Saturday, March 25, 2017

Health Care & It's Alternate


I follow stock market wave counts because like most of you I am sometimes interested in things economic, and how they effect us - until they get boring. With that .. here is ..

A Brief History of Health Care

During the 1920s, individual hospitals began offering pre-paid services to individuals, leading to the development of Blue Cross organizations in the 1930s. The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929.

There weren't even insurance companies until the 1920's. Good health care then was largely for the well-to-do, and middle-class. Somehow, sadly, we actually survived several thousand years without insurance companies, and now, of course, some politicians and corporate types couldn't possibly do without them. And, if there is any factual basis for the TV Drama, The Knick, minority populations and immigrants were ill-treated in such a pay-your-way system. Ill-treated is probably kind; I am sure deep in my bones it was actually much worse for the poor than anyone can describe or picture.

Then in July 1965, Congress enacted Medicare and Medicaid under Title XVIII of the Social Security Act to provide health insurance to people age 65 and older, regardless of income or medical history. And, the United States of America became an insurance company for people of age. And, under Medicaid a certain portion of the poor were then covered, also reducing discrimination in health care.

Later, in 1980 President Ronald Regan defeated then President Jimmy Carter and discarded the proposed Mental Health Systems Act which would have continued funding to local mental health treatment.

And in 2010, President Barrack Obama signed into the law the Affordable Care Act to expand the number of people who could be covered under an insurance plan of some type, and provide a basic suite of essential services, including some level of mental health care.

State of the Art

So, now we find ourselves with a health care system which is largely centered in hospitals and doctors offices, using miraculous imaging technology, advanced surgical tools, and medicines developed by large drug companies - many of whom support candidates friendly to their industry with very large donations to their various campaigns and causes. We still have private insurance companies and we have the federal government also insuring health care for some.

The Result
No matter your opinion, the facts are that somehow this invented-on-the-fly system of health care and health care insurance, along with improvements in food sanitation & disease prevention, has resulted in dramatically reduced infant mortality and increased life expectancy in the United States - from roughly 47 years in 1900 to roughly 79 years today in 2017. It's hard to argue with the result. We're doing pretty well, and now the issue seems to be, "do we want to continue as is or change things?"

Change Imperative
If we're going to change, as a group, we should have pretty good reasons for doing so. And this is where things can get sticky - because then our oughts & shoulds will likely become involved.

Economic Lesson
From a purely economic perspective, the Medicare experiment has taught us that the Federal Government can indeed run a health care system and do so quite well for a select group of people. Whether we as a nation can afford to do that remains to be seen. But, we know this works.

Experience

There are many people who's economic experience it is that, "getting a good job with good benefits" was one reason to try to grow up well, learn, follow-the-rules, and become a good citizen and employee. Health care coverage was an incentive to undertake socially acceptable conduct. It is also within our experience, that, over time, there has been some reduction in discrimination against minorities and immigrants. But, we must admit some people prefer to still show this behavior. It's their choice. No one requires them to do it, and yet the law of the land is one of non-discrimination.

Still, for numerous reasons, just as some health care was getting better, one of the major providers of health care benefits began slowly and insidiously to pull a switch on us. We might work for a corporation for benefits, but then they began charging us for the health benefit, too! At one point, many employers stated, "We don't want to be in the health insurance business. That's not our main mission and we are mission focused." The employers paid us, but then they told us to pay them back!

We also can not deny, that for all the money we might put into a child's health care, it can almost all be literally wasted if - one day on the streets of Chicago or literally any other city - that child's life is ended in a gang murder. What's the point of a vaccination for that victim?

And, there has been another recent trend that shows up in the data. For some reason, with the best health care in the nation in 2014, "Adult Obesity rates exceeded 35 percent in four states, 30 percent in 25 states and are above 20 percent in all states. The lowest rate was 20.2 percent in Colorado. [Behavioral Risk Factor Surveillance Survey, 2015]. While in 1985, no state had an adult obesity rate higher than 15 percent; in 1991, no state was over 20 percent; in 2000, no state was over 25 percent; and, in 2006, only Mississippi and West Virginia were above 31 percent."

So for all this health care, we were getting heavier and heavier, though the trend has leveled off to some degree and is declining in some cases.

And, we also now know that in the U.S. it is an objective fact that we are paying more for health care per person than in Canada or the U.K. at least.

Reasons To Change

Clearly, with a generally rising trend in life expectancy, from the perspective of a lay person, the only reason to change is to make things better. There are three reasons I can see why we might want to change the system.
  1. To reduce inefficiency, and therefore allow us to better afford health care
  2. To reduce the non-medical trauma to a patient dealing with the bills
  3. To further promote wellness in the population, in general, and in each person in particular
An Alternate 

Part 1 - Insurance

It would be hard to argue that separate insurance companies must introduce some inefficiencies by fact of sheer duplication, different billing codes, even just different addresses or phone numbers that patients or care-givers have to memorize, deal with, etc. let alone that there is an entire industry that makes a profit providing the insurance. Somehow that profit must come at the expense of the patient in their cost of insurance, cost of care provided, governmental rebate, or some other method. Where else would the profit come from? With single-payer, an industry (that has served us well in the past) would be wiped out.

The people in this industry would likely be greatly opposed to losing their jobs. But what if they were intentionally re-deployed into health care - to further reduce the cost of providing care. They don't have to be doctors. But what about nurses, therapists, home care givers, health educators, etc? They would actually do a function - and not just shuffle paper and answer irate patient calls as to why their benefits were denied.

This answer, or an answer like this, in some form goes a long way to addressing the first two reasons for change. What if a health care bill recognized this shift in industry? Folks, the leather tanning industry just isn't around to the same degree it was before. Industries change. Can we recognize that? Is that "excessive government interference" or is it "forward-thinking"? Does it have to be single-payer? No, but a massive streamlining must occur - for our sake.

No one really wants choice of insurance, per se - what they likely want is choice of doctor, and choice of quality, affordable care.

Part 2 - Wellness

Regarding the third reason, most people are not going to like this difficult discussion. Given that life expectancy has increased. The question now is what is our quality of life during those years. Clearly, for the child gunned down in a city, that child wishes his attacker had better mental health and did not use the gun in the first place.

(When I watch Congress and the President, I can only dream of what could be different if mental health levels were substantially improved. I do not say that jokingly.)

We must create a new mental health care system in the United States. We must do it together, and we must do it for a reason. Law enforcement can not stop a murderous act before it happens. Only mental health care can do that. Who needs mental health care? I contend everyone does! From the time a child is verbal and can enter school, there should be mental health check-ups just as certain as there is physical education or vaccinations. Think of the societal problems that might be alleviated if people were more rational and their emotions were more in control.

We need to further switch from spending money on insurance to mental health care. If a child needs physical support, he or she also needs mental and / or emotional support. How can we just assume, that everything going on in a child's heart or brain is serving that child well? How we monitor, and how we intervene is a great discussion this nation should have. But we need to get something done here, and we need to get it done quickly.

By substantially improving mental health, we may eventually be able to reduce the cost of incarceration, and law enforcement over a longer period of time.

Part 3 - We can all become Physician's Assistants

Physicians are talented, well-educated, and they deserve to be well compensated for that education and skill. But who says that doctors, nurses and the hospital staffs are the one's who are primarily responsible for our wellness?

Who said that a person in 8th grade should not be taught how to care for themselves? When I was in 8th grade, they sure taught me about the Jain Temple in Kuala Lumpur. But did they ever teach me the importance of, or ways to control, the insulin level in the temple that is my body? No. Both of these are facts. Which would be more valuable to me? I don't think the contest would even be close.

We must get much more and better information and practical experience with satisfying nutrition, stress reduction, avoiding the ravage of tobacco smoke, dealing with addiction as a disease, ways to limit alcohol consumption, and the need for exercise. And we must get it from the time we are young.

In this category if we are going to be the physician's little helpers, then since health workers are paid, we must find a way to incentivize healthy behavior. It would be our payment. We do it partially now - non-smokers enjoy lower insurance rates. But is there some non-insurance way to incentivize lower risk individuals? How can we find a way to actually reward and reinforce the better behavior so that it continues? We must find such a way, and discuss it, until we implement a program in which we decide WE are going to reduce health care costs, not necessarily by haggling for drug prices, but simply by being healthier.

I hope you understand what I am trying to say, here. I would be very interested in your thoughts and contributions.

Thanks for listening.
TraderJoe








Friday, March 24, 2017

Three Waves Down from the ATH

As best I can tell, there are - at this point in time - only three waves down from the all-time high at 2401. They are 2354.54, 2390.01, and today's low of 2335.74, as shown on this chart below.

SP500 - Hourly - Three Waves Down So Far

Wave ((C)) is slightly longer than Wave ((A)). Within wave ((A)), wave (5) is an expanding ending diagonal - which has a much better look and feel than the prior w-x-y count, and it does count properly.

Note that this count puts wave (3) of a third wave, which is only a ((C)) wave as shown above, on the low point of the Elliott Wave Oscillator. (So far, this wave in it's entirety does not follow The Eight Fold Path Methodology - but there was no expectation that it would have to). Since the wave does not yet follow the method, a bearish 1, 2, 3 from the high must only be an alternate at this time.

So far, the 2335 level is holding, but there is no firm evidence to conclude downward movement is over. Trading above wave (4) of ((C)) would go a long way to providing that evidence, as it would also again overlap the ((A)) wave down.

We showed in our last blog update how this could form a fourth wave, 4, and that option still remains open for a bull count. For a bear count, more waves would be needed with either a longer decline below 2330, and then an upward wave that does not overlap the ((A)) wave, OR, a few more waves that will make a diagonal in one of two fashions. But there is not good evidence for a bear count of this type, yet.

From the standpoint of the daily chart, below, price is for the first time touching the EMA-34, and so there is some rationale for that fourth wave here.

SP500 - Daily - Contact with EMA-34

But at this rare height in stock prices, the market will have to demonstrate whether there is or is not support at this level.

My opinion is neutral and remains flexible and patient.

Have a good weekend!
TraderJoe

Wednesday, March 22, 2017

Last Chance 4th Wave

In yesterday's post, I noted that trading below 2,335 in the S&P cash would start to signal a problem, and the count of a diagonal in the major indexes. Today, I'd like to show you where that calculation comes from.

The S&P500 4-hour chart below, now has the needed 120 - 160 candles to be indicative of The Eight Fold Path methodology. It actually has 185, but any lower time frame results in too many candles, and any higher time frame results in too few. The count below is one that was established as an alternate on the ES E-mini S&P 500 futures. This is just the extension of that count to the future.

At this exact point in time, it should be seen as an "equal alternate" to the counts shown yesterday.

SP500 4-hr Chart : Last Chance Fourth Wave?

The rationale for this potential count is that usually, most-often, fourth waves and second waves can travel a similar net amount. The black rectangle shows the total number of points traveled in wave 2, from low to high. And, the blue rectangle is just a copy of the black rectangle and shows a near exact measurement for a wave 4 at this level. This morning cash hit 2336.45, narrowly missing that 2335 level.

This count would provide the needed alternation for an impulse, as wave 2 would be the sideways holiday trading, counted as a double combination w-x-y, with the y wave as a triangle, and wave 4 would be a sharp - and simpler - (zigzag) correction.

At a level of -16, the Elliott Wave Oscillator is just  barely hanging on to a -40% of the peak of +40-2 on this chart.  A UBS strategist said it well this afternoon (paraphrase), "the market has decided to make this vote on health care the decider as to whether a further correction begins here or not".

In this count wave 3 is shorter than wave 1, so a wave 5 would have to remain shorter than wave 3. And, by way of invalidation, in no case, could a wave 4 overlap wave 1 (in this count).

As I said in my weekend video having clear alternates - and clear rationale for them - is an item that helps keep an Elliott analyst's ego in check. Breathe. Enjoy. Stay patient and flexible.

Have a good evening.
TraderJoe


Tuesday, March 21, 2017

Critical Juncture

In the live chat room over the last several weeks, I have been posting this chart of the Russell 2000.

Russell 2000 - 2 Daily - Completed Minor A, B, C

If you study this wave from an Elliott Wave perspective, you'll see that it is easy to count five non-overlapping waves up to the Minor A wave high in September 2016 with a good pattern of alternation to the waves. This is followed by a B wave to the election low, and, now a completed Minor C wave up to an Intermediate (1) wave at the high, as an ending contracting diagonal which has really excellent form.

This can be the first wave of an ending diagonal wave in the Russell as the Advance / Decline line now begins to diverge from the averages, and the Russell leads the way down.

And, there is now a similar potential in the Dow Jones Industrial Average as in the chart below.

Dow Jones Industrial Average - 2 Daily - Completed Minor A, B, C

This is one of the few ways that we can count the Dow, and still maintain a pattern of alternation in the C wave, up. This is the same chart as was published in my prior video - although we were looking for the end of the C wave, then. The Dow did make it over 21,039, and appears to be stopping short of that C = 1.618 x A wave.

It is already possible to conclude that minute ((v)) of Minor C is over. There is one possibility for a fourth wave in this area, but the problem is it is difficult to find a further pattern of alternation in minute ((v)). The only way this would be possible would be if minuet (iv) within minute ((v)) became a much longer triangle in time, but, we have already had a triangle for the minute ((iv)) wave. So, I have no confidence that will happen yet.

I will be patient for a few more points but is it should be apparent to even an untrained eye that the first risk could be down to a trend line drawn between waves 0 - B and ((ii)). Being patient does not mean I am looking for further upside. It means the market must now disprove the hypothesis that the Russell 2000 has made an ending contracting diagonal at the highs. It has the potential to travel back below it's B wave - which is the start of the diagonal.

From the standpoint of The Eight Fold Path, the high of the EWO on the SP500 2-hr chart was 30-1, and we said, as a fourth wave, the EWO should not travel below -12 which is where is it right now. This would seem to indicate that below prices of 2335, and / or lower, the The Eight Fold Path Method would indicate we are not following the guidelines for an impulsive wave, and it will have done it's job here too. So, one possible chance for a stick-save, but I certainly am not waiting with bated breath.

Have a good evening, and be careful.
TraderJoe






Monday, March 20, 2017

Anything look familiar?

If you watched my weekend video, you might see some patterns here that look familiar. If not, might want to watch it a second time - with popcorn!


SP500 Half-Hour : Patterns in a Potential Triangle

By the way. We know that the five waves up to (c) at 2389.70 on FED day, Wed, March 16th, were, in fact, an ending contracting diagonal - as we had surmised in live chat - because the start of that diagonal has been exceeded lower. Now, it looks like we have another contracting diagonal lower.

This suggests in the very short term the next move will be up, then down. A triangle is not a certainty. It is only a probability until it proves itself.

Have a good evening!
TraderJoe

Saturday, March 18, 2017

Weekend Video

Here's a video I made a commitment to provide, regarding the relationship between Elliott Wave Counting Decisions and Trading Decisions.


Enjoy the video, and best of luck in the markets.
TraderJoe

Thursday, March 16, 2017

The Fourth Wave Conundrum And Pseudo-certainty

Pseudo-certainty is pretending one is certain of something when, in fact, certainty is not possible or likely. I specifically coined the term "The Fourth Wave Conundrum" because when an Elliott analyst is in the throes of counting fourth and fifth waves, it is less likely one will get the count correct the first time.

First, there was nothing untoward today to the down side. Voicing their 'opinions' some will say the market had a "consolidation day" after the large rise on the FED meeting announcement. Others might say "there was a failure to follow-through" and begin looking for a downward count. Others are "certain" we are going higher - but will  not show how. Those that express their certainty are often involved with trying to sell a product: like a web-site subscription or a course with their super secret keys to unlocking the mystery of the trading universe.

Few will just refer back to the Elliott Wave Principle, outlined by Ralph Nelson Elliott, and realize all the possibilities here.

Next, in yesterday's chart, we showed how we have "three waves up" so far, which could be i, ii, and part of iii of an impulse. Or, it could be a, b, and part of c of a diagonal. Today we will show a slightly shorter term chart than the SP500 2-hr chart, instead focusing on the narrower 30 minute time frame, below.

SP500 - Half Hourly Triangle Alternate

I am showing this alternate only so that you have a full understanding of how and why a precise call in the fourth or fifth waves may not be possible - at this point in time. I have not even shown this chart in the live chat room.

So, suppose the down wave from 2401 is a three-wave structure as shown to ((A)), read as circle-A. So far, the up move has been limited to 78.6% of the down move, also in three waves, at this point in time. The Dow has already downwardly overlapped the Mar 10th (A) wave. The S&P has not.

Suppose more downward wave movement is in store for the S&P500 tomorrow. We don't know that. We are just supposing. Then, it's possible the ((C)) wave down of a larger fourth wave triangle would form.

But, and this is key, we are just supposing. There is nothing yet to say that the upward wave is over. So far, there has been little more than a 38.2% retrace of the March 15th high - which could either still be an internal fourth wave or an internal second wave of a continuing upward wave.

In other words, it may be premature to label ((B)) upward as over. We could still very well go on to form 1) an upward impulse, or 2) an upward diagonal over the highs.

And anyone who feigns certainty in such a situation is largely selling you cigar smoke in my opinion. You can go ahead and buy it, but there just isn't a lot there.

Have a good evening!
TraderJoe

Wednesday, March 15, 2017

Parallel Remains in Tact

The S&P500 today did make a higher high than the tentative ((A)) wave we posted in the prior chart. This means for now that the upward sloping trend channel remains in tact. (Remember, ((A)) is read as circle-A).

SP500 2-Hr Chart Higher Local High

Yesterday, the down wave again challenged the lower trend channel line, and extended to the point (a near exact 78.6% retracement) that we can give it credence as "either" a ((B)) wave, or a second wave, so both upward counts are currently noted.

If it is ((A)), ((B)), then the structure will be of a diagonal. If it's ((1)), ((2)), then the structure is that of an impulse. As of the moment, I have no preference what-so-ever. However, the Elliott Wave Oscillator (EWO) has both turned green and is now above the zero line which should indicate a fifth wave in this sequence. The NQ futures have already made higher highs, while the Dow is currently lagging the S&P. And we are now at about only 146 candles, well within the 120 - 160 that are typical.

On another note, we previously showed you this example of a 138.2% wave that we labeled b:3, and said the prediction in the Dollar Index was to be below the a:3 wave. As you can see from the chart below, as of the end of the NYSE session today, the Dollar did indeed trade today below that a:3 wave. So, you have seen a prediction made days in advance come true.

US Dollar Index b:3 Wave at 138.2%


Even though the over-all prediction came true, calling this downward wave in real time became a real challenge because several of the downward legs did not follow The Eight Fold Path. For example, the first wave down down from the top (wave i) was an expanding leading diagonal. In fact, yesterday, my "opinion" of what the Fed would do resulted in a turn-around possibility saying that it was possible we had a truncated flat. But, when the Fed suggested only two more rate hikes this year instead of three, the better definition of wave iii, downward occurred. (Interestingly, in the live chat room I suggested that exact possibility later in the day).

Anyway, my purpose here has been served. I simply wanted to demonstrate a true 138.2% b:3 wave, as well as it's consequence. And that is now done. Again, this type of FLAT wave is called an Expanded Flat. It is not called by it's older name the Irregular Flat because there is nothing irregular about it. Expanded flats are one of the most common types of flats. They are seen often and regularly, so using the older name is a misnomer.

But, the lesson still is being absorbed, as long as I've been at this, not to mix opinions - of any type - with wave counts.

Here's hoping you have the best of evenings.
TraderJoe


Friday, March 10, 2017

Fuss and Muss

There sure was a lot of fuss for a final 8 points in cash and 6 points in futures. Luckily, it was enough to save our primary count because it took the Elliott Wave Oscillator away from that -12 level we wrote about yesterday, ending with a final value around -6, up from -10.

Intraday, the market went up to a high of 2377 before making a quite precise 61.8% retracement lower to 2363, and then ending at 2373. Here is the S&P500 2-Hourly Chart again.

SP500 2-Hr Chart

As best I can tell at the moment, the up movement was so quick today as to likely be an ((A)) wave up. It certainly didn't have that 20-to-30 point zip one might expect from some employment reports. From a wave labeling perspective, wave (iv) now clearly took more time than wave (ii), and has more complexity to it, so that seems to be all that is required of wave (iv). And, I would like to see a new high above ((A)) before labeling the first impulse of a ((C)) wave which might be part of an ending diagonal.

You can chose to differ, and call today i, up, and ii, down of five (v). That's fine. I'll be watching for that one too. The key point is that if a new local high is made above 2377 then, a 1.618 extension is expected in either case.

At this time, while a triangle is still a plausible count, I think it has slightly less priority than an ending diagonal or a straight impulse higher because the time relationship of wave (iv) to wave (ii) noted above was at least minimally satisfied, and because of the Federal Reserve Meeting on Wednesday, 15 March.

Speaking of predictability, on the March 3 post (Sixteen Candles), we showed you this chart of a likely 138.2% b:3 wave in the U.S. Dollar Index, and said that a likely target was back below the a:3 wave in a flat.

US Dollar Index Futures (March, 2017)

Today, we are happy to note that there appears to have been a first wave down, i, and a second wave up, ii, that held below the prior high and today made a new low below the low of wave i.

If the downward wave extends as it should, we are showing you where the 1.618 extension would be. But, so far, so good.

And good enough to hope you have a good start to your weekend!
TraderJoe


Thursday, March 9, 2017

Risk Increases

Happy Anniversary! A Fibonacci Eight Years to the Day. I remember a trader in one chat room telling me the bull market would never make it this long. Hard to argue 'yet' that it's over.

And please, calm down. Nothing happened  to the diagonal I counted yesterday. It is still here in one of two forms. But something very, very, significant did happen today and that leaves the market potentially vulnerable to a larger set back. First, let's look at the SP500 2-Hr Chart. The best we can tell is that our diagonal stayed in tact, but two extra waves were added on to it. So, now we have a w-x-y wave downward.

SP500 2-Hour Chart

We think this was the result of two things. First and foremost, we think that people were "bailing out" in front of the employment report tomorrow. And, so that caused part of the downward movement. But more importantly, during the live chat room, we noted that the Russell 2000 (symbol $IUX) fell out of a larger diagonal downward. Here is the chart of the Russell posted today.

Russell 2000 - 2 Day Chart

That means the Russell could have easily completed Minor A, Minor B and Minor C, upward, with a Fibonacci ratio of C = 0.786 x A; and short of it's top line trend target. It is very likely that when the so-called "Smart Money" saw that one, it caused them to take a giant step backward. This is just not the way an impulse wave trades.

As a result of noticing this, we "sat back and let the market do the work" of counting today, and we arrived at the close with this alternate for the S&P500 15-minute chart.

SP500 15-Minute ALTERNATE : Running Flat

So, in this case, we still have the diagonal. But it is a Leading Diagonal and not an ending diagonal, counted only slightly differently internally. Notice the measurement we took at the end of the day. The downward wave is 1.618 times the (a) wave upward. That means the market is potentially also vulnerable to a sell-off from the employment report. The market is leaving it's options open!

We could still be in a fourth wave, as per the SP500 2-Hr chart. But, if we have one of those days where the market tanks 20 or 30 points on an employment report - without taking out that (a) wave first - then it would be explained by the potential running flat. (By the way, yes, the diagonal could be minute ((a)) as well as minute ((i)), and minute ((ii)) could equally well be minute ((b)) of a much larger structure).

If the current (a) wave is exceeded higher, the "running flat" alternate likely gets tossed because then it wouldn't be "running". But I was very surprised at the close to see that the market left that option open. Certainly, if the (b) wave lower is exceeded, something is likely going on (which is likely not a triple zigzag because the x waves would be grossly out of proportion) and which may be a third wave or a "C" wave of some type.

If upward gaps start getting filled instead, then the downward move is likely just the double zigzag, and the upward wave may be part of a new "B" wave up, or the fifth and final wave up in the SP500. It's very hard to see now how the Russell would do that. The reason the "running flat" is the alternate is that it would be a very short wave in time compared to the length of the first wave. That gives it less odds of occurring. On the other side of the ledger, the EWO in the original count is coming within a hair's breadth of that -12 level (at -10.2) which is the lowest guideline for the fourth wave in this case.

If it were me, I would try to tune in to the employment report tomorrow and see how things are going. Hopefully, the original count stays in tact.

Meanwhile, have a very good night's rest. Because, regardless, we remain patient and flexible.
TraderJoe

Wednesday, March 8, 2017

Mind The Gap

In the S&P500 2-Hour chart, the gap that was created from the combination of the first of the month money from pension funds, 401k's, dividend reinvestment plans, and company bonus contributions on March 1st was filled today. Some people wrongly attribute this gap to hot air from Washington. Not so.

SP500 2-Hour Chart : Gap Filled

As we said yesterday, further downward movement was possible, and was possible we were getting an ending diagonal c wave, lower. Not only was the gap filled, not only was the lower trend channel line attacked more vigorously, but, at the end of the day, it did look like an ending diagonal c wave did indeed form. At least as of the end of the cash close. And, so too, the Elliott Wave Oscillator remained in the acceptable range - staying within -12 currently.

In sort of a rare treat, I'm going to provide this SP500 15-minute chart from the live chat room so you can see how this potential ending diagonal c wave formed in near real time.

SP500 15-Minute Chart - Potential Ending Diagonal

As we stated before, we can not count the downward wave currently using The Eight Fold Path Methodology. Therefore, it seems best to call this wave corrective in nature, and not an impulse. We counted the five waves down to the a wave - live and in real time. And then things started getting whippy, murky, and compressed which is what made me think of a diagonal. We also had a clear triangle yesterday which I called in real time and which broke to the down side, and that was likely the (B) wave of wave ((3)) of the diagonal. Please remember, a double set of parentheses means the same as 'circle'.

So, at this point, here you have it: Wave ((5)) is less than ((3)), Wave ((3)) is less than ((1)), Wave ((4)) is less than ((2)), and Wave ((4)) overlaps wave ((1)) and each wave is a zigzag, currently fitting the definition of an ending contracting diagonal.

During live chat, I stated the limit of wave ((5)) as 2359.80, and that level held into the close with the day's low at 2361.01; and in looking this wave over after the heat of battle, I realize it is possible but not necessary at this point to move wave ((4)) to where (B) of ((5)) is. In other words, it is possible the (C) wave of ((4)) truncated slightly. That would allow the invalidation to be moved down about a point to 2358.50, but that's it.

Still, diagonals are waves that must prove themselves, and regardless of what happens in the futures overnight, it is this cash count that must hold. The Dow Jones Industrial Average also made lower lows today, so it seems, for now, these two markets are in gear. Let's see what tomorrow does to the structure.

Currently, with three-waves down, at least three waves more up could be expected, if downward movement ends in this area and the upper diagonal trend line is broken to the up side.

Until then, have a great evening.
TraderJoe



Tuesday, March 7, 2017

Critical Conditions Met

Again, using the SP500 2-Hour chart (the same as yesterday), the critical conditions for a fourth wave have been met. The chart is now out to 122 candles, within the suggested range of 120 - 160 candles, and the Elliott Wave Oscillator (EWO) has retraced back to the zero line, and slightly under.

SP500 2-Hour Chart - Fourth Wave Critical Conditions Met

It can also be clearly seen that the lower trend channel line is being attacked to the down side, and we do not know that downward movement is over. (It's "possible" we are still getting an ending diagonal c wave lower or a more complex correction lower).  At present, minuet (iv) has traveled back to the area of sub-minuet wave iv, but has not closed the upward gap there, and the wave currently has a 23.6% downward retrace on wave (iii).

At this point, the only unsatisfactory aspects of a fourth wave are the amount of time taken and the "look" of wave (iv) compared to wave (ii). They look very much the same. Therefore, while we do not like to use alternates often, we must suggest that the down wave could still only be the a:3 wave of a larger fourth wave flat or triangle, so we have posted a flag regarding that on the chart.

Alternate or not, we are glad we began looking for a correction just as others began their "how high the S&P can go" postings.

Because fourth waves may not overlap wave (i), that will have to be the invalidation point for this fourth wave. Sometimes - high up in the wave sequence - fourth waves can get fairly deep.

Speaking of invalidation, if the market decides to pull a "fast one" and get out of hand to the down side, within the live chat room I did post a clear alternate count for a possible top. But, there are some things I don't like about it, yet: primarily the proportionality. And so I will leave it in the chat room for now and only show it should this fourth wave not work out as expected.

Why did I develop an alternate already? Because I am always looking for the count that would tell me where the current count is not correct. Keeps one on their toes.

Have a great evening!
TraderJoe

Monday, March 6, 2017

Gaps Above and Gaps Below

The market gapped lower at the outset, and after bottoming, continued upward in five clear waves. In doing so, the market has pushed the S&P500 2-Hourly chart out to 118 candles, quite close to that magic 120 candles - and we would expect to see that tomorrow. Here is the continuation of that chart.

SP500 2-Hours

In live chat room, we were able to count a clear three-waves down, and we saw that the lower trend line was not attacked yet by wave minuet (iv) as we would eventually expect it to be. Therefore, it is most likely that this is the a:3 wave of a minuet (iv) flat, or of a minuet (iv) triangle. And the impulse up this afternoon may have been the start of a sojourn back towards the highs for a b:3 wave in some form. Since, the lower trend channel line was not touched yet, either prices need to continue down in a further sub-division of the .c wave, down, tomorrow, which seems less likely because there has already been one impulse up from the lows, or the correction will continue as a FLAT or triangle wave - either of which can attack the channel in their own ways eventually.

It is worth seeing that today the $NYAD (NYSE Advance/Decline Line) finally broke it's short term upward trend, with a ratio of approximately 1 : 2. But, rather than publish that here, you can view this for yourself using a free chart service like stockcharts-dot-com and entering in the symbol $NYAD, and select "cumulative" from the drop-down list for the style of candle.

Please note that in Friday's post (Sixteen Candles), the likely target values of the Elliott Wave Oscillator were provided as +3 to -12, by the time wave minuet (iv) is wrapped up. Today's value is +3.11, and is not too shabby. The EWO can certainly can travel lower if it wants, but from our perspective has fulfilled it's job in this wave. It's maximum target was met.

Kindly remember that for a FLAT wave, the b:3 wave upward must make a target of at least 90% of a:3 wave whereas for a triangle, one might expect only a 78.6% upward wave.

It's worth noting that one of the reasons we think this is only a corrective wave is that the market put in new gaps above the market - which it can then try to fill.

So let's see how wave minuet (iv) progresses. Remember, these fourth waves can be a royal pain. They are destined to try to burn off the long price rise of minuet (iii) by taking a lot of time and moving prices sideways.

So, at this point, it's good to be patient and flexible. Have a great evening!
TraderJoe




Saturday, March 4, 2017

Three Questions for You

Here is the weekly chart of the ES E-mini S&P 500 Futures plotted on a log scale. Elliott Wave labels have been omitted in this chart. Here are three questions for you to ponder.

ES E-Mini S&P 500 Futures Weekly Chart - Log Scale

Here are the questions:

1. Are we or are we not finding some level of resistance at the upper channel line?
2. How about the size of that weekly wick versus those in the rest of the rise from Feb 2016?
3. How long do you think it will be before prices "mean revert" to the EMA-34, shown?

This is just food for thought. Nothing has changed in the wave counts shown yesterday.

Cheers!
TraderJoe

Friday, March 3, 2017

Sixteen Candles

Well .. more than that actually. The S&P500 2-Hr Chart that we showed yesterday is now out to 114 candles, and will likely make the typical 120 - 160 candles before a fourth wave, minuet (iv) attacks the lower trend channel line. For consistency, here is a repeat of that chart.

SP500 2-Hour Chart with 114 Candles

Of interest, prices have traded below the mid-channel line, which is a likely sign that wave minuet (iv) has begun. And in the bottom indicator panel, the Elliott Wave Oscillator continued to decline. Since the peak of the EWO was about 30 - 31, we would expect the final value of the EWO to be between +10% to -40% of peak. And that means anywhere between about +3, and -12 in terms of the raw indicator value.

In the upper indicator RSI(14) panel, we see that the RSI made a lower low which is "confirmation of a lower low" only. Today's low was lower than yesterday's. It really doesn't tell a lot yet.

In the very choppy decline, downward so far, it is "likely" only three-waves down or a part of three waves down have been made, so far, as it is very difficult to count the downward wave using The Eight Fold Path Methodology. If it turns out to be three-waves down that ended today, then it could be the sub-minuet 'a' wave of a flat. And the 'b' wave of a flat must go back to within 90% of the high of wave ((iii)). And, this 'b' wave could go as high as 138.2% times the height of the 'a' wave; yes, over the prior high, before it's 'c' wave came tumbling down to attack the lower channel line.

It turns out that a 38.2% retrace on wave minuet (iii) would take prices back down to the 2350 level. And, we are nowhere near there yet. The 'c' wave of a flat could easily do that.

The second potential path is that the choppy downward waves are really a "five", or just part of a "five" and this would allow three weak waves upward, before another "five" down to complete a larger zigzag which would only be the first 'a' wave down of triangle. This second path is slightly less favored, and may be needed to waste time until the Federal Reserve's interest rate announcement this month. We'll see,

Fourth waves are tricky. They are like teenagers at the age connoted by the title. It is why I have coined the term "The Fourth Wave Conundrum" for these waves. It is because there are so many styles of flats, triangles or combination waves that can happen in this position before the final top that it makes it inherently difficult to predict the exact top. You thought it was you? No, the difficulty is inherent in wave theory itself.

If you are interested to see a 'b' wave that goes exactly to 138.2% before reversing, it just so happens I counted this one out in the live chat room today. It's on the March, 2017 US Dollar Index Futures (4 Hour) chart. And, the picture of it is below.

US Dollar Index Mar '17 Futures (4 Hr) - b wave at 138.2%

After the peak of the wave on Feb 15th, there is an 'a' wave down, and then there is a clear three wave sequence upward (it actually counts as seven waves which is still not impulsive). It hits the 138.2% mark like there was a target on it, and after the reversal, there are now downward overlaps of both wave peaks - which pretty much seals the deal.

There are some who say regular Elliott Wave analysis is not good enough. They say it is not predictive enough. Well, for me it is good enough that I showed the Fibonacci ruler before the top was ever made! Further, I made up this special template for a Fibonacci ruler, specifically, for B waves of flats. Therefore, the only points that show are the ones governed by the rules of regular Elliott wave. The B wave of a flat must travel within 90% of the start of the a:3 wave.  So, that is the 90% mark. For an expanded flat, the B wave must travel over 105% of the a:3 wave. So, that is the 105% mark. And, then, in a regular or expanded flat, the common limit of travel of B waves is 138.2%, and so that is the 138.2% mark.

So, this chart makes a specific prediction, and that prediction is that the a:3 wave will be exceeded lower by the c wave of the flat. What other methodology do you know that .. when used properly .. makes specific predictions that you can test to see if they come true?

The question is, "Is that methodology not good enough for you?!" I know what it's reputation is. And I know why. But I do hope you'll at least keep an open mind.

P.S. I know people read blogs and get confused easily. There is nothing about what I am saying about the dollar chart that says that the b wave of the flat in the S&P 500 must "go over the top, or go to 138.2%". Clearly, if a flat is made it must at least go to 90%; that's all. It could go to 138.2%. And nothing says an up couldn't stall at the 78.6% level or thereabouts, and create the b wave of a triangle instead. Both are still equally likely. That's what makes fourth waves so insidious.

Cheers and I hope your weekend starts off in the best of ways.
TraderJoe






Thursday, March 2, 2017

How the S&P 500 Meshes with the Dow at this Point

Here is the count of waves minuet (i), (ii), and (iii), so far in the S&P500 from the 2257 level. This is the same count as on the Dow chart provided yesterday and in the weekend video. These waves are inside of minute ((v)) of Minor C, upward.

SP500 2-Hr Chart

Since minuet (ii) is pretty clearly a deep, sharp wave, then minuet (iv) can be a flat or triangle. That means a new high can still be possible in this wave set, but does not have to occur. I would expect minuet (iv) to attack the lower channel boundary and for the Elliott Wave Oscillator (EWO) to return to near the zero line (+10% to -40% of the peak).

In this two-hourly chart, I've included the standard 14-period RSI so you can see how the peaks line up so far - when you have the right number of candles on the chart. This chart has just about 110 candles, and should have 120 candles as minuet wave (iv) becomes better defined. So far, the overall alternation in the wave has been holding up well.

Also importantly, it shows the b wave of the ivth wave triangle was, in fact, a b wave, and not countable by the The Eight Fold Path procedure. The triangle should indicate the "last wave up" within wave (iii) follows it, and so far, it seems too. Within wave (iv) a 38.2 - 50% retracement of wave (iii), only, could be expected.

Hope this helps, and have a good night.
TraderJoe

Wednesday, March 1, 2017

Chart from Video - Updated

Here is the chart from last weekend's video, updated for your reference.

Dow Jones Industrial Average Two-Day Chart

Within wave Minor C, wave minute ((iii)) is longer than wave minute ((i)), so technically, wave minute ((v)) of Minor C can be as long as it wishes. My video had a target of 21,374 and change, and today we are over 21,100. If tomorrow we get a slightly higher high, then minuet (iii) can be counted as completed.

The best alternate is that Minor B ended at the election low, as shown in blue with a question mark. But, the Dow and the S&P synchronize better this way at the end of minute ((iv)) in the main count. And, further, it agrees with a third wave on a peak of the EWO.

Minor C would end Intermediate Wave (1) of a diagonal wave in the Dow. Then there would be four more Intermediate waves (2), (3), (4), and (5) required in an overlapping diagonal sequence for Primary V.

Although today's point increase was impressive, the advance - decline line was a fairly tepid 2:1, as opposed to some 4:1, 6:1  or even 9:1 days inside of more prominent impulses. And, today was the first day of the new month with the usual inflows from pension funds, 401k's, dividend reinvestment plans, etc. as I have often mentioned in this blog before.

For now, stay flexible and patient with regard to wave counting. If you are wondering how this relates to trading, then see my paraphrase of Ira Epstein's Guidelines for trading at this LINK. They are my best effort to summarize what Ira Epstein teaches. I do not offer trading or investment advice.

From that perspective, prices have hit their daily upper Bollinger Band target today, and are still above the 18-day "line in the sand", with the daily slow stochastic fully embedded. And so, there is still a positive bias to prices. There has not yet been an outside reversal candle down - or anything like it - yet! But Ira teaches, one does not buy "new long" positions at the upper Bollinger Band, because that is where the so-called 'Smart Money" is likely taking profits, and there is only about a 5% chance of being outside of the Bollinger Bands on any given day.

Neither, he teaches does one "sell short" at the upper Bollinger Band for three reasons. The first reason is, "There is a big difference between selling to take profits, or selling a portion to take profits, versus selling short outright." There is no reason price can not continue to "ride the band" with the slow stochastic fully embedded. The second reason is that price is not below the 18-day SMA, the line in the sand, and so prices do not yet have a downside bias. And third, there is no "swingline" series of lower lows and lower highs to indicate a down trend on the daily chart of the ES futures.

Here is the daily chart of the March, 2017 ES E-Mini S&P Futures so you can reference it, relative to the above.

ES E-Mini S&P 500 March Futures - Daily

Note price hit the upper Bollinger Band, is above the 18-day SMA, has a fully embedded slow stochastic over 80, and, has no swing line sequence of lower lows and lower highs.

I will simply say it is Ira's advice that gives me the patience to be a bit flexible with wave counting.

Best wishes for your success.
TraderJoe