Wednesday, August 15, 2018

Gap Lower and Rebound

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

Yesterday's inside candle could not break through the previous day's high in the cash market. It was something of a sign of weakness. Stocks, as measured by the S&P500, gapped lower, and continued lower until late in the session when a bit of a rebound occurred. Here is the daily chart of the S&P500 Cash Index for reference.

S&P500 Cash Index- Daily - Gap lower and Rebound

There is still nothing that takes this wave out of the realm of a possible fourth wave. Until there is, one must be patient, and continue to be flexible. Stocks dropped down to the daily EMA-34, breached it a bit, then held, and rebounded. The Elliott Wave Oscillator continued red and lower, as upward momentum continues as dreadful.

But, this is what we technicians have been waiting for. We are beginning to see further signs that the $NYAD is beginning to buckle, which may allow for a divergent top from prices at some point in the future. Today's candle is only a 'weak' hammer candle, as the real body of the candle is not green or unchanged. Therefore, it may only represent being in a triangle still. The Russell 2000 also did not break down out of it's potential triangle.

On another note from our recent posts (and not to be taken or interpreted as trading or investment advice), there is a 90 - 95% chance that the U.S. Dollar Index made at least an interim top today. Concomitantly, the EUR/USD may have bottomed with a similar probability. Typical candlestick charting would require a confirming lower close candle for the Dollar (and vice-versa for the EUR/USD).

Have a very good start to your evening.
TraderJoe

Tuesday, August 14, 2018

Still Nothing Much

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

If yesterday was an outside day down in the S&P500 cash market, and it was, then today was an inside day up, even though it started with a gap up. It's still very, very difficult (because of the Fourth Wave Conundrum) to nail down the exact count. Here is the daily chart of S&P500 Cash Index for reference, with our best take on it.

S&P500 Cash Index - Daily - Still Languishing

The momentum continues to be awful (as one would expect in a fifth wave - Minor 5), and the Elliott Wave Oscillator is red and declining - even though today was an up day. Today was also a lower volume day in the cash markets.

So, if the Russell 2000 is still in a triangle, and it appears to be, then perhaps we are also making a smaller running triangle for wave iv of (iii) in the S&P500 Index.Time will tell. But at this time there is insufficient down side price movement to give bearish alternatives much ink.

Have a good start to your evening.
TraderJoe


Sunday, August 12, 2018

Dollar Demonstrates 4WC

In our last post we said it was the first time possible to count a completed five-wave up sequence in the U.S. Dollar Index, so we wanted to alert the reader to it. However, well aware of the Fourth Wave Conundrum (4WC), we said we could still see two ways for the Dollar to extend it's rise if the potential ending diagonal we highlighted did not show the typical post-pattern behavior. We said that the first possibility was of that of a longer wave (iii) for the diagonal, and the second was as a longer triangle for a fourth wave.

With Friday's large move higher, it appears the latter of these options is the correct one. Here is a revised daily chart of the U.S. Dollar Index. Friday's move does look like the typical 'thrust' out of a triangle, still on a divergence with the Elliott Wave Oscillator. The 'fooler' wave, of course, is the (d) wave of the barrier triangle - with it's marginal higher high - which initially suggested the upper barrier line could be the up-sloping line of a diagonal instead.

U.S. Dollar Index Futures - Daily - Likely Triangle

With the inclusion of the channel, and the measurement boxes, one can see that the best count at this time is as a standard impulse wave - with 124 candles for the wave of interest - well within the usual parameters of The Eight Fold Path Methodology. And the boxes show this impulse has the potential to form a 5 = 1 leg, a very common relationship in Elliott Wave work. The important lesson here is not the exact count. No, the significance is that the Dollar demonstrates clearly how The Fourth Wave Conundrum operates to create uncertainty in the Elliott Wave - an uncertainty that must be dealt with and incorporated into one's routine. And, it happens at every degree of trend.

With Friday's drop, the S&P500 Index can be in one of several configurations including a fourth wave flat, a fourth wave triangle, a fifth wave diagonal or even a fifth wave truncation. Because some of these options are at different degrees of trend, rather than confuse the reader with too many options, we will be patient and calm and look for the wave sequence to clear up a bit. However, we will show the futures contract that has the greater propensity to be in a triangle now, at that is the Russell 2000 futures, below.

Russell 2000 Futures - Daily - Potential Triangle

Again, like diagonals, triangles are structures which must prove themselves by forming properly, and by showing the correct post-pattern behavior. We will watch to see if this one does. As with all potential triangles, any significant drop below the prior (c) wave would be a sign that a triangle is not forming properly and require re-evaluation.

In the meanwhile, have an excellent weekend.
TraderJoe

Thursday, August 9, 2018

Backing and Filling Continues

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

Again with relatively narrow price range movement, the stock market, as measured by the S&P500 Index, had an outside day lower, but did not even fill it's closest near-by gap yet. Here is the daily chart of the S&P500 Cash Index for reference.

S&P500 Cash Index - Daily - Outside Day

The Elliott Wave Oscillator (EWO) still has green histogram bars and is still rising. Price momentum remains puckish, and the small nature of the pull-pack thus far is hard to argue with. This appears to still be a sub-wave within the minuet wave v of minute wave (iii).

On a slightly different note, in previous post we stated that we might begin to look for a bottom in the EUR/USD. We now show the daily chart of it's near-inverse: the daily US Dollar Index futures, which may be nearing or at a top.

DX - US Dollar Index Futures - Daily

For the first time, it is possible to count a completed five-wave sequence upward in this index, too. If so, it would be to an a contracting ending diagonal at this point in time, occurring on a divergence with the Elliott Wave Oscillator. Remember, diagonals are structures which must prove themselves, so we would want to see the typical post-pattern behavior that occurs after a diagonal to confirm it, otherwise, an extension of minuet wave (iii), as shown, or even an extension of minute ((iv)), not shown, as a larger triangle is possible.

Still, it is possible to count a completed wave sequence and we wanted to bring it to your attention. 

Have a very good start to your evening.
TraderJoe 

Wednesday, August 8, 2018

Consolidation Day - Little Change

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

After the run-up of the last few days, we had warned at the end of our post yesterday that "Pull-backs can occur at any time as part of a back-and-filling process", and that seems to be what today was for U.S. Equity markets. Here is the daily chart of the S&P500 Cash Index for reference.

S&P500 Cash Index - Daily - Consolidation Day


The Elliott Wave Oscillator (EWO) still has green histogram bars and is still rising. Price momentum remains puckish, and the small nature of the pull-pack thus far is hard to argue with. 

Crude Oil experienced the more significant losses, down over -$2.35 for the day.

So, keep a close eye on things, and have a very good start to your evening.
TraderJoe

Tuesday, August 7, 2018

Continuation Higher

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

Stocks, as measured by the S&P500 gapped up at the open and had a higher high day, and a higher close day. Here is the daily chart of the S&P500 Cash Index for reference.

S&P500 Cash Index - Daily - Gap Up Day

The Elliott Wave Oscillator (EWO) still has green histogram bars and is still rising. Although momentum seems like pulling teeth, steady progress continues to be made towards the upper trend channel boundary.

The Dow Jones Industrial Average had a decent day, too. It made a new local higher high, and the highest high since its up trend began on April 2. Meanwhile neither the Russell 2000 futures nor the NQ (NASDAQ 100) futures have put in new higher highs just yet.

Pull-backs can occur at any time as part of a back-and-filling process. The downside price to beat to start something meaningful lower would be 2,796.

Have a good start to your evening.
TraderJoe

 

Monday, August 6, 2018

New Recovery High

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)

Stocks, as measured by the S&P500, had a higher high day, a new recovery high day and closed over 2,850. As we said on Friday, the up move didn't quite look finished yet. It wasn't. Here is the daily chart of the S&P500 Cash Index for reference.

 
S&P500 Cash Index - Daily - New Recovery High



The  Elliott Wave Oscillator (EWO) is now green and rising. Trading over the upper trend channel boundary is still possible, even though momentum is still pretty awful.

The Dow Jones Industrial Average had a higher high day, but continued to lag a bit, and did not make a new recovery high for that index.

On a different note, the EUR/USD made a lower below the triangle we outlined as the primary count on Saturday, thus fulfilling the minimum requirement for the fifth wave of an impulse downward. Wave 5 can extend if it wishes, but it time to start looking for a turn in this currency pair.

Have a very good start to your evening.
TraderJoe

Saturday, August 4, 2018

Real-Time Triangle

For this weekend's post, I thought we'd have a look at a chart from the perspective of both Elliott Wave and the daily Bollinger Bands. This chart is of the daily EUR/USD currency pair.

The first thing the reader might like to observe is that when price breaks down from the very narrow bands on the left side of the chart in late April, it begins a trending move as the bands expand their width. Every day brings new lows (new swing line lows - lower lows & lower highs) underneath the "line in the sand", the 18-day SMA in red. Price "rides the band" lower as the daily slow stochastic first embeds below  the 20 mark of the indicator. (See first black ellipse on the indicator). Then, in early May, the 18-day SMA crosses below the 100-day SMA - as the green dotted curve - which gives more fuel to the moving average cross-over analysts.


EUR/USD - Daily - Triangle

In mid-May, the daily slow stochastic un-embeds for one day at the blue arrow - which it is allowed to do - and quickly re-embeds, per Ira Epstein's guidelines. See second black ellipse on the indicator. Price thus continues its ride of the lower band, and finally closes below the band at the wave 3 marker, shown. Ira's guidelines tell us not to "sell new positions" below the lower Bollinger band at 3, and that turns out to be sound thinking at that point.

Notice how when price was 'riding the band' it may strike the lower band, or penetrate it, but then quickly closes back above the band in accordance with the algorithm's aim to keep price within the band 95% of the time. When price closes outside of the band at 3, it has only a 5% chance of further closing outside the band - actually 4% because it expended one day outside the band already - and it quickly reverses and heads for the 18-day SMA, has a short battle there, and then goes on to close above the band.

Price makes the target of the upper band, and this is where the triangle begins. Trader whiplash and narrowing of the bands occurs in an attempt to confuse traders and reduce account profits. One can see price ping-ponging between the bands as the (b), (c), (d) and (e) waves of a triangle take form.

On the far right-hand side of the chart, this is where price can be seen to have broken down below the current (d) wave location. Price is also on the lower band, and the slow stochastic is clearly in over-sold territory.

From Bollinger Band theory, we know the rough probability of trading outside of the bands is only 5%. But, from triangle theory, we know a lower low might be expected as wave 5. So, whether one risks their money in a wave 5 trade, or waits for a reversal becomes a matter of judgement and skill in counting Elliott Waves.

But, here is why this particular example is shown for this weekend's chart. There is one very clear alternate which would still call for marginally higher prices first. That alternate would consider that Friday's low is only wave (d) of the triangle. Let me illustrate that so there is no confusion.

EUR/USD - Daily - Alternate Triangle

Since the (d) wave is not below the (b) wave, one must still at least consider that the triangle is on-going. Further, while we know the form of the triangle in the first chart is the "symmetrical" form, the bottom form of triangle could devolve into the "barrier" form of triangle where the bottom line becomes perfectly flat. Either triangle form would be a perfectly acceptable Elliott wave form!*

And this is the very essence of The Fourth Wave Conundrum! There are two completely plausible counts from an Elliott Wave perspective. One has already occurred (a bird in the hand?), and one is in the future. That's why any site that tells you that they have an infallible method, or once they count something, it always remains that count is smoking something that was legalized in Colorado.

No. The message we can take from this example is that the daily Bollinger Bands say that the probability of being outside the lower band in the future is only about 4 - 5%, meanwhile, the Elliott Wave analysis of a triangle of any type screams the message, "the last downward wave set is dead ahead".

Whether you use this information or not - or how you use it - is entirely up to you. This site does not provide trading or investment advice for reasons we have cited in the past.

If you are a very, very large trading firm - with oodles of capital that allows sitting through draw downs - then you might start buying now, or as soon as the exit of the triangle occurs. That is the Smart Money coming in to play the reversion to the 18-day SMA. If you are a retail trader, you might do as our paraphrase of Ira Epstein's guidelines for trading suggests, and wait until price has a positive bias by being above the 18-day SMA, "the line in the sand", in an effort to put the "wind at your back" and trade in the direction of the prevailing trend. Which you decide - if any of these - is just your decision.

The purpose of the Elliott Wave analysis is to help you gauge what paths are possible or potential so that you can accurately assess the situation in a systematic, uniform and rules-based manner. The reason so much Elliott Wave analysis out there on the web is so awful is either: 1) analysts simply don't know the rules, 2) analysts intentionally break the rules to fit their purposes, or 3) there is insufficient consideration of how alternates and technical analysis interplay. There are really times when the count can have a legitimate alternate. We just showed you one. This means that wave analysis is always and ever an exercise in probability.

We are always and only estimating probabilities in every post we make. This is especially true during The Fourth Wave Conundrum - which happens during every fourth wave - at every degree of trend.

*Note: The true Elliott Wave aficionado would observe that the existence of the alternate is due to the Elliott Wave rule that says "four of the five legs of the triangle must be simple zigzags". The fifth leg of any triangle can be more complex, and is most commonly a double zigzag, less commonly a triangle, and even less commonly a flat wave. So, in the above example, if wave (b) is the double zigzag then the original triangle count is perfectly fine. But, most commonly, the complex wave of the triangle is wave (c) or (d). Whether wave (b) is a double zigzag is exceptionally difficult to discern in this instance. The market doesn't make it easy.

Have a good weekend.
TraderJoe


Friday, August 3, 2018

Follow-Through Day

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)

Nothing has changed with the larger overall count in the U.S. equity indexes. Today was a positive day for the S&P500 cash index, the ES E-mini futures, the NQ NASDAQ 100 futures and the Dow Jones Industrial Average. This is not a bullish statement. I remain neutral and am still attempting to count the wave sequence to completion. The up move does not look completed - just yet.

S&P500 Cash Index - Daily - Follow Through Day

The market continues to grind here. Only taking out the low of yesterday's outside day up would be a cause for significant worry that the count is not correct. Perhaps there will be more on the weekend.

Have a good start to your evening.
TraderJoe
 

Thursday, August 2, 2018

Outside Day Up

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

On the Saturday 28 July post, we noted "Interim Top Possible - Not Proven".  With today's outside day up, there are two very, very good possibilities. Either we are still in wave sub-wave iv of (iii), or we are in wave minute (iv) within Minor 5. While the DJIA does have some downward overlaps, the S&P500 has not provided downward overlap of any important wave.

Essentially, there are no changes to the count. The uncertainty in the exact degree of wave label I fully accept as part of the phenomenon I have described as The Fourth Wave Conundrum - which occurs at every degree of trend. I realize almost no one wants to accepts this inherent uncertainty. They want to know what the count is. I prefer to recognize the small uncertainty as it prevents me from making larger errors. With 169 candles on the hourly chart (narrowly outside the recommended range of 120 - 160 candles), we are still within the range where a minuet ivth wave of minute (iii) could have bottomed this morning. And, more precisely, we just entered the range (with 119 candles on the chart) where a 90-minute wave could have the same count. The EWO would agree with either. If I had to guess, my best guess would be "still in minute (iii)", but it is just that: an educated guess. So, that's what the daily chart below will show.


S&P500 Cash Index - Daily - The Fourth Wave Conundrum


There are still many ways new highs and pull-backs can occur at this juncture without altering the count. Grueling small triangles, higher B waves, and other reversals are possible here. So one must simply have some flexibility, patience and calm until a fully countable structure emerges. As I have stated in several posts now, downward alternates are still possible. But from a price perspective, downward momentum provides insufficient evidence that a full-on downward count has taken hold. Today's outside day up reinforces that view.

So have a very good start to your evening.
TraderJoe

Tuesday, July 31, 2018

No Changes

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)

No changes to the current count on the hourly, daily or weekly time frames. While the cash S&P500 Index was up quite strongly, the ES E-Mini S&P500 was up even more after the close of cash trading.


S&P500 Cash Index - Daily - Likely in Minute (iv)

With today's gap up and follow-through, we may very well be in the minute (iv)th wave. This wave might appear as a triangle and should contact the lower trend channel boundary at some point in time.

The Elliott Wave Oscillator is now on a red histogram bar.

The clear alternate for this count would that the market topped at (iii) as a truncated fifth wave, but the odds of the alternate (and the reason why it is the alternate) are very low as downward price action does not justify it yet. In the alternate, the wave x is the (d) wave of the larger triangle, and y is the (e) wave of the larger triangle. The alternate count does not work as well with the Elliott Wave Oscillator.

Have a very good start to your evening.
TraderJoe

Saturday, July 28, 2018

Interim Top Possible, Not Proven - 2

On our Thursday July 19th post (see this LINK), we took the cautious approach that an interim top was possible, not proven. That was, in fact, the title of that post. Further, we outlined the case for an alternate wave ((4)) location far to the right of the 30-minute chart that was shown. The reader should review that post if unfamiliar. It's now more than a week later.

On the short term time-frame, the alternate is what played out. And now, with 126 candles on the hourly chart (well within the 120 - 160 recommended by The Eight Fold Path Methodology) you can see a much more proportionately formed wave. Wave (3) of ((3)) is now clearly above the upper channel boundary - again showing the point of maximum momentum of the wave, wave ((4)) has attacked the lower channel boundary, requiring the typical channel re-draw from the wave ((2)) to the new wave ((4)) location, and wave ((5)) is now both much more proportional to wave ((1)), and it is shown to fail very near the channel mid-line. Also, there is good alternation between the sharp wave ((2)), and the very sideways wave ((4)), with wave ((4)) still having that higher (B) wave. Wave ((5)) likely ended on a divergence with the Elliott Wave Oscillator. The Elliott Wave Oscillator is now both red and below zero.

These are the usual, the typical, and the most common characteristics of the Elliott Impulse wave.

S&P500 Cash Index - Hourly - Well Formed Impulse Structure

Price is now trading below the lower channel boundary again, so it must be suggested that an interim top is again possible, but not proven. To make the case stronger for a downward wave, price should trade below the wave ((4)) marker to rule out the potential that the fifth wave is extending. (Price would have to re-enter the channel for a fifth wave extension). The case for an extended fifth wave within this minute (iii) wave is made quite a bit less likely, though, by the fact that wave ((3)), above, is longer than 1.618 times its wave ((1)). So, the down side would be favored here. Still, from the high of ((5)), only three waves down clearly appear on the hourly chart. So caution and patience are still required.

But now is where we really wish to speak about fifth wave extensions - as we refer to the weekly chart below.

S&P500 Cash Index - Weekly Chart - In Minor 5

So, from our previous post on Wednesday of this week (Jul 25) we noted that, within Minor 5, wave minute (iii) had just become longer than wave minute (i). And those are the circumstances from which an extended fifth wave, in this case, minute (v) could be created. Extended fifth waves are most often created when the third wave is longer, but only marginally longer, than the first wave. And that is exactly what we have here.

So, first, we must see how and if a wave minute (iv) forms, and whether it shows alternation with the flat for minute (ii). If it does, it could well be an extended fifth wave, (v), that takes the market to new highs or to its ultimate top. Of course, to do so, a minute (iv) wave must not overlap wave minute (i). If we should see downward overlap, we will address it at that time. Right now there simply is no evidence for it.

Have a very good start to your weekend.
TraderJoe

Thursday, July 26, 2018

Gap Down and Stall

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

Today appears to be a narrow range consolidation day. It does not appear to be a big deal at the moment.

S&P500 Cash Index - Daily - Inside Day

The Elliott Wave Oscillator is green and is again increasing, even though price was lower. The Dow Jones Industrial Average perked up a bit today which is a positive.

Have a very good start to your evening.
TraderJoe

Wednesday, July 25, 2018

Very much a third wave

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)

The S&P500 closed higher by almost +26 points today. A day like today must convince the outright bears - some of whom are readers here - that the market is, in fact, stronger than they thought. On-the-other-hand, I have been steadfastly making the case for the Minor 5th wave higher - likely an impulse wave - not exactly sure how it would occur..

The daily chart of the S&P500 Cash Index is below for reference. 


S&P500 Cash Index - Daily - Nearing the Upper Channel Line

The significance of  today is that price crossed the (iii) = 100% x (i) price level. That means that this particular wave sequence is now not a sub-wave of wave (iii). That would be a degree violation. Today means we must very likely be in the third wave, minute (iii) itself, and likely in it's fifth wave sequence higher.

Again, trading over the upper channel line would likely completely validate that third wave momentum. We will watch to see if it occurs as we expect. On the daily chart from now on, we will only show the wave from the Minor 4 terminal as the triangle is likely cemented. It was predictive. It has done it's job.

Furthermore, since price is beyond both the 78% retrace of wave (a) of the triangle, and beyond 90% of that same wave, we are in the area where truncated waves can and do occur - if they are going to to. There is no more reason to discuss Minor 4 - with one lower probability exception: since price has attained the 90% level there is still a "chance" - just a chance - this is still a B wave higher. It would be the B wave of an even larger flat wave for a Minor 4.

There are three problems with that scenario: 1) that count would not currently agree with the weekly Elliott Wave Oscillator, 2) there is virtually no downward price evidence for such a count, and 3) it would create an even larger disagreement with the potential degree violation between Minor 4 and Intermediate (4).

No, the higher probability scenario - particularly after today - is we are in Minor 5, even if it truncates.

The trend is your friend, until it is not. Have a good start to your evening.
TraderJoe

Monday, July 23, 2018

Market Mish-Mash

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

As we aptly titled our Thursday post "Interim Top Possible Not Proven", our cautious approach to this whippy market is in clear distinction to the outright bears who keep calling for immediate declines. First, note that the ES E-mini S&P500 futures had a clear outside reversal day up, as distinct from the S&P500 cash index. Further, the daily slow stochastic on the ES futures remains clearly embedded - a potential bit of evidence for higher prices yet.

Next, here is the S&P500 cash index 15-minute chart from the recent high - whether it is an interim top or not.


S&P500 Cash Index - 15 Minutes - Not Impulsive to the Down Side Yet


Looking at the decline so far there is is not much that looks impulsive about it. After the first gap down, it's like the market "put on the brakes" to whip around more and chew up capital. So, either another diagonal is forming in the downward direction. Or perhaps, there is still the left-over of a triangle fourth sub-wave of minuet i to play out yet before the recognizable fifth wave high. Or, perhaps, this is a first wave or an 'a' wave down, three waves up of a a:3 wave, three waves down of a b:3 wave, and the market has started on or completed five waves up of a c:5 wave for a flat second wave or 'b' wave.

It is clear with the market in this position, you are clear to "pick your poison". You have roughly a 1 in 4 chance of getting it correct based on wave counting skills alone, or a 50% chance based on direction (up or down) alone.

Along with The Fourth Wave Conundrum that happens at every degree of trend, this is another reason why I remain neutral and am attempting to count waves to a countable top.

Have a very good start to your evening.
TraderJoe

Sunday, July 22, 2018

Still in Up Channel

Below is the weekly chart of the S&P500 Cash Index. As the wave ruler (lower right) shows, there are now 127 weekly bars on the chart - well within the establish parameters of The Eight Fold Path Method of between 120 - 160 candles on the chart for "the wave of interest".

S&P500 Cash Index - Weekly - The Eight Fold Path Method

During this time, the Elliott Wave Oscillator (EWO) has had two close approaches to the zero line. The first in November 2016 signalling wave Minor 2, and the second, in May, 2018 signalling the end of the Minor wave 4 triangle. As we noted before, we found it amazing (and not surprising) that the Minor 4 triangle took up more time than the Minor 2 zigzag.

The wave count shown is the only one we could find that meets with "degree labeling requirements". This is the requirement that so-called smaller degree waves must, in fact, be smaller than their larger degree counterparts. This essential idea in wave theory is one reason why, once proposed, this count has not had to change over the many weeks.

Concomitant with this idea, we also proposed that a triangle would be likely for Minor 4, to shorten it's length - as measured to wave (e) - so that it would not be longer in price points than Intermediate (4) which was from May 2015 to February 2016. And - whether some services and sites wish to admit it or not - the triangle can clearly be seen, in full agreement with the Elliott Wave Oscillator. Yet, they did not predict the triangle. We did.

On this chart, we have sketched in the median line of the weekly price channel (dotted), and you will note that there is some resistance to price movement there. In fact, price change on the week is quite small.

We have said for weeks now that we expect Minor 5 to have absolutely horrible momentum. So far, in terms of volume it is living up to that expectation. Further, we said that pull-backs can now be expected - probably for minuet ii within minute (iii) of Minor 5. The pullback can be quite substantial but should not violate the lower daily up trend channel line shown on the daily chart below.

S&P500 Cash Index - Daily - Minuet i of Minute (iii) Possibly Completed

Now that potential wave minuet i has made a higher high than the x wave of the minute (ii) flat, we have removed the tentative status of the up channel. Prices should now remain in the channel or exceed the channel to the upside - probably in minuet iii of minute (iii) which would be predicted to have stronger momentum. As it stands now - and as the Fibonacci ruler shows - minuet i is shorter in length than minute (i) also reflecting proper degree labeling.

So now we are at the point of monitoring for the minuet wave ii pull-back which should be more than 38%, but stay within the channel if minute wave (iii) is to be the extended wave in the sequence. The wave can go as deep as 62 - 78% of minuet i, but it can be shallower. First, confirmation is needed that minuet i is over. That would probably occur by price filling the gap shown as the red circle on the above chart.

Have a very good start to your weekend.
TraderJoe