Wednesday, June 20, 2018

GE removed from Dow Jones Industrials

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; $DJIA lower
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

After more than 100 years in the Dow Jones Industrial Average, the iconic stock of General Electric will be removed from the DJIA on Tuesday June 26th, to be replaced by drug chain Walgreens.

Meanwhile in the S&P500 Cash Index hourly, price broke the upper diagonal trend line after a gap-up open, closed yesterday's down gap (shown by the black circle), and then, in another choppy session, back-tested the trend line, and stopped there.

S&P500 Cash Index - Hourly - Break of Upper Diagonal Trend Line


Yesterday's low and last week's high remain the critical fractals. The Elliott Wave Oscillator has come back to the neutral point, but is green and rising. The market will have to decide.

Have a very good start to your evening.
TraderJoe

Tuesday, June 19, 2018

A Hit at 38% & Problems Abound

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower; $RUT, $DJUTIL higher
SPX Candle: Lower High, Lower Low, Lower Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

We said yesterday that there was a way for the market to head lower to hit the 38% Fibonacci retracement level. Today that level was hit in the hourly chart of the S&P500 Cash Index.

S&P500 Cash Index - Hourly - Hit on 38% Retrace


We had sketched in on yesterday's chart (and noted previously in response to some comments) that a potential diagonal could be forming.

That diagonal completed today in good form, and is shown as waves brown i - v on the above chart. As the diagonal is shown today, it is properly formed in all aspects. Wave v is longer than wave iii (which it wasn't yesterday), wave iii is longer than wave i, wave iv is longer than wave ii, wave iv overlaps wave i, and does not travel beyond the end of wave ii, and they are all zigzag sequences.

This is the S&P500. We note in this index that wave .iv has not yet overlapped wave blue .i. And so this index could still eek out a minuet wave to the upside as an impulse.

But problems abound in other indexes. The Dow, for example, has two levels of downward overlap, while the Russell 2000 almost made a new all-time-high today. Therefore, we must count each index independently - for it's own count - as we suspect we will get some divergence in the indexes.

Another problem is that the hourly EWO (shown above) has gone a bit too deep. It is more than 40% of the peak of the highest wave, traveling almost 100% of the peak reading on the down-side. So, that makes today's low in the S&P500 cash index critical. IF we again travel below today's low, we will accept that wave .iv is not forming properly, and we only have three waves to the upside.

And there are two options for what that means a) either the daily minute-degree triangle is continuing in the longer possible pattern, or b) minute wave (ii) of Minor 5 is further to the right-hand side of the chart, which is a possibility I showed twice before on charts. If either of these is the case, then wave .iii ended where -b is currently shown.

Remember, 1, 2, 3 is the same as A, B, C until it is not.

While it is likely the downward expanding diagonal will break to the upside, we simply will not know if it is a Leading or an Ending Diagonal until we see if 2,792 is exceeded to the upside or not. This is all part of both the larger and smaller Fourth Wave Conundrum - and it happens at every degree of trend. It is what makes trading with Elliott Wave less reliable that some would think.

Have a very good start to your evening.
TraderJoe


 

Monday, June 18, 2018

Closer to 38%

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Lower High, Lower Low, Lower Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

We noted in Friday's update that there were, in fact, several ways to count the down trending fourth wave. Further, we said lower lows were possible. They were, and they occurred today.


S&P500 Cash Index - Hourly

As you may know if you followed the intraday price behavior,  there was a gap open lower, and a rebound. And, the gap was not firmly closed on the hourly chart. There is still the possibility of move downward movement to make the 38% mark. But there is also a way to count in which the down move is over. And that description seems to fit the slow, undecided and overlapping nature of the decline.

Have a good start to your evening.
TraderJoe

Saturday, June 16, 2018

For Serious Elliotticians

If you are already, or intend to become, a serious Elliott wave analyst there are some lessons you have either seen already or may wish to learn below. We post the chart below primarily on behalf of the latter.

Objective: to demonstrate where diagonals form after triangles.

This is the daily chart of the July 2018 Crude Oil Futures contract.

CL July 2018 Futures - Daily

The first item to note since we were following this chart is that the peak of momentum, based on the daily Elliott Oscillator, was back in February of this year. That was the peak of wave Minor 3. Then there was a very clear minute degree triangle, labeled above as a - e, which we called out in real time on this blog, and said it would lead to higher highs. It did.

As we watched this triangle form, we noted that the b wave was not higher than wave 3, and, thus, it was a regular symmetrical triangle, and not a "running triangle". With a higher b wave, a "running triangle" would have been a more structure bullish. Without the higher b wave, this one was signalling to beware. Further signs of caution were that none of the new highs were confirmed to have higher momentum by the Elliott Oscillator.

This was, none-the-less, a daily triangle, and it's waves were and are clearly visible on the daily chart. This most usually means that the triangle immediately precedes the last five waves on exit from the triangle. You can then see the five non-overlapping minute waves labeled i - v that make up Minor wave 5.

Clearly, wave v of 5, was a contracting wedge, a tweezers's top, or a structure that serious Elliott analysts call an ending contracting diagonal. Note that all of the waves within the structure can be delineated as three-wave zigzags. Space permits only the labeling of the first zigzag for wave (i).

Once the tiny throw-over of the diagonal completes, then it can clearly be seen that the entire diagonal wave is completely and entirely retraced - back to its starting point in wave iv, in less time than the diagonal took to build. This is a key confirmatory step to noting that an ending contracting diagonal has actually occurred. It did. The diagonal took about fifteen daily bars to build. The down wave exceeded the low of wave iv in five bars.

But, note too, just how the diagonal forms. Wave (i) of the diagonal is not formed until it has exceeded the prior wave minute iii high. And wave (iii) exceeds (i). This is most often the case. Waves (i), (iii), and (v) of a contracting diagonal are motive waves (not corrective waves), even though they are three-wave structures, and so they most often form above their prior peaks. Too often analysts try to put the diagonal inside of prior highs - that should be a red flag that the count might not work out.

Further, note that the diagonal does not immediately follow the triangle. The triangle, and the diagonal are cousins. They are not the same pattern, but they are related. While each has five three-wave sequences, the triangle always travels sideways along the price pattern. It does not slant with the trend as the diagonal does.

But, because they are cousins, it would be rare to see an entire diagonal immediately follow a triangle. That would be poor alternation. It would be two triangle-type patterns in a row. Said differently, if all of the triangle is Minor wave 4, then one would not, by the principle of alternation, expect Minor wave 5 to be entirely a diagonal. And, in this chart you see that it is not.

No, rather, exiting the triangle are the four waves of an impulse pattern at Minute degree (i - iv) and the diagonal comprises Minute v. In other words, if the triangle is a minor wave, this diagonal is a minute wave - fully one degree lower than the triangle. So now, following the triangle is an impulse wave, and only wave v of that impulse wave is a diagonal. This is acceptable alternation because the wave degrees are different.

Paying this type of attention to alternation and the meaning of wave degrees is another way you can distinguish yourself in the category of Elliott analysts who practice this craft from those who don't wish to understand the true nature of wave counting, or those who think they have some much better method, usually for a lot more money. No better method is needed. It's simply here in black and white for people to notice - if they will.

Will you be among those who learn the skill properly; will you invite your friends and relatives to try to learn along also? We hope so.

And we hope you have an excellent weekend.
TraderJoe

P.S. There was a post on Friday, too, if you missed it.



Friday, June 15, 2018

Hourly Update

Here is just a brief update of the chart we presented a couple of days ago. It is the hourly S&P 500 Cash Index.

S&P 500 Cash Index - Hourly

The only salient message on the chart, so far, is that wave blue .iv stopped in the vicinity of the prior fourth wave, brown -iv. There are actually several ways to count this sloppy overlapping wave. In any case with it's higher -b wave, it is a FLAT wave, and it alternates well with blue wave .ii in both shape and time, being much longer in time that wave .ii. And, the downward movement 'could' be over with.

Can the down wave go lower? Yes, there is a way to still continue the down count if a full 38.2% retracement wave is to occur. It doesn't have to.

But, we said the down wave would likely attack the lower channel line, and it has. This puts more of wave blue .iii above the channel, showing where most of the upward momentum is. So far, this up wave has consumed 13 calendar days. A Fibonacci interesting number.

Have a good start to your weekend.
TraderJoe

Wednesday, June 13, 2018

Outside Day Down

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Higher High, Lower Low, Lower Close -  Outside Reversal (Bearish Engulfing) Candle
FED Posture: Quantitative Tightening (QT)

Near mid-day today, the S&P500 cash market made its highest high for the up move, so far. And then, after the Federal Reserve Press Conference, prices backed off, and made a lower daily low, and lower daily close.

S&P500 Cash Index - Daily  - Outside Day Lower

In doing so, the Elliott Wave Oscillator (EWO) turned in a red daily histogram bar on the chart above. In looking at the wave since the low of minute ((ii)) on May 30, on the hourly chart, below, we see the impulsive structure is still in tact.


S&P500 Hourly - Since low of Minute (ii) on May 30.

There are several factors that make us think that we are still in fourth wave within minuet i. First is the simple fact that there has not been a 38% retracement yet. That level is shown on the chart. Second is since the initial rise on May 30, and decline into May 31 (sub-minuet waves .i and .ii), there is a clear five wave structure shown for you as brown -i to -v, which is likely the sub-minuet wave .iii. Within that wave, there is good alternation with brown -ii as a FLAT, and and brown -iv as a non-overlapping sharp.

Thus, to further the case for alternation, if sub-minuet wave .ii is a sharp, then wave sub-minuet wave .iv should be a flat. And today's marginal higher high, could have fit the bill for the -b wave of such a flat. Today's closing price is already below the -a wave of such a flat, fulfilling the 'minimum' expectation for such a flat wave. It can go lower. 

Roughly following The Eight Fold Path Method, wave -iii of .iii should be on the peak of the EWO, and wave -v of .iii should be on the divergence, as we have it shown.  We also see that wave that part of wave .iii is currently above the upper channel line, showing where the most momentum is. Then, lastly, the EWO is nearing the zero line for what may be the wave .iv signature. It would certainly be possible for price to attack the lower channel line. Of course, any significant overlap of wave .iv with wave .i would invalidate the potential fourth wave, and mean the upward move had already crested.

With the ECB meeting tomorrow, it bears keeping an eye on it.

Have a very good start to your evening.
TraderJoe

Monday, June 11, 2018

Higher High Day

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; DJUtil lower
SPX Candle: Higher High, Higher Low, Lower Close -  Doji Candle
FED Posture: Quantitative Tightening (QT)

Nothing has essentially changed today versus Sunday's post. It was a higher high day in price for many indexes, and the Elliott Wave Oscillator also continued to make a second new higher high - which often indicates that a third wave is in progress. 

S&P500 Cash Index - Daily - Higher High Day

The slow stochastic of the Daily ES E-Mini S&P500 Index futures continues to be embedded - another fairly strong technical sign. Price continues to crawl up the median line of the tentative channel we've sketched in. Again, we are monitoring the 100% x minute (i) level, relative to the end of minuet i of minute (iii). So far, all the parameters are being met.

The FOMC begins a two-day meeting tomorrow, and concludes with an announcement on Wednesday, and a Press Conference by Chair Powell.

Have a good start to your evening.
TraderJoe

 

Sunday, June 10, 2018

Inside Day

The daily S&P500, shown below, had an inside day, while the Dow Jones Industrial Average had a slight higher high. Continuing with the triangle count to Minor 4 from the June 5 post (and earlier)...

S&P500 Cash Index - Daily - Inside Day

We do note, however, that the Elliott Wave Oscillator, is green and rising, and made a higher high for the move since February. This is often, not always, a sign of a third wave in progress.

Further, if the up move in May is labeled as minute (i), then we are showing the 100% x (i) Fibonacci ruler for a reason. While minute (iii) can become longer than minute (i), the first minuet wave i within minute (iii) can not be longer than minute (i) by degree labeling constraints. That is, minuet i would not be a wave of smaller degree if it were larger in points than minute (i). We will have more to say about that as the days progress.

For now, we'll only say that proper degree labeling is a topic few other Elliott analysts visit.

And have a very good rest of the weekend.
TraderJoe

Thursday, June 7, 2018

Two Of Four new ATH

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Higher High, Higher Low, Lower Close -  Spinning Top Candle
FED Posture: Quantitative Tightening (QT)

Many major U.S. equity indexes made higher daily highs today, and then pulled back. In a major feat of heroics, the NASDAQ 100 futures and NDX made new all-time-highs (ATH), joining the Russell 2000 to make two of the four major indexes that have done so. The Dow Jones Industrial Average, and the S&P500 Index have not. 

The significance of those moves can not be understated: no matter how much the bears wish to claim it, these indexes now simply can not be counted as a 1, down and 2, up, with the new all-time highs. That would violate the simplest of the Elliott Wave rules.


$RUT and $NDX Daily - New All Time Highs


Now, it is possible for the NDX / NQ100 to be in a potential diagonal, but that remains to be seen. If so, we would be in minute ((iii)) of such a diagonal. There is simply nothing wrong with the prior triangle count, and so now our job is to look for upward extensions or downward overlaps in this index.

As long as the Dow and S&P continue making new daily highs, the trend should be viewed as up as the swing line is currently up in the ES E-Mini S&P500 futures, price is over the 18-day SMA, and the 18-day SMA is over the 100-day SMA in a bullish cross. Further, the ES daily slow stochastic embedded today with three days in a row with both the %D, and the %K over the 80 level.

Again, price can pull back at any time to the lower boundary of the up trend channel line shown, yesterday. For now, steady as she goes.

Have a very good start to your evening.
TraderJoe




Wednesday, June 6, 2018

Move Out of Triangle Continues

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Lower Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

Prices continued higher today. Even the Dow made a slight new higher high over it's May waves. Therefore, it is now possible to sketch in a tentative Elliott Parallel Trend Channel on the right hand side of the chart.


ES E-Mini S&P500 Index Futures - Daily - Tentative Parallel Drawn In

Now that price has cleared the green up-fractal at 2,742 the swing line is up in virtually all indexes. Therefore, damage is not done to the swing line unless the red down fractal at 2,675 is exceeded lower. That's still almost 70 points of risk if the swing line is used as a risk parameter.

Further signs of strength would be if the median line of the channel is exceeded higher, and, then if the (b) wave is exceeded higher. Price is still over the blue EMA-34, and the Elliott Wave Oscillator is currently green and rising. It is possible the futures have latched on to the upper daily Bollinger Band, and, the daily slow stochastic is now in over-bought territory but needs to be followed daily to see if it embeds or not. Clearly, a pull-back to the rising channel is possible at any time.

Have a good start to your evening,
TraderJoe

Tuesday, June 5, 2018

Major Markets - Four Triangles

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Higher High, Lower Low, Higher Close -  Doji Candle
FED Posture: Quantitative Tightening (QT)

A four-block of major U.S. market futures shows they can all now be counted as triangles on the daily chart, as below. The four (4) markets are the ES E-Mini S&P500 futures, the NQ NASDAQ 100 futures, the Russell 2000 futures and the Dow 30 Index futures.

Four Markets - Daily - Triangles

Each triangle has its (a) wave low in February, its (b) wave high in late Feb or early March, its (c) wave low in  the beginning of April,  its (d) wave high in mid-late April, and its (e) wave low in late April or early May. Since exiting the triangle, all markets have exceeded their (d) wave highs., the Russell 2000 has made a new all time high, and NQ futures are very close to a new all-time high.

It should be clear that each market should be counted separately to it's top. Clearly, the DOW is lagging a bit. Certainly pull-backs to trend lines or second waves that are longer in time might  be expected at any time.

Have a very good start to your evening.
TraderJoe

Sunday, June 3, 2018

NetFlix, Diagonals and Required Zigzags

It's not often that one gets to study potential ending diagonals in some detail. For that reason, and that reason alone, the daily chart of Netflix is being posted below, and included is one level of detail.

NFLX - Daily - Potential Contracting Ending Diagonal

So, overall, this chart shows higher highs - currently in a wedge shape - and on a divergence of the Elliott Wave Oscillator. Yes, we don't know wave minute ((iii)) is done yet. But it looks 'close'. And certainly wave minute ((iii)) is currently shorter than minute ((i)) at this point in time, as is required in a contracting ending diagonal.

Further, starting over on the left, I have clearly indicated the five-wave non-overlapping sequences for each of the (a) and (c) waves within minute ((i)). And, the same for each of the (a) and (c) waves within minute ((iii)).

Let me be clear at the outset. Unless one can clearly find and describe these five-wave sub-waves within the potential zigzag waves of the diagonal, one's chances for calling a true diagonal would be substantially reduced.

But next, and very importantly, one must be able to establish - beyond any doubt - that waves minute ((ii)) which is seen on the chart, and minute ((iv)), which has not formed yet, are clear and distinct simple zigzags. This is required to prove the case of a diagonal.

For that reason one goes down from the daily chart - to the hourly or half-hourly chart - to see if that is fact or fiction. Now, just looking at this wave minute ((ii)) on the daily chart, above, one sees a big "hump" right in the middle of the wave - and because of degree labeling requirements - that is a big "clue" that the wave is a zigzag. But, does a zigzag count, in fact, hold up on closer inspection?

Here is the detail of the hourly chart which I have blown up as an "inset" for you, so you can count along as I have. If it seems like you would never have gotten this downward count correct to begin with, we'll explore why. See the boxed portion of the chart, below.

NLFX - Hourly - Zigzag Count

The waves immediately off the top are a true mess for most traders. Whenever I see that, I think in terms of (triangles? diagonals?). In fact, that is what we have, in spades. We have a leading contracting diagonal for the (a) wave - which counts correctly in every detail, followed by a zigzag (b) wave, followed by an impulsive (c) wave down to complete wave minute ((ii)).

The diagonal, zigzag, impulse pattern shows excellent alternation. In general, because of alternation, within a zigzag the (a) and (c) waves should not both be diagonals. If one is a diagonal, the other should be an impulse, and  that is precisely what we see.

But further, to complicate traders & wave-counters lives there are at least two triangles in this count. The leading diagonal (a) wave must also be comprised of zigzags. And that is exactly what we see. The LD's wave i, starts off as ((A)), triangle ((B)), and ((C)). And the remaining waves ii - v are clearly three-wave sequences too, in which wave iv is shorter than wave ii, and overlaps wave i.

Within wave (c), it is hard to miss the cascading waterfall wave for it's wave iii. It's wave ii is very short in terms of points, and time. And, it's wave iv makes up for that with a much larger but entirely valid running triangle which is "the structure before the last wave in the sequence". Once again, this is just excellent alternation between waves ii and wave iv!

So, again, we show - without breaking or bending any Elliott Wave rules - we wind up with a fully proven case for a zigzag downward. In fact, it is the alternation that gives us high confidence in the count. Some people do not understand alternation. Some people don't use it, and some people use it incorrectly.

Will you be one of the people who use it as a veritable weapon in your wave counting? I hope you will. And I hope you will enjoy the rest of your weekend.

TraderJoe
(P.S. - Just a reminder there was a post on Saturday, too, if you haven't seen it yet)

Saturday, June 2, 2018

Alternates & The Eight Fold Path

Welcome to the Fourth Wave Conundrum! We have been writing about this phenomenon since February of this year when we first posited that a triangle 'could' form for a Minor 4th wave in the S&P500 Cash Index. This conclusion was suggested because a Minor 4th wave would be larger in points, than the prior Intermediate (4)th wave unless a triangle formed. That is because a triangle is always measured to it's (e) wave to determine its length.

Meanwhile, a major Elliott Wave service and certain websites were predicting a panic crash that simply has not yet occurred. They used phrases like "the third wave will begin accelerating down immediately". That just didn't happen yet. (Could it? Yes. Has it? No). Instead prices have had no net travel since the first few days at the beginning of February.

We have already shown you how a "smaller triangle" could have formed. An updated chart of the smaller triangle is below.

Figure 1 : S&P500 Daily Chart - Completed Smaller Triangle

This, above, count has the advantages that 1) it is completed - so we could stop talking about a triangle! 2) It is well-formed, agrees with the daily Elliott Wave Oscillator (EWO), as we showed before, 3) has minute waves ((a)) - through ((e)) each on an opposite side of the EMA-34, 4) each wave counts correctly: each wave is a zigzag except wave ((e)) which is a triple zigzag, and 5) the pop out of the triangle occurs reasonably near the apex of the triangle. In this count, minute ((i)) of Minor 5 is completed, and minute ((ii)) could have completed or may still be underway. So far, minute ((ii)) has taken less time than minute ((i)) suggesting that a deeper correction or one longer in time may still occur.

Then, there is the larger version of the triangle.


Figure 2 : S&P500 Cash Index - Daily - Completed Larger Triangle

The larger version of the triangle has many of the same qualities, although it does not fit the daily EWO quite as well. It does have the advantage that it's minute ((e)) wave is shorter - which makes a much better "fit" with the point distances traveled by Minor 4, and Intermediate (4). And, Friday's high stopped right on the declining trend line, without yet breaking the minute ((d)) wave high. But, it also has the disadvantage of price not being as close to the apex of the triangle if a breakout were to occur here. Could the (e) wave extend lower? It certainly could provided the minute ((d)) high is not exceeded first. It has not been, yet, in the Dow and the S&P.

What if the minute ((d)) wave is only marginally exceeded higher? Yes, it is possible to draw an even larger version of a triangle. This one would see the minute ((d)) wave as a triple zigzag, as in Figure 3, below.

Figure 3: S&P500 Cash - Daily - Largest Triangle in Progress

This version of the triangle has the characteristic that the minute ((d)) wave, being a triple zigzag, would be the complex leg of the triangle and would be fulfilling the mission of a triangle: to take up time and to move price sideways. But it has the disadvantage that some of the zigzags would look non-proportional within this ((d)) wave.  Still it might allow for more symmetrical slopes to the two triangle trend lines, and push price further out into the apex of the triangle in another ((e)) wave.

In this version of the triangle, though, minute ((d)) may not trade above the minute ((b)) wave.

So, here we are: three different versions of upward counts - any one of which could come true - or has already come true in two instances. And there is one downward count that we have noted before, which is minute ((i)) down at the February low, and this upward wave is minute ((ii)), up. So, there are four different counts - using pretty much the same wave structure, and that's what makes trading with the Elliott Wave still quite a risky business. This is very true at or near market tops where it takes a larger number of points to prove one's wave count or invalidate it. It's what makes it The Fourth Wave Conundrum, and it does occur at every degree of trend.

Of course, there are other lenses through which to view the market. For example, the most recent cash price action was a "gap up". And in the daily futures, the ES price is above the 18-day SMA, giving it a positive bias, and the 18-day SMA has just crossed above the 100-day SMA, giving the moving average traders a "bull cross". The daily slow stochastic has turned up from the 50 level, and so momentum, as of Friday, is and was up. And while that is to be respected, there is a daily upper Bollinger Band sitting at 2,747 which is not too far away from the current price. Further, the bands have narrowed in the last three days which may presage an eventual breakout.

ES E-Mini S&P500 June Futures - Daily - Bollinger Bands


So, will price latch on to the upper daily Bollinger Band and ride it higher to make that Minor 5th wave? Or will price hit the upper band and reverse again, break lower and make a further wave ((ii)), or wave ((e)), lower, or something worse?

Again, my bias is that a triangle completes, and a satisfactory Minor 5th wave up completes (even if it truncates in some indexes) to make a clearly identifiable conclusion to a Primary Vth wave.

Lastly, using fully disclosed Eight Fold Path Methodology in the weekly chart, below, we see that it has 119 candles on it; the only time frame that mates with the 120 - 160 candles recommended by the method. Further, we see price is still in the up channel, and we had commented in prior posts how the Elliott Wave Oscillator had come back to the zero line to likely indicate the Minor 4th wave.

S&P500 Cash - Weekly - The Eight Fold Path Methodology

So, when we count using proper degree labeling (so that minute ((i)) of Minor 3 is not longer than Minor 1), we also see that any of the triangles - the smaller one is shown - is now longer in time than Minor 2, at 14 weekly bars versus 12. This is a truly excellent result, to have a fourth wave longer in time than a second wave, and it is one you will hear little mentioned on other websites, or even by major Elliott Wave services.

Could a triangle go longer in time? Yes it certainly could, but only within certain limits. Does a triangle have to go longer in time? As the above chart shows, it does not have to. The weekly EWO is already green and rising which 'could' indicate the fifth wave, Minor 5, in progress.

Have an excellent weekend.
TraderJoe

Thursday, May 31, 2018

Choppy Day Lower

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close -  Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

Let's get right to the chart and keep this short and sweet. Prices gapped lower today and did not fill the gap.

S&P500 Cash - 15 Minute - Decline

During the live chat room session, we identified the (dotted) three-touch trend line, and it's break lower with the lower lows, and prices currently trading in a channel for the bulk of the day.

Although price made some progress lower, it was a very choppy day, and the 61.8% Fibonacci retracement level (shown) at 2,696 was not attained in the downward direction. As long as price continues in the channel or below it, we must consider a downward trending wave still in force. At this point there can be a double zigzag lower with Y just slightly greater than W. This could turn into a triple zigzag lower, or it's cousin, a leading diagonal. We won't know until we see either more downward price movement, or if price breaks the channel in the upward direction.

Again, this could be wave ii if the minute (e) wave of the triangle ended on May 29th. Or, if a leading diagonal takes hold, then the minute (e) wave can still be continuing, lower. 

Only time will tell. Stay flexible, patient and calm. And most importantly, have a good start to your evening.
TraderJoe

Wednesday, May 30, 2018

i or x

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

Based on yesterday's hourly chart of the cash S&P500 Index, there are two excellent possibilities for today's wave: either it is part of a first wave up, after the minute (e) wave of the larger triangle on the daily chart, or it is wave x of a more complicated double zigzag for wave (e) - still in progress.

Here is a cash chart on the fifteen minute time frame.

S&P500 Cash Index - 15 Minutes - i or x

In order to confirm a minute (e) wave of the triangle is completed, then price would need to get above the minute (d) wave high. That has not happened yet. Yes, the downward wave sequence in the channel was clearly an a, b, c three-wave sequence. Further, there is very poor alternation in the downward wave, so I conclude it is a corrective wave sequence of some type. 

Next, the upward wave sequence that began yesterday and continued today has a "no pullback" look to it. And, while it can very well be the first wave of the thrust out the triangle, the no pullback character can also just mean it is the "x" wave of a double zigzag. For the up wave to survive as the x wave, then it should not make a new high above the (d) wave, as that would invalidate a double zigzag count.

Otherwise, if the x wave survives, the (e) wave can travel more fully lower. I have no preference which occurs, remaining neutral and counting waves.

Have a very good start to your evening.
TraderJoe

Tuesday, May 29, 2018

Diagonal Failure

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower ; DJUtil Higher
SPX Candle: Lower High, Lower Low, Lower Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

As we had written about in our previous post, there was no requirement for the potential hourly ending contracting diagonal to make a new high. When a contracting diagonal is a C wave, it's fifth wave may fail. This one did, and it failed badly. So, we hope we prepared you for that eventuality.


S&P500 Cash Index - Ending Contracting Diagonal C Wave Failure

So, we now conclude the (d) wave of the larger triangle is now over, and it ended with the three-wave, .a, .b, and .c to the wave ((5)) of the c wave of minute (d). There are people who may recoil at the truncation. Given the news environment, particularly as it relates to Italy, Korea and China, it seems like the right count from a psychological perspective, as well. The news could have been better this weekend. It wasn't.

So, now we look at the larger potential daily triangle on this index.


S&P500 Cash Index - Daily - Potential Larger Triangle

From this chart, we can see a completed minute (d) wave, and the beginning of the minute (e) wave - or worse - lower. Today's decline was not small potatoes. Yet, the (e) wave has already done everything we suggested it 'must' do - which is to trade on the opposite side of the daily EMA-34 for better form and balance. It can still trade lower. The only thing this down wave can not do, and remain within this particular triangle count, is trade below the (c) wave.

We'll see how it goes, taking it step by step. Remember, the best alternate now is that a minute (ii) wave ended where the minute (d) did - all as shown previously. I hope you are gaining a better understanding now of The Fourth Wave Conundrum, and why this makes wave calling so treacherous at times.

For now, be patient, calm and flexible. And have a good start to your evening.
TraderJoe


Wednesday, May 23, 2018

Follow Up

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; DJTran Lower
SPX Candle: Lower High, Lower Low, Higher Close -  Neutral Candle
FED Posture: Quantitative Tightening (QT)

Yesterday's bearish engulfing candle was not confirmed lower with a lower close day, as is typically required of daily candle patterns. From the hourly chart we presented at the top of yesterday's post, we weren't expecting it would be. Today's initial drop was 'testy' but the market came through and did not invalidate the potential diagonal. Here is yesterday's hourly chart updated.

S&P500 Cash - Hourly - Potential Diagonal c wave of minute (d)

For the diagonal to play out properly, then wave ((5)) must remain shorter than wave ((3)). As we said, wave ((4)), by the skin of its teeth, remained shorter than wave ((2)), but overlapped wave ((1)) as it should have. You can see from the Elliott Wave Oscillator, that there is a nice little wave ((4)) signature happening currently.

We must note that wave ((5)) most likely would make a marginal new high, but it does not have to. Because this is likely an ending diagonal pattern, then this fifth wave can fail to make that new high if it wants, and still remain a valid structure. Only in a leading diagonal must the fifth wave not fail.

From an invalidation standpoint, no part of wave ((5)) may be allowed to trade below the low of wave ((4)), and from a time signature viewpoint, wave ((3)) has consumed less time than wave ((1)), and wave ((4)) has taken less time than wave ((2)). So far, the wave structures fit. Now, let's see if they hold up.

Have a very good start to your evening.
TraderJoe

Tuesday, May 22, 2018

End of Minute (d) Approaching ?

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil higher
SPX Candle: Higher High, Lower Low, Lower Close -  Bearish Engulfing Candle
FED Posture: Quantitative Tightening (QT)

In the daily chart of the S&P500 cash we said it was likely the c wave of the minute (d) wave was underway, and we had stated it could have higher to go. It still could. 

Yet, in the live chat room today, this hourly count was posted.

S&P500 Cash Index - Houly - c wave of minute (d)

So far, we can count this movement as a potential contracting ending diagonal to end the c wave of the minute (d) wave. Interestingly, we called this potential wave structure at today's marginal new high - which makes such a diagonal a potential. Notice how the Elliott Wave Oscillator is declining from wave ((1)) to wave ((3)). We had no assurance that wave ((4)) would begin in earnest, but it did.

As a refresher, here is that larger potential daily triangle.

S&P500 Cash - Daily - Potential Larger Daily Triangle

Clearly you can see why we have a Fourth Wave Conundrum. This larger triangle could play out or the smaller triangle - as we outlined in a previous post on The Russell 2000 Index (with it's new high) could have been the triangle of interest - just apply the same declining trend line from (b) to a, above in the smaller version of the triangle. There simply is not a fool-proof way to tell.

The hourly ending diagonal c wave could be spelling out that the prior b wave low will be taken out by the minute (e) wave lower. That is one excellent possibility. In any event, I would like to see the (e) wave travel below the blue EMA-34 shown for best form and balance. Such a wave would probably generate a lot of bearish sentiment.

And, so that you know, this is now the first time that I can call a legitimate downward alternate to this count - bearing in mind there is little downward evidence for it just yet. However, in the interest of 'an abundance of caution', we're going to show it to you here first.


S&P500 Cash - Daily - Downward ALTERNATE

The above count would be that of a double combination w-x-y whose purpose would be to form minute wave (ii) after a minute wave (i), down, from an Extended 5th wave higher. This count would be the very same in the DJIA as it would be in the S&P500, and might help explain the Dow's lower low at x, which is unconfirmed by the S&P500.

Why have we NOT counted it as the proverbial 1,2, (i), (ii) down as so many web-sites have? Well, remember Neely's guideline that no part of wave 3 should break a line from 0 - 2? That is what would happen if w was wave 2., and if y was wave (ii). So, we are not going that route.

Further, we think that considering this wave as either of the two triangles, above, or as the double-combination alternate count has served us well in terms of predicting just how this wave would stall as it has in the low volume reflecting the tremendous uncertainty as nations elect whether or not to play the "Trade War" game.

And this should be the best written illustration of why The Fourth Wave Conundrum exists in reality. With exactly the same wave structure, you have the clear possibility for the smaller triangle, and the larger triangle which point upward, and this latter double-combination, which points downward. If that doesn't spell conundrum I don't know what does.

We might suppose that with the recent highs in the advance-decline line, that it would be better to have a Minor 4 triangle help finish the Primary 5th wave to end the SuperCycle. That's our bias, but it is just that, our bias. It could also be that the Primary 5th wave ended with the extended Minor 5th wave as a major Elliott Wave firm sees it. And, the evidence for that might be that we are forming an ending contracting diagonal. Will such a structure lead to a complete breakdown of the entire triangle? It could. But, it hasn't as of yet.

Stay tuned, and have a very good start to your evening.
TraderJoe