIA, S&P500 cash new all-time highs, ES and NQ futures too!
SPX Candle: Higher High, Lower Low, Lower Close - Outside Candle; Doji and/or Key Reversal
FED Posture: Quantitative Tightening (QT)

So far, so good. The market as measured by the S&P500 cash Index, closed Monday at 2,591. Futures were higher overnight, and the cash market opened with a small gap up, and traded up to a new all time high of 2,597. Then, as if on cue for a "turn around Tuesday", stocks headed lower and traded down to 2,584 by noon - in the process breaking yesterday's cash daily low. At that time, they began to trade sideways to up for the rest of the day and closed at 2,591, closing only 0.49 points lower than where they started. But it was enough for the cash market to make an outside range day, lower, and possibly a "key reversal", although the point change was quite small.

So, here are the two charts we showed you yesterday. The first is of the S&P500 cash index channel and how price again found resistance at the upper channel, then reversed to trade lower.

S&P500 Cash Index - Daily - Resistance at Upper Channel Line

Price is still inside that daily wedge at the highs.

And here is the ES E-Mini S&P500 Index Futures - 4 Hr Chart showing two possibilities for the wedge.

ES E-Mini S&P500 Index Futures - 4 Hr Chart - Wedge Counts

If one adjusts the trend line across the highs we showed yesterday, now shown in blue, above, then we can still be in the formative phases of the potential diagonal. However, if one keeps the original trend line (now shown in red, above), then it is possible to see today as the "throw-over" of the trend line, and the potential end of the move. The alternate count for the completed diagonal is shown in red below the pattern. In this second case, October 18 is "a" of (i), and October 19 is "b" of (i) and October 21 is "c" of (i) of the completed diagonal.

The uncertainty in the two counts goes back to how the market bottomed back in late August and/ or in September. Did it bottom as a simple zigzag or as a triangle? This affects the number of waves upward to count. In live chat room today, we were able to show a satisfactory counts on the triangle and completed diagonal combination, but only said it was possible. There is no confirmation yet.

In the above ES chart, trading below 2,558 would invalidate the black diagonal, and begin to confirm the red diagonal. Because of the choppy internal trading today, we must have patience until there are more impulsive clues as to resolution. But, so far, so good.

So have a very good start to your evening.

Monday, November 6, 2017

Some Resistance at the Highs

Market Outlook: Possibly Topping this Week
Market Indexes: DJIA, S&P500 cash new all-time highs, ES and NQ futures too!
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Since I wrote a lot over the weekend, I'll keep this brief and the let the charts speak for themselves.  The market, as measured by the S&P500 Index closed Friday at 2588. At the open, the index dipped two points, then began climbing, eventually making a marginal  new high at 2,593 by 15:30 EST. The cash market is seeing some resistance at the highs and from the parallel channel shown below.

S&P500 Cash Index - Daily - Some Resistance at the Highs

Both cash and futures prices are potentially trading in a wedge shape, shown above, and, as below.

ES E-Mini S&P500 Futures - 4 HR - Potential Wedge

And so, it is possible we are counting a potential contracting diagonal. So far, the trend lines are holding nicely. For a well-formed diagonal, wave (iv) should trade below the blue EMA-34 shown. Of course, wave (iii) must still hold first as a shorter wave than wave (i).

Have a very good start to your night, and to your week!