Tuesday, February 28, 2017

NOT The Eight Fold Path

Sometimes, to learn whether a method is useful or not, it is helpful to see it's predictions in action. This is an S&P500 5-Minute chart for the price action on February 24th and 27th (Friday and Monday), which was published in the live chat room yesterday.

SP500 5-Minute Chart : NOT the Eight Fold Path

While some traders might have been tempted to label this up-wave as a five-wave sequence, from the perspective of The Eight Fold Path method, while there can be 'construed' to be five-waves-up, if one tries hard enough, there are three big difficulties with it.

The first is this: It is almost impossible to count the first two waves as anything other than a first wave up, (1) and a sideways second wave (2). And that is regardless of exactly which peak the tentative wave (1) is placed. Next, it is very difficult to position wave (3) as anywhere other than as shown, because if the subsequent peaks were used, then it would make wave (3) a diagonal, and, in an impulse wave, wave (3) is never allowed to be an entire diagonal, itself. So, that clearly would make wave (4) the triangle - which I called out in real time; and most likely "last wave up dead ahead". But, that very triangle is the difficulty for the impulse count. Because the triangle has a higher (b) wave, then it does not provide alternation for the higher (b) wave of wave (2). So, to summarize, the first problem is no alternation.

The second problem is to notice that wave (4) does not come down to attack the lower channel line, as delineated in the method.

Third: Notice the EWO signature is surprisingly close to that required by the method, but not quite. The peak reading of the EWO does not represent a third-of-a-third wave, even though there are the required number of candles on the chart. So, my view yesterday in the live chat room especially given the only marginal highs on the Dow and the S&P was "probably just a B wave".

Today, prices have fallen sufficiently low enough to conclude we do have the C wave of an expanded flat (probably within a larger fourth wave) underway. What form that C wave will take (impulse or diagonal) will be interesting in and of itself. Regardless, another prediction from the methodology is likely coming true.

Hopefully, this type of rigorous, fully disclosed, procedure, can be more useful than "guessing" where letters and numbers go on a Elliott Wave chart.

Have a great day!
TraderJoe


Sunday, February 26, 2017

A New Video - Which Changes Things Most Likely


While I do not like flip-flopping on counts, I am trying to get it right, as it might be very important. I hope you will have some patience and flexibility. These things take time.

Thanks and have a good weekend,
TraderJoe

Saturday, February 25, 2017

Minute ((iii)) of Minor 3 is now Complete

In my post of February 21, entitled William Tell, I stated that I was looking for a contracting ending diagonal to end minute wave ((iii)) of Minor Wave 3, of Intermediate Wave (3). On February 23, a fairly reliable reader wrote in to say that the contracting ending diagonal was busted. And, as far as his comment, it was correct in-so-far as I had published the potential diagonal. But, it turned out I was working on numerous things that day and didn't have time to closely visit the situation. But I did this weekend, and this is what I found: a diagonal did, indeed, complete in good form. William Tell, told!


ES E-Mini S&P 2 HR Futures Diagonal Correct in Every Detail

As you can see, within the diagonal, wave v is shorter than wave iii, wave iii is shorter than wave i, wave iv is shorter than wave ii, and wave iv overlaps wave i. The diagonal is perfect in every detail. There is even a beautiful B wave triangle shown which is before the last upward wave.

I apologize to all readers because this error turned me around and caused me to look for a much larger running triangle instead of the diagonal. Once again, diagonals (like potential triangles) are funny birds. They will tend to fool you and sometimes distract you with odd time relationships. But, this one is now completed. And I have no qualms with the reader because he is usually very accurate, and I'm sure he was just trying to be helpful. And, then again, it was mostly me that rushed the count to scrap heap without proper verification. But, the reason I apologize is that I am trying to help build your confidence in regular old EW Theory. And making errors does not help that cause!*

And, so too, one can see with the correct number of candles on the chart we now have the Elliott Wave Oscillator now making that characteristic fourth wave signature, currently at between +10% to -40% of the previous peaks.  Further, we have the situation where wave ((iv)) has come down to attack the lower trend channel boundary - just as it should in The Eight Fold Path Method. And because wave ((iv)) is currently a zigzag, it does, of itself, provide sufficient alternation for the very sideways minute wave ((ii)). And that is regardless of exactly where you position minute wave ((i)).

So, now the question is does minute wave ((v)) proceed directly from here, or does minute wave ((iv)) extend further lower? Well, if that is truly a diagonal (and not it's cousin the triple zigzag B wave upward), then it should try to retrace to it's origins in less time than it took to build it. One thing that does seem odd in this entire up wave is that there has not been even a 38.2% retracement so far. Perhaps (.. just perhaps..) that is what's coming.

There simply aren't any guarantees, but this blog is about what is most common and usual about Elliott Wave theory, and it is not uncommon at all for a fourth wave to have a 38.2% retrace, yet it is not required. Regardless, we should now drop the upper edge of the channel so it only contracts waves minute ((i)) and minute ((iii)) to look for the end to minute wave ((iv)), if it is not done.

If the President addresses the joint session of Congress on  Tuesday February 28th, it might have some impact on this wave. We'll see how it goes.

*Note: I am very well aware that some people don't want to see regular EW verified. This is either because they want to believe things like, "you can only see it in the past", or "Prechter made too many bad calls", or some other guru has the supposed keys to the universe. I, on-the-other-hand, am just trying to show you that with hard work and persistence, a person can understand this theory. I am also very well aware that some people want to use every wave top as a place to go short, or something similar. That is not at all the purpose of this article. (I will try to better address some aspects of trading with Elliott Wave in an upcoming video).

Have a good weekend.
TraderJoe

Thursday, February 23, 2017

Best Hourly Count

So, even though the potential wave three of a diagonal shown on Tuesday's post did, in fact, remain less than the 2368.50 needed to be shorter than potential first wave of such a diagonal, the wave traveled far enough (as per the comments section yesterday) that a fourth wave could not downwardly overlap and remain shorter than the second wave, as required in a contracting diagonal. And even though I suggested one more higher high could be made, "rules are rules" and they will be followed.

None-the-less, the potential wave count did serve as an excellent "tell" precisely because we can now know for sure that we are not in a diagonal. (See post William Tell).

That being said, there are about 115 candles on this chart of the hourly S&P500 Index, and so that tends to indicate with today's sharp downward movement and lack of a new all-time-high in the afternoon, that a triangle might be in progress instead of a diagonal.

The rationale is below the chart.

SP500 Index Hourly - Potential Running Triangle

Examing the chart, we see that wave (iii) of ((iii)) is on the maximum of the Elliott Wave Oscillator, at a 2.618 Fibonacci extension, and wave (v) of ((iii)) is on the first divergence. If we look at the lengths of the corrections - just in terms of time, not price - we see that no correction, so far, has been remotely long enough to correct the strong minute ((iii)) wave in terms of the time taken by the advance.

And, if we look solely at alternation, we see that wave (iv) alternates with wave (ii) since wave (iv) is a short sharp, and wave (ii) is a long flat. But, then we see that wave (a) down of the potential triangle would not alternate well with minute wave ((ii)) lower at the bottom of the chart. In fact, they are the same shape! So, this suggests that we need a wave that is long enough in time to provide a decent length of a correction for minute wave ((iii)), and one that will alternate with minute wave ((ii)). A decent triangle would do that at this point in time. I have sketched in the potential triangle.

Tonight and tomorrow, I would watch to see if 2359.50 is exceeded lower in the futures, as that is the low of the B wave that was counted in this afternoon's upward waves. If that is exceeded lower, then most likely, a downward wave is in progress. Of course, a low below 2353.00 futures would solidify the correction in progress, and the invalidation point is the high of today's cash C wave upward at 2366.40 (cash), as a running triangle like this one must contract.

And, there is a reason I have not suggested a flat wave for the type of correction, even though a flat might provide the needed alternation. The (b) wave of this triangle is just inside a 2.618 extension on the (a) wave. That most likely means a "running correction" is in progress, and, again, a "running" triangle would fit that bill.

Such a correction might get us to the end of the month until the new month begins with the possibility of inflows from pension funds, bonuses, 401k's, etc.

This weekend I will address the "most likely" alternates as price moves forward - even though we have been correct, so far, that price is finding some resistance at the channels shown yesterday on the linear and log charts. Is it perfect? It seldom is.

A word for those following Gold. It can now be counted that Gold can have "five waves up" in the form of a contracting diagonal, with today's higher highs. Nothing rules out a B wave as a triple zigzag - since every contracting diagonal must be comprised of three zigzags. But, I wanted to at least confirm that "five waves up" can be counted (although there may be one or two more slight new highs to go.) The chart is below.

GOLD Futures - 4 Hours - Five Waves Up Can Now Be Counted

One point being, in order to even make this count, one needs to learn how to be able to count diagonals (leading and ending, expanding and contracting), and triangles, because they are all legitimately there, and shown in near real-time.

In the overall count, at the present time, wave 5 is shorter than wave 3, wave 3 is shorter than wave 1. Wave 4 is shorter than wave 2, wave 4 overlaps wave 1, and they are all zigzag sequences. So, a contracting diagonal is currently valid, provided that wave 5 remains shorter than wave 3. Wave 3 was 0.618 the length of wave 1, so there may be a similar relationship between wave 5 and wave 3. Then, if it really is a contracting diagonal, the low of 0 must hold. If the whole structure is a triple zigzag B wave, the low of 0 might break.

Truth be told, I do not like diagonals and triangles very much: they are murder on the nerves. But, it is not possible to follow the rules of Elliott Waves unless one learns to manage them. That's some food for thought.

Cheers! And have a good night!
TraderJoe



Wednesday, February 22, 2017

Nothing Changed from Yesterday

Nothing has changed from yesterday. An overlap downward of 2051.50 on the ES March futures would help confirm the fourth wave of a diagonal to possibly end minute ((iii)) of Minor 3 of Intermediate (3). But, a minor new high can occur first without invalidating the opportunity - but not beyond the levels we provided yesterday.

In the meanwhile, here are two longer term monthly views - one linear scale and one semi-log scale.

SP500 Monthly Linear Scale

Nothing in this chart is to be construed yet that upward movement has ended.  But, there may be some resistance at this original monthly channel line.

SP500 Monthly Semi-Log Scale

Once again, nothing says upward movement has ended. Price is nicking above the mid-channel here and may find some resistance here, as well.

Enjoy the evening.
TraderJoe

Tuesday, February 21, 2017

William Tell

The market as measured by the ES E-Mini S&P Futures may be about to give us a big "tell" as to where the overall Elliott Wave Count resides, William (.. or Wilma). Many major market indexes made new highs today, some of them, twice. With that in mind, and momentum still strong, it does suggest we may still be in the minute wave ((iii)) of Minor wave 3, higher.

But, there is a significant caution because of overlaps at the end of the day. If we look at the ES two-hour chart, there is one location (the 2320 level) from which I can count only three-wave sequences.

ES E-Mini S&P Futures Two-Hour Chart

The chart above shows the three-wave sequences (connected with blue swing lines) to show the internal a, b, and c sequences of a potential diagonal upward. The Fibonacci ruler, also shown, shows that minuet wave (iii) is currently shorter than minuet wave (i).

And at the close price acted much differently that it usually does. Instead of breaking the stops at today's high and following through to the upside, there was a bit of a sell-off instead.

So here is the "tell". If price in wave (iii) remains shorter that 2368.50 and a fourth wave downward begins and overlaps wave (i) at the 2351.50 level, first, then there is the possibility of a diagonal forming to end minute wave ((iii)) on the larger ES 12-hour chart, shown on Thursday February 16th, post at this LINK.

Again, diagonals must form properly, and wave (iv) would need to remain shorter than wave (ii), and wave (v) would need to remain shorter than wave (iii) overall, if and when we get there.

So, the upward invalidation is 2368.50, if that occurs before wave (iv) forms, and the downward invalidation for a contracting diagonal is that wave (iv) may not travel below the low of wave (ii), or be longer than wave (ii).

The market is getting increasingly choppy. All of today's upward movement after the sell-off to the 11:30 am low, was both hesitant and overlapping. If the upside invalidation level of 2368.50 is broken upward first, before wave (iv) forms properly, then the market is sub-dividing further higher, but it is hard to see that with all the three-wave sequences.

Hope this helps.
TraderJoe

Friday, February 17, 2017

Some New Lows, Some New Highs

The Dow cash, and the ES E-Mini S&P500 futures, along with the NQ futures made new lows today. The S&P cash did not make new lows today. The Dow and the S&P then rallied but did not make new all time highs. The NQ futures did rally to new all time highs, so now it becomes a question of which index you want to count and follow.

Pretty much regardless of which one you pick, the correction does not look quite over yet, because, particularly in the Dow, S&P and ES, price has not interacted yet with an internal lower channel line.  As just one example, the DJIA 30-minute chart currently has about 120 - 160 candles for the wave of interest at present (with 145 on this chart), as according to The Eight Fold Path Methodology.

DJIA Half-Hour With 145 Candles

The chart shows the clear gap - with the red circle - for wave (iii) of minute ((iii)), and it's located on a peak of the Elliott Wave Wave Oscillator, with wave (v) of minute ((iii)) on a divergence and just beyond a 1.618 extension of wave ((i)).

It also nicely shows that the Elliott Wave Oscillator has come back to within the required +10% to -40% as would indicate the minute ((iv))th wave (black circle on the indicator). The only thing that hasn't occurred is price touching the lower channel line.

With today's lower low, its clear the Dow made three waves down to the (a) wave, and likely three waves up to the minuet (b) wave which may not be finished yet. It could, of course, exceed the high in a flat wave. Then, the (c) wave down would be expected to touch the trend line in some manner. In the S&P500, this (b) wave has already met the 90% requirement of the retrace on the (a) wave. And, of course the NQ has already made the new high.

In this count, a flat or triangle wave ((iv)) would provide excellent alternation for the sharp minute ((ii)) wave. The importance of this trend line touch can not be understated. What happens if it doesn't touch? Well, let's say there were some big news announcement this weekend, like a new tax plan (we don't know there will be - just providing an example), and the futures spike 15 or 20 points Sunday night. Then, in that case, there would acceleration away from the trend line, and a larger third wave. Just keep in mind, at this time, the weekly ES trend line is providing some resistance here, as expected, so the fourth wave currently seems more likely.

Some new highs, and some new lows. So, let's see how it goes!

Have a nice weekend.
TraderJoe

Thursday, February 16, 2017

Either Way Minute Wave ((iii)), Now Possibly Minute Wave ((iv))

Some of you have asked what happens if the EWO should invalidate the count provided yesterday on the cash market, and how best to preserve the rule promulgated by Glenn Neely, of Mastering Elliott Wave fame, that no portion of a third wave should fall below the zero-to-two trend line. That count is in the chart below, using the ES futures (12 hr chart), only, so there can be no 'hidden waves', gaps, or other tricks to play with.

To avoid confusion you may wish to review yesterday's cash count to see how it is different before studying the chart below. To accept the chart below, one needs to seriously be on board with the concept of alternation. Second and fourth waves, according to Neely, should vary in amount of price, structure (i.e. sharp versus sideways), and / or complexity. The way Neely sees it, if any one varies, that is sufficient, but often times the waves alternate in two or all three characteristics.

ES E-Mini S&P 12-Hr Futures

So, starting at the left side of the chart on the night of the election, we see a first candle up, wave (i), and it has a red body, down, so that red body down is wave (ii), the next candle up is wave (iii), and then there is a long - relatively - running triangle which crosses it's 'e' wave back over the top of wave (iii), and it is wave (iv), and then the break out of the triangle is minuet (v), of the minute ((i)) wave in blue. This sequence, interestingly follows the rules for an extended first wave, as five is shorter than three, which is shorter than one.

Then, this would be the hard-to-swallow-part. All of minute ((ii)), in blue, is a sideways (w), (x), (y) flat that crosses down over wave minute ((i)) to be corrective to it. Next we have minute ((iii)), up, and no part of the zero-to-minute ((ii)) trend line is broken by minute ((iii)). Then there is a very short zigzag for minute ((iv)) that alternates in the extreme with the long minute ((ii)), and finally minute ((v)), up, of Minor 1. And interestingly, this sequence, too, follows the rules for an extended first wave, as five is shorter than three, which is shorter than one.

Then, as incredulous as it might seem, all of the sideways movement from 12-Dec to 02-Feb would be a sideways Minor wave 2. Since, wave 2 must cross back down over wave 1 to be corrective to it, and since a wave 2 can never be a triangle in it's entirety, then that means the structure of wave 2 is a flat-x-triangle or ((w))-((x))-((y)) where ((y)) is the triangle. This is the only valid structure I can find, and it was suggested in part by a reader here, mblcta, although the implementation was faulty.

And, by this count on futures, or yesterday's count on cash, we are in a minute ((iii)) wave, then, and possibly started a minute ((iv))th wave today.

Now the futures count would put the wave count in Minor 3, with the chance for the EWO to go higher. But one of the concerns with this count is the extremely shallow retrace of Minor 2. At it's deepest portion there would be only a 23.6% retrace on the cash market, and only about a 20% retrace in the futures. Once again, that is supposed to mean that wave 1 is the extended wave in the sequence.

For this reason, and with deference to the weekly ES chart, where we are finding some resistance at the upper edge of the weekly trend channel, I am again showing a wedge shape to the impulse (not a diagonal: a wedge-shaped impulse) as Minor 3 should be shorter than Minor 1. Also, with Minor 2 so long in time and sideways in the futures, then one would look for relatively short and quick fourth waves. Since this count does result in no part of Minor 3 being below the zero-to-Minor 2 trend line, I will monitor this count for a while and see how it does.

Thanks & with kudos to mblcta for the suggestion. This time around, it would work,
TraderJoe



Wednesday, February 15, 2017

Trend Line Touch

Today's movement was sufficient in the ES E-Mini S&P Futures to create an upper trend line touch on the weekly chart. Here is the chart, as a reminder below.

ES E-Mini S&P 500 Futures Trend Line Touch

Price still remains in Intermediate Wave (3). It can go higher. There was nothing at the close today to indicate a reversal was imminent or occurring (as far as I could tell).  It's possible for the upper trend line of the channel to provide some resistance here : that remains to be seen. Persons who follow the futures will now note that in this count, Intermediate (3) is now longer in points than Intermediate (1). Some had raised a concern in labeling Intermediate (2) as a flat earlier on that then Intermediate (3) wouldn't be a longer wave. Well, there it is (in the futures anyway).

Notice that a chart like this would now not envision a final top until at least the autumn because there is no ending signature such as a diagonal or a triangle (shown) at this time. Perhaps a triangle like that would be coincident with another "sell May - go away" scenario, this year.

While the internal count of Intermediate (3) is still a bit of speculation - because there is nothing conclusive to say waves have ended yet - this is the count that best fits The Eight Fold Path Methodolgy and the signals from the Elliott Wave Oscillator on the cash chart of the S&P500, using 120 - 160 candles. As I noted yesterday, if 2347 was exceeded - which it was today - then Minor wave 1 would be moved down to the post-election high, which is, interestingly, where I had it originally.

SP500 4-Hour Chart and The Eight Fold Path Methodology

Wave minute ((iii)) within Minor 5 has now exceeded 1.618 times minute ((i)). It should be noted on the cash chart today - with the fresh new highs - there are no gaps above the market, and all of the gaps are below the market. Novel, huh? It's going to be fun when the algorithms go "gap hunting".

Well, have a good night and stay patient and flexible.
TraderJoe

Tuesday, February 14, 2017

Two Items to Note

First, the easy part. With today's upward movement, the alternate diagonal we showed on Saturday with the intention to monitor and measure it did, in fact, invalidate today.

Now, for the slightly harder part. As of yesterday, we said we were still in the minute ((iii)) wave upward. As of tonight, we simply want to show the measurement that wave ((iii)) = 1.618 x ((i)). Here is the chart.

SP500 Half-Hour Minute ((iii)) = 1.618 x ((i))

As of the end of the day, there was nothing to say that price movement upward had necessarily ended. In fact, in the after hours, the futures were slightly higher.

If upward price movement ends in this neighborhood, then it's possible for a wave minute ((iv)) to form downward and not overlap. Further, the internal count on this wave is not certain. It is simply one that results in alternation.

If price exceeds 2347.12, then the count would likely result in Minor 1 being placed at the Nov 8 - 9 high, so that wave Minor 5 is not longer than Minor 3.

So, let's see how things go.  In the weekly ES chart, below, wave Intermediate (3) is getting very close to the upper parallel trend line. So, that is something to keep in mind.

Weekly ES E-Mini S&P Futures Contract Trend Channel

From a social perspective, today the President said, (paraphrase) "the market likes what we are doing and so it is setting records." Gulp. And  T.V. commentators are getting increasingly confident of no reversals. From a technical perspective, price, while the daily slow stochastic is embedded, is over the daily Bollinger Bands for consecutive days. And advancers and decliners were about even on this 'rally day'. Odd.

Cheers, and have a great evening!
TraderJoe

Monday, February 13, 2017

Minute ((iii)) Continues

In the S&P 500 Index, minute wave ((iii)) in the main count continues with small gaps higher. The alternate diagonal scenario (from Saturday) has not invalidated yet, but we will let you know if / when it does.

SP500 4-hr Chart : Minute ((iii)) Continues


As a special favor to all those interested in the GOLD market : from the year-end YouTube video, I said that for me to count GOLD in a more bullish posture, it would have to make a clean five-waves up. I have been commenting regularly on this in the live chat room, but due to overlaps at the onset of the yellow metals' recent advance, it is not yet possible to count five waves up, using The Eight Fold Path Methodology. Here is the four-hourly chart.


GOLD (GC  J17) Not Yet Five Waves Up

Due to those overlaps, I can only count W-X-Y, and I provided a warning last week of more potential downward overlaps that did, in fact, later occur (right-hand-side of chart). The initial overlaps appeared to be a part of an expanding leading diagonal which does count correctly for wave (i), on the left-hand-side of the chart. (Yes, a lot of overlaps to deal with!)

You can now see that W has been overlapped downward, as has the 'a' wave of Y. The problem from the perspective of The Eight-Fold Path Method is that the Elliott Wave Oscillator on X is way too deep to be a fourth wave. It is more than -40% of the highest value. In fact, it's more than -100% of the highest value!

Because Y is shorter than W, there is only one way I can see for the market to rescue a bullish count. Since W is a zigzag, X is a zigzag, and Y is a zigzag, then it would be necessary to form a leading contracting diagonal upward, and this downward wave would have to be both be shorter than X, and remain above the end of X. Then, another upward zigzag could form as a Z wave, or wave (v) in a contracting leading diagonal where W = (i), X = (ii), Y = (iii), X2 = (iv), and Z = (v). Then, such a Z wave or wave (v) would need to remain shorter than the Y wave or wave (iii).

Diagonals are sometimes rare birds, and there is no evidence for the upward wave Z, as of yet. So, until I clearly see "five waves up", it is possible to revisit the lows to finish the downward count. But, I will definitely keep my mind and my eyes open.

Until then, Cheers! And have a nice night.
TraderJoe

Saturday, February 11, 2017

IF the Market gets Testy

You know your best friend, or perhaps one of the children, or perhaps a classmate: You always expect them to be on their best behavior, but every once in a while one of 'em gets a little "Testy". It never happens to you, or I, of course, but we always have to be on guard to keep our cool if we see such things.

This post is about what happens if, while everyone is proclaiming "green lights" for the stock market, the 'ole girl just decides to get a little Testy. Before I even post this chart. I want to be clear that this idea is just an alternate at this time. There is, as it says on the chart, very little evidence for the count other than the potential shape of the current wave. It's not even fully formed yet. But, none-the-less this scenario is now 'possible' because of the wave lengths, and so we will present it with some very big caveats.


SP500 Daily Potential Wedge Alternate

First, one thing to like about this count is that it is one way Minor 5 could remain less than Minor 3, and still be in exactly the same wave location at the present time: minute ((iii)). Second, it would be taking place on a divergence in the Elliott Wave Oscillator. And, third, a count like this would tend to fill the upward gaps on the chart sooner rather than later. But, that's about it.

So now for the caveats. First, and foremost, we do not know minute ((iii)) is even over, upwards yet. Even in the live chat room it seemed as if the waves in progress were slightly unfinished as of now. Second, in this wedge or diagonal scenario, the diagonal must prove itself in every detail. A minute ((iii)) must remain shorter than it's minute ((i)) counterpart. Third, therefore, there must be an overlap of wave minute ((iv)) downward over wave minute ((i)), and that down wave must remain shorter than minute ((ii)). Fourth, a minute ((v)) wave upward would need to remain shorter than minute ((iii)) overall, and be in a three-wave zigzag on some smaller time-scale. And last & Fibonacci fifth, we note that the EWO is not even red yet so even developing the plan may be premature.

So, there you have it. A viable option: a plan B, as it were. And not a lot of evidence for it. It would mean that the DOW and the S&P ended their Minor 4th waves at two different times, and the S&P did not make a triangle while the Dow did. The scenario where they both made triangles is the preferred one for the obvious logical reason of keeping the indexes in-synch.

Once again, this chart is only an alternate, and is labeled that way. Right now it is just a plan on a piece of paper. Perhaps it will work out if Chair Yellen sneezes too hard in front of Congress in her testimony this week - or for some other reason of the market's choosing. All we do with alternates is a) keep them in mind, and, b) perform measurements to see if they remain viable. It does not mean we change our wholesale view on things, until or unless we see the evidence needed.

It does mean will will advise you if any of the upcoming price movement prevents such a diagonal from occurring in the proper form. I will add at the present time that such a scenario would invalidate overall above about 2335 because in the case where Minor 4 is not a triangle, then Minor 5 would become longer than Minor 3 at that level - given the new location for Minor 4.

Until then, have a great weekend.
TraderJoe



Friday, February 10, 2017

Minute ((iii)) Longer Than Minute ((i))

In the chart below, minute wave ((iii)) of Minor 5, upward, of Intermediate (3), upward became longer than minute ((i)), this morning. See the blue-colored Fibonacci ruler. This further tends to invalidate some of the possible diagonal scenarios people were throwing around the last few days. We said, Minor 5 could sub-divide as all the other Minor waves in the sequence have, and it has.

SP500 4-Hr Chart : Minute ((iii)) Longer Than Minute ((i))

Therefore, as long as prices remain in the tiny new up channel we sketched in there is no reason to conclude upward movement is over exactly yet. (We'd like to see a few more fourth and fifth waves in this general area - perhaps beginning Monday or Tuesday.)

BUT, if you've been watching the volume figures, they are growing smaller and smaller, particularly on the futures. This to me is another significant caution signal. It seems like the market is coasting and people are on auto-pilot or hanging on for dear life. I'm not sure which. Meanwhile, actual risk builds to the down side (in my opinion).

Well, that's all for today. Maybe some more over the weekend. Have a good night.
TraderJoe

Thursday, February 9, 2017

Minute ((iii)) of Minor 5 of Intermediate (3)

With the lack of overlapping 2283.97, downward, in the cash market, and subsequent overnight upward movement in the futures market, the price extension is enough that we must now seriously consider the best count as minute ((iii) of Minor 5 of Intermediate (3), as shown on this daily chart, below. (Remember: read ((iii)) as minute-iii or as symbol circle iii).

Figure 1. SP500 4-Hr Minute ((iii)) of Minor 5

And, when I said yesterday that "three waves down, and three waves up could still be part of a triangle count that would break upward, it was in reference to this following ES E-mini Hourly S&P chart on which I could count an Expanding Triangle which is correct in every detail. Notice how the waves A, B, C, D, & E expand in time as well as in points, and wave (4) does not overlap wave (1). The upward diagonal we counted at the end of the day was not fully retraced, and therefore had to be a leading diagonal. Crafty 'ole market.

Figure 2. ES Expanding Triangle (4)th Wave that does not overlap it's wave (1)

So, now that likely leaves the ? wave (question-mark wave) as a lone wave, and the Fibonacci ruler shows that as of early this morning the extension is greater than 1.618 x that wave. So, we 'should' consider that ? as a larger degree first wave, and everything after it as a third wave until that is disproved. You might want to draw your own channel around the larger wave set - as a guide only.

But something else happened today that is particularly note worthy. If you remember from previous blog posts (see Jan 19 - LINK) for an overall diagonal count upward for the daily or weekly S&P500, there were only 5 points to spare for an Intermediate Wave (4) to overlap down on an Intermediate Wave (2) and still have (4) remain shorter than (2) - as required for a contracting diagonal. With the +17 point up move today, that possibility is now gone. And, again, I said I had no preference for whether this move finishes as an impulse or as a diagonal. It is finishing as an impulse - just as we had already determined for the DJIA. Period.

So now when I look over the weekly chart of the ES E-Mini S&P Futures, the count that would best form an impulse looking count would be the one below - as published earlier this afternoon in the live chat room.

Figure 3. ES E-Mini S&P Futures Weekly Impulse Count

So, it is likely we are finishing the Intermediate (3)rd wave up, as discussed above, and are in the Minor 5th wave. Cash prices are getting quite gap prone at this time, and price should experience some significant upward resistance at the upper edge of the weekly parallel Elliot trend channel.

Then, if an Intermediate (4)th wave is to form, and if it is to precede the last wave in the sequence, then it could very well be a triangle; and it may be a triangle that tries to avoid overlapping the X wave upward, of Intermediate (2). While not a rule that wave (4) can not overlap the top of wave (2), it is a very strong guideline to look for in true impulse waves. Also, since Intermediate (2) is a FLAT wave, then Intermediate (4) as a triangle would provide excellent alternation before the final (5)th wave up, provided that the minor B wave of such a triangle does not make a higher high than the high of Intermediate (3) when we get there.

With regard to Figure 1, I know a lot of people will now say "there are the first three waves of a diagonal for Minor 5". And while technically it is a plausible alternate count for the SP500 only, at this point, there are two problems with it. The first problem it is that as an upward wave ((iii)) of a diagonal, it is shorter than a wave ((i)) by only 0.10 points. So, it has a high risk of invalidation here. But more importantly such a count invalidated in the DJIA today because wave ((iii)) is longer than ((i)). So, stay loose and flexible here and keep in mind with a diagonal Minor 5, prices might not reach the upper weekly trend channel line, too.

Lastly, you may remember how I said that the S&P500 15-minute diagonal posted on the 01/27/2017 Mid-Day Update : Time Has Run Out, could not have been an ending diagonal because it was not fully retraced in less than the amount of time that took to form it? Well, today, here is your proof - as that level was exceeded higher.

From an invalidation standpoint, using the futures, overlapping the ? mark wave at 2285, downward, without having made new highs first would pose a serious problem for an impulse minute ((iii)) count, and we'll get into that topic only if and / or when it happens.

So, that's all for today. Don't get too frustrated. Tops are tough. And, if the air is kind of thin up here, always remember, "there are other markets!"

Hope this helps.

TraderJoe


Wednesday, February 8, 2017

Even Steven, Stephen

Near-even odds resulted in ... ?? ..well ... a very tight range today for the SP500. Although the NQ futures topped the high again late in the afternoon, after opening lower, then rallying, the S&P500 stayed inside of a 78.6% retracement of it's downward waves.

And where are we now? As of today, still even-steven. Below is a special presentation of the 5-minute cash S&P chart as was published during the live chat room today, starting at the prior high over on the left at the (0) mark.

SP500 5-Minute Chart from Yesterday's High

In real time, I counted only three waves down (a), (b) and (c), with (c) finishing today. I actually counted the contracting Leading Diagonal downward to (a) on a one-minute chart in real-time and to the minute! Importantly, today's low missed the 2283.97 overlap level we have cited in recent posts. (Do you think someone is listening? Lol!).

Then, as best I can tell, we have only an (a), (b) and (c), upward from the low to end just shy of the 78.6% Fibonacci retracement level. However, because of downward overlaps, we clearly stated in the live chat room today that the upward wave can be counted as a diagonal wave. Is it an ending diagonal (c) wave? It very well could be. It has already overlapped waves iii and i downward. But it needs to prove itself by retracing to below the start of the diagonal - below today's (b) wave - in less time than it took to build. If it doesn't prove itself, each segment of the last (c) has to be seen as an ugly sequence of i, ii, (i), (ii), -i, -ii upward. Very messy in that latter case.

So, for a downward count, an (a), (b), (c) down to this morning, and an (a), (b), (c) up to this afternoon could be the start of a much larger diagonal downward. The 78.6% retrace would be characteristic of retrace waves in a diagonal.

And, in yet a still alive upward count, three-waves down and three-waves up could be part of a triangle. A 78.6% retrace can also be found inside of a triangle. So, the odds remain nearly even. Favoring the downside is an Elliott Wave Oscillator which is showing divergence at this afternoon's high, and a DJIA which barely managed a 38.2% retrace while the S&P500 retraced nearly 78.6%. What's up with that?

Favoring the upside is the NQ has still made a higher high, and the 5-minute chart above again shows another potential inverted head & shoulders pattern like we showed in previous days on the DJIA 30-minute chart. I trust this one quite a bit less.

If downward overlap of 2283.97 occurs tomorrow, then the triangle is off the table and we'll start looking for a diagonal to the downside. 

Once things clear up just a bit, we'll provide a better idea of where we are in the larger picture. I don't mean to confuse or obfuscate here by showing you a very short term chart. To the contrary, my aim is to show you just what Elliott Wave analysis really looks like in near real time. Yes, I have some opinions of the market, but they are an entirely separate matter from objective wave counting - and the two shall not cross paths -- if I can help it.

Have a very nice night. And thanks for your support.
TraderJoe


Tuesday, February 7, 2017

Not Conclusive Yet, but Looking Like a B Wave

Nothing is conclusive until we overlap 2283.97, downward, as in yesterday's post. But, the DOW and the NQ made slight new highs today while the S&P500 and  the ES did not. So, the count below has an even chance or greater of being correct.

SP500 Potential Count

Such a count from Minor 5, of a three-wave minute ((a)) wave down, and a three-wave minute ((b)) wave, up, would likely have prospects of retracing all of Minor 4, and / or more. (Remember: read  the double-parentheses as 'circle' from here on out). This could would mean that all of Minor 5 of Intermediate (3) would be complete if the count holds. Let's see if it does.

If the ((b)) wave count has a 50% probability, the count that has the other 50% probability is that this up wave would go on to finishing a third wave of a diagonal count, but that higher high would have to happen tomorrow or the next day, and before 2283.97 was over-lapped downward. (This count is given slightly less odds because a diagonal following a triangle would be quite rare.)

By-the-way, here's how that potential inverted Head & Shoulders in the Dow Jones Industrial Average 30-minute chart worked out that I provided in a previous post (02-Feb).

DJIA 30-Minute Inverted Head & Shoulders Meets Target

That's likely the last one of those I will be calling in this market.

I would also keep my eye on Crude Oil, as it broke below $52 today. See my year-end video on You-Tube for some expectations.

The next few days will be very critical to determining short term market direction. So now is the time to pay attention and to remain patient & flexible.

(Remember, nothing posted here is to be taken as trading or investment advice. The patterns and wave counts are for education only.)

Thanks and have a great evening.
TraderJoe

Monday, February 6, 2017

Quick Follow-Up

So, in Saturday's post, we were expecting a fourth wave lower, iv, which should not have crossed below the 2283.97 level so that it did not overlap with it's first wave lower, i, on the right-hand-side in the SP500 30-min chart below.

SP500 30-min Wave iv 'likely' completed

And, after prices made a tad bit more than a 38.2% retrace on wave iii, downward movement ceased for the day in a completed count downward for wave iv, as w-x-y, with the 'x' wave being that little pip above the prior wave iii - much too short for a fifth wave. You'll now note the position of the Elliott Wave Oscillator so close to zero at this time.

The next test for the market is to see if it can make the nine-to-ten points needed to make yet another new all-time-high (ATH). Usually, that is a day or two's trading - so all eyes are watching.

As per the steps in The Eight Fold Path Methodology, when wave four has been identified, then we adjust the channel so the lower boundary is on the wave ii, iv price extremes. So, that has been done and now wave iii is clearly above the channel indicating that it is the wave with the most momentum. The first price target is a new high that is near the mid-point of the channel. That is usually v = i. If that price target is exceeded, then the price target becomes v = 0.618 x (net distance i through iii).

If and / or when a new price high is made, then we can begin to discuss the form of minute ((iii)) of Minor 5 because we will then have evidence that a minute ((iii)) wave is underway.

Please note: from here on out in this blog, I will use double parentheses to indicate minute waves in text form. The double parentheses will indicate a "circle" from now on, and allow me to avoid repeating minute iii (circle iii), for example. One of the charting programs actually makes a circle for the minute waves, the other does not (it's dumb - what can I say?). So hopefully the symbol of two parentheses will translate for you as ((iii)) = circle iii = minute iii.

Thanks for your patience and understanding. Have a great evening.
TraderJoe

Saturday, February 4, 2017

Ninety Percent (90%) Rule Activated

We want to use this post to remind all that the Elliott Wave "rule" (not guideline) for a flat states that the wave B in a flat wave must retrace at least 90% of the former three-wave sequence lower. Well, that did occur in Friday's session, but are we calling it a flat wave, yet? Not so fast. Let's review the SP500 30-minute chart below and see exactly what we can see, and see if it tells us anything specific.


SP500 30-Minute with 90%+ Retrace

If we consider the wave downward from the high on 26-Jan to the low on 31-Jan, then the upward retrace to Friday's high - and we don't know the up wave is concluded yet - has indeed retraced more than 90% of the down wave as shown by the Fibonacci ruler.

So, here is what we know, as facts, thus far. We know the 26-Jan wave ended in a diagonal, but it may not completely be an "ending" diagonal because it was not fully and completely retraced in less than the time it took to build it. We know it is a diagonal, by measurement, as it did not exceed the 2301 limit that we had calculated - precisely so. So, it is possible the end of the 26-Jan wave is just as likely a "c" wave, as it is a "v" wave.

We also know for a fact that the Dow made a new low on 31-Jan where the S&P500 did not. From this fact, we conclude that the S&P500 also finished it's three-wave sequence lower in a slight truncation on 31-Jan, in a wave that would be the truncated fifth wave (v) of a contracting ending diagonal c wave, downward to end a :3 wave sequence overall. The a & b of that wave occurred on 26-Jan, and 27-Jan.

We also know for a fact that the potential triangle forming on 1-Feb and 2-Feb was quickly invalidated at the open on trading on Friday, 3-Feb as the result of the employment report.

We also know for a fact that on 2-Feb, the c wave of a zigzag ended precisely at the 78.6% Fibonacci retracement level of the wave now shown with a question mark (?) in the above chart. We also know two other facts.

First, within the tentative green channel upward I have sketched in, we know that a potential third wave upward (tentatively shown as iii) has traveled just slightly beyond a 1.618 Fibonacci extension on the wave i within that channel. That measurement is not shown on the chart, for clarity, but it was measured so on Friday during live chat.

Second, we also know that the wave ii within the channel is a very nice sharp zigzag - which was formerly a zigzag portion of the former potential triangle.

Adding these facts together, we can see we are in a potential impulse wave upward, and, with the marginal new high after wave iii, can now potentially be in the wave iv, downward of such an impulse wave - as a flat or triangle within it's own channel.

As such, the chart now provides us with a very specific downward invalidation point: any movement below the top of this prior wave i, below the 2283.97 level, shown as the red-dotted line, would mean that an upward impulse wave is invalidating, and another wave structure downward is beginning. In order to alternate with the sharp for wave ii, as noted above, wave iv should be a flat or triangle.

On a five-minute chart level, this upward impulse is currently following The Eight Fold Path Method for counting an impulse. But that method also tells us, that if a downward wave iv invalidates before the new high is made, then we simply accept that i, ii, iii is just a,b,c instead. No fuss, no muss. They are equivalent until they are not. But, if a wave iv holds, then it is likely we go over the top is some fashion in a wave v, upward.

Let's assume for a minute we go up over the top. All well and good. Then the next challenge becomes what to label that wave shown only as ? on 1-Feb. Right now, I can make a good case to label that wave as either a larger 1, or an A, or even a W wave, upward. And a good case can be made to label that c = 78.6% downward wave as a larger 2, or a B or even an X wave downward. It depends on whether the structure of that upward wave is also either a :3 or a :5! Clearly, the downward wave is a sharp three-wave sequence ending at that c = 78.6% level. Again, one of the zigzags that was part of the former potential triangle.

So, if an impulse upward seems to be in progress, why do I even mention the 90% level? Because whenever I see that level reached in real-time I always make the same notation: "The 90% level has been reached and is either the B wave of a larger flat, or the next impulse in progress."

That means that if the current downward wave iv is invalidated, we could legitimately be in a larger Intermediate (4) flat wave, downward. But not until or unless that happens. Otherwise, we are in that next impulse upward.

In this manner we are able to turn what looks like a mish-mosh of wave shapes into some very specific and useful information, providing you with a very specific invalidation level.

Cheers and enjoy the weekend.
TraderJoe

Friday, February 3, 2017

Trying it On For Size

So, within the Intermediate wave (3), we have either finished the Minor 5th wave up (less likely), or are in the minute iii wave up of Minor 5. We don't have 'proof' of minute iii, yet, because there is not a new all time high. But, close, and it seems likely enough.

SP500 Daily - Within Intermediate (3) and Minor 5


But we need to allow that minute iii could be a fooler for those looking for a massive rally. We have to admit in advance to not knowing precisely how this wave will play out. But, Minor 5 is at a large enough degree that it 'could' end with a diagonal. I discussed an idea of the current possible count within a diagonal in the live chat room today.

But, because that idea is tentative, I will not publish it here at the moment. Suffice it to say that if we make a new all-time high in the SP500, then - whether impulse or diagonal - we would likely be in the minute iii wave of Minor 5, higher. (If a higher high is not made, then wave Minor 5 ended at the 2301 high.)

Another very plausible idea is that for alternation, because minute ii, down from the 2031 high, would be so deep and well defined, it could be that minute iv will be unusually short and ill-defined before the final top. Hard to determine in advance, but we'll try to keep on top of it.

The other thing to say today is that, regardless of what tool or tools you use to note the momentum divergence - whether EWO, RSI, MACD, or Stochastics - the current level of that divergence is quite large, and furthermore, many indexes or futures are very close to their upper daily Bollinger Bands - which may be a warning.

That's all for the time being. Be good.
TraderJoe 


Thursday, February 2, 2017

A Wave Counter's Nightmare

Wave counters do have nightmares, sometimes. This situation is not that bad, but it does remain a bit murky. From the 2301 high, as I said, it is possible to count five waves down in the SP500, as is shown on the chart.


SP500 15-Minute Currently in Limbo Land

First, in the SP500 15-min chart there is a very badly shaped contracting Leading Diagonal, downward, which can not be counted this way in the DOW because wave (v) of the diagonal never makes a new low. That would be wave i in the SP500, with a too-small ii, up, the large gap for iii, down, a too long double-zigzag for wave iv, up, and a contracting diagonal downward for wave v, and remember: if wave i is a diagonal, then wave v should not be but what do we see? So we have a count downward that violates a lot of guidelines but not rules* (* see note below).

Then, we have the situation when the DOW made a new low late in the afternoon on 31-Jan whereas the S&P did not. So, the Dow and the S&P don't even agree on a count that doesn't follow guidelines well.

So, one must ask the question, "Is the down wave really a :5, or is it a :3 instead"? Very difficult to say.

Beyond that, on the S&P500 chart, the waves leading up to, and including, today, also form a "poorly shaped triangle". It's not the worst triangle there ever was. But, it is not the best, either.  About the only thing good about it is that the a,b,c down to today's low stopped at exactly the 78.6% Fibonacci retracement level - often a sign of a potential triangle. And, the EWO is relatively flat again, making more signs of a potential triangle.

You can also see sketched in on the S&P chart, a very tentative up channel (in dotted gray), which hasn't been broken, lower, yet, either.

So what's all the fuss about? Well, tomorrow is an important employment report. And, there is the potential for a lot of different things to happen. It could be a snoozer. Or it could generate a lot of volatility.

If the potential triangle holds, we have the possibility of a larger (a), (b), (c) downward - degree to be decided yet. But, if the overall down move to 31-Jan is corrective, and the triangle busts upward, then there is realistically the possibility of this inverse head & shoulders pattern that could play out using the Dow as an example.


DJIA 30-Min Potential Inverse Head & Shoulders Pattern

Now, as I said in live chat today, I am not a fan of Inverse Head & Shoulder patterns - especially near an all-time high. But, I can see that possibility of a measured move as shown above.

So, what is to be done in such circumstances? What I like to do is wait for the cash market to open and just see which of the patterns invalidates first. That way it is the market informing me, rather than me guessing.

Well, anyway, it lets me sleep at night while the count becomes clearer.

(*Note: the possible way out of the diagonal, and Dow, S&P mismatch at the top is that perhaps they  are both rare 'running flat' waves. That would mean there was no diagonal at the top, and the diagonal at the bottom would better follow guidelines. Still not perfect though.)

Best wishes for your success.
TraderJoe