Friday, October 19, 2018

Some Lower Low Days

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle 
FED Posture: Quantitative Tightening (QT)

The market knows we're all watching. Some markets, like the Nasdaq 100 Futures, and the Russell 2000 Futures put on lower low candles. The S&P500 was an inside candle, with a lower close. The DOW had a higher close.

S&P500 Cash Index - Daily - Inside Day

There still remain several ways to count the six last overlapping days. They could be wave iv of an impulse. They could be wave ii of a downward diagonal. They could be part of a triangle for wave iv, with a downward wave v to follow. Today was still very, very choppy price movement.

There are upward possibilities as well, but they will not be addressed unless or until there are higher high days. Right now, price is still being rejected by the EMA-13, and it is widening from the EMA-34, which still connotes a downward bias.  

As of today, the NQ futures on the daily chart have a bearish cross of the 18-day SMA under the longer term 100-day moving average. The Russell 2000 did that on 09 Oct. The NQ futures have upward overlap on their first or 'a' wave down, which makes it seems like further downward price movement might help make a diagonal more readily in that price series. The Russell 2000 futures did not overlap upward.

On a shorter-term basis, the S&P500 30-minute channel we showed in yesterday's post was broken to the downside today, as we expected from the ((A)), ((B)), ((C)) labeling, upward, in yesterday's post.

Have a good start to your evening, and to your weekend!
TraderJoe

Thursday, October 18, 2018

Confirmation Day

Market Outlook: Probable Long Term Top Identified
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)

Yesterday's possible "hanging man" candle in the cash S&P500 (see yesterday's SPX candle) played out nicely today, with both a lower low day, and a lower close day, confirming the candle. However, after the gap down, in tone the day was quite choppy.

The only things that seemed to work reasonably well were 1) to consider the up move from 11 Oct to 17 Oct as a large three-wave sequence; the chart is shown below, 2) to realize that corrective moves often occur in channels, as a bear flag, & that the break of the lower channel lower could be telling, and 3) to count on a very short term 5-minute basis, the down wave as a five wave sequence.

Here is the S&P500 30-minute chart showing the three wave sequence, and the channel boundaries.

S&P500 Cash Index - 30 Minutes - Channel

In the down wave today you can find a few ways to count "five down", but the alternation gets a little unclear. If the down move continues tomorrow, and makes a new lower low, lower than 2,710 we could have had a minuet fourth wave up, and a minuet fifth wave down to make an impulse.

If the choppiness is endemic of a triangle, we could thrash around for a while before making the lower low. Or finally, if we only make a marginal low then this ((A)), ((B)), ((C)) up wave could be wave ii of a diagonal lower, with the zero point on the chart as a,b,c of i, and the end of the ((C)) wave as ii.

None of these can yet be ruled out, so we remain, patient and flexible.

Counts in the upward direction can not be considered without a daily higher-high candle. And all those larger potential diagonal upward diagonals would require a cross of 2,900 and again would not be considered until or unless that occurs.

Have a good evening,
TraderJoe


 

Wednesday, October 17, 2018

Crude Oil Impulses Lower

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower; NDX higher
SPX Candle: Higher High, Higher Low, Lower Close - Possible Hanging-Man Candle 
FED Posture: Quantitative Tightening (QT)

On October 11, 2018, in a post you can find at this LINK. I stated it was very possible we had a daily top in Crude Oil. Today, unlike the S&P500, the WTI November Crude Oil chart, made a clear, impulse wave down on the two-hourly chart which appears below.

CL November Futures - Daily - Clear Non-Overlapping Impulse

The wave began with the contracting diagonal lower - same as in the S&P500 Cash Index. After a sharp looking second wave, which retraced about 60%, this predicted a longer and stronger third wave down on the low of the MACD indicator shown. Then, there was a very sideways looking fourth wave, which can be either a failed double combination or a triangle with a very, very short (e) wave. Regardless, after attacking the upper parallel Elliott trend channel, without overlapping the first wave, prices then broke down as expected for a fifth wave.

This is what we were expecting in the S&P500. So far, we haven't gotten it. Of course, Crude Oil doesn't have "quarterly earning report news" to possibly interfere with the creation of an impulse in terms of timing.

The jury is still out on the S&P500. More on it tomorrow.
Have a good start to your evening.
TraderJoe


Tuesday, October 16, 2018

Higher High Day & Invalidated Triangle

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle 
FED Posture: Quantitative Tightening (QT)

One of the clear reasons that we caution that triangles and diagonals are patterns that must prove themselves is in relationship to a day like today. Overnight, the ES 2-hr triangle had the potential to complete and complete properly. In the last wave, the potential (e) wave, the pattern was invalidated, and a short squeeze was on.

That leaves us with only three-waves down on the daily chart. Sad, but true. Let's eliminate from consideration everything on the daily chart, except this down wave, and what comes after wave 5.

S&P500 Cash Index - Daily - Only Three Waves Down


The Elliott Wave Oscillator (EWO) remains much lower.

It should be clear that so far, there are only three waves down. Could a fourth and fifth wave form? Yes.  But given the length of today's rise, a straight-forward downward impulse is now tougher to do.

Could price find resistance at the back test of the channel? Yes. 

Could the first three waves down be the start of a downward diagonal? Yes. 

Could they only be a second wave of a larger move upward? Given only a 62% retrace to the low, yes, but harder at this time to see how. Therefore, it is lower probability. (See note below!)

This is just one of those situations where one has to wait for more information, and to see what happens, if and when price back tests the channel and interacts with the EMA-13 and EMA-34.

Have a good start to your evening.
TraderJoe 

(P.S. Revision after the close. I measured this down wave, it is much, much larger in the cash market than Minor 2, at the election low. Therefore, by degree labeling, it would likely be incorrect to put a 2, or (ii) at the October low.)








Monday, October 15, 2018

No Higher High Day, Yet

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil, DJTrans, RUT higher
SPX Candle: Lower High, Higher Low, Lower Close - Inside Candle 
FED Posture: Quantitative Tightening (QT)

From the Friday and weekend posts, you will have read we are expecting a consolidation at lower levels. So far, we are getting that, and it tilts the odds in the downward direction - at least temporarily. Below is a continued chart on the ES E-Mini S&P500 Futures, so you can see that, as of now, nothing has changed.


ES E-Mini S&P500 Futures - 2 Hr - Potential Running Triangle


As of this writing, a potential running triangle remains in tact. Today it found upward resistance on the upper edge of the declining Elliott parallel trend channel, and was attacking it as we delineate in The Eight Fold Path Methodology.

The triangle remains a potential. It must prove itself in every detail. There is already one way to count such a triangle as complete. Just slide the (c) wave over to the 12 Oct high, and slide the (d) wave over to the 12 Oct low. That would leave today's high as the (e) wave - which breaks no rules or guidelines. The reason it is labeled as above is that this looks better in the cash market. So, the (d) wave could still break down a bit, and then an (e) wave upward take over.

Kindly remember three details of potential running triangles. First, the upward (e) wave must overlap wave iii wave. If the (e) wave ended today, it does this already. If it ends, tomorrow, such an overlap would be expected. Second, running triangles, with their lower (b) waves are bearish structures - at least temporarily. Running triangles with their higher b waves are bullish in bull markets. Running triangles with lower b waves are bearish in bear markets. IF this triangle completes successfully it will be giving us a very big clue. (This is not trading or investment advice - just a description of how running triangles operate in various markets, as best I understand it). Third, and finally, the usual technical analysis target for a triangle is the widest width of the triangle added to the breakout point, or breakdown point in this case. If this occurs, it would target at least a new low from the current triangle width.

So, stay tuned. Let's be patient, flexible and calm, and lets see if a triangle forms properly, and if it does, then does a clean lower low form for a fifth wave down?

Have a good evening, and a good start to the week.
TraderJoe

Saturday, October 13, 2018

Elliott Wave Video

As I haven't done one of these in a while, I thought I'd post a video now to review some milestones on quite a long journey. The journey isn't over. I still have more to learn and to discover. But, I thought you might enjoy this now. After you click on the video you can enlarge it to full screen by clicking on the [  ] full-screen button.



Further, I hope this video will encourage a 'new generation' of Elliott analysts to dig into the specifics of wave counting, and help make it more scientific, and less vague.

Have a very good weekend, and leave a comment or a question if you liked the video. Most importantly, tell your friends to help spread the word, and support the blog.

Have a good weekend.
TraderJoe

Friday, October 12, 2018

Inside Day

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle 
FED Posture: Quantitative Tightening (QT)

Yesterday, we suggested readers and wave counters might look for an inside day - a day of consolidation. That is what we got. Here it is, using the daily ES E-mini S&P Futures just to insure all prices are included.


ES E-mini S&P500 Futures - Daily - Inside Consolidation Day

Here is a continued count on the down wave, using the two-hourly futures, the chart starts on the left with the Leading Contracting Diagonal we identified in near-real time for you on the S&P500 Cash 15-minute chart. Then, it continues with a complex wave 2 correction as w-x--y, where only the y wave is a triangle (allowed). Next, there is the long and strong third wave, 3, in five sub-waves, and now a consolidation, likely for wave 4.


ES E-min S&P500 Futures - 2 HR Chart - Downward Count

So far, prices are still channeling well. The next expectation of an impulse lower is for prices to attack the upper channel boundary, and possibly push it out a bit. Right now, the internal structure of wave 4 favors a triangle, as this might help equalize the size of the wave with the size of wave 2, which is quite small. It is hard to be more definitive about which wave of the potential triangle we are in because it's hard to determine yet, if one leg is more than a simple zigzag. IF we are making a running triangle - then just as running triangles were bullish on the way up - they are bearish on the way down. Again, a triangle is a structure that must prove itself, so it needs to form properly in every detail.

Again, under no circumstances can wave 4 up, overlap wave 1, down, and have the wave remain an impulse.

Let's see how it goes. Have a very good start to your evening and to your weekend!
TraderJoe

Thursday, October 11, 2018

Lower Low Day & Overlap

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed significantly lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle 
FED Posture: Quantitative Tightening (QT)

If you have not seen this morning's update on Crude Oil, you can view it below this post. In the equity markets, today was a lower low day, some consolidation, and a further lower low. From the standpoint of an impulse wave, the overlap means that the impulse ended with the earlier description we discussed yesterday. We'll show that count on the daily chart, below.


S&P500 Cash Index - Daily - Terminal Count

Nothing breaks the rules in this count, but from Minor 4, there are only 105 candles, not the required 120 - 140 needed to follow The Eight Fold Path Method. So, we conclude this wave just doesn't follow it.

Although there are other ways to count the index to a new all-time high, they would both be diagonal counts. One would be a contracting diagonal, with this as wave ((ii)), lower. And one would be an expanding diagonal, with this as wave ((iv)) lower. And, they both would rely on prices first breaking 2,900 on the upside.

Because of that and the fact that there is already a clear diagonal on the daily chart, above, the odds favor further downside (this is not trading or investment advice). Also, there can be no suggestion of a turn higher until there are candles on the chart that have higher high days. Right now, the candles have lower lows.

So far, the downward wave looks best counted as three waves down. Let's see if there is a consolidation for a fourth wave, and a fifth wave lower. If so, that would likely rule out one upward diagonal scenarios. In the case of the expanding diagonal, in no case could the current minute ((ii)) wave be exceeded lower. In the case of the contracting diagonal, of course, in no case could the Minor 4 be exceeded lower.

I will not be writing about diagonals again until or unless prices close above 2,900. They are possible, but they fight the odds at this point.

Have a good rest of the day and a great start to your evening.
TraderJoe

Possible Top in Daily Crude Oil

This is a morning post before the stock market opens for the day.

If you examine the daily chart of Crude Oil using the EMA-34, and some trend lines as a guide, it is possible that we have a top in Crude. Here is a chart.

WTI Crude Oil Futures - Daily - Possible Top

The Elliott Wave Oscillator has a very characteristic converging triangle signature. It would be a "running triangle" in this case. The daily EMA-34 weaves through each of the triangle's waves for good form and balance, and the minute ((e)) wave overlaps Minor wave 3, as is required from a running triangle. Further, triangles 'usually', 'most-often' precede the last wave in the series, up, in this case, and that may be what happened here.

Validation of a likely top would occur if CL makes a 1.618 or more extension from the first wave down off the high, and if the minute ((e)) wave is exceeded lower.

Have a good day.
TraderJoe

Wednesday, October 10, 2018

Back to prior fourth Wave

Market Outlook: Interim or Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed significantly lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle 
FED Posture: Quantitative Tightening (QT)

Over a week ago, we made the case for a daily ending contracting diagonal in the cash S&P500 Index. Today, that case was proven out in that the start of the diagonal was taken out lower in much less time than it took to build the diagonal. The daily chart of the cash S&P500 below shows that count and that level.

S&P500 Cash Index - Daily - Larger Daily Ending Diagonal Proven


At the end of last week, we made the case for a 5:3:5:3:5 Leading Contracting Diagonal in the S&P500 Cash 15-minute chart. We made the case, that because of the structure, it could not be an ending diagonal. Today, as you probably know, the case for that diagonal was also made clear, as lower lows have followed it (and how!). The Dow closed lower by some 831 points.

Last night we made the case that a larger b wave could occur if prices popped up out of what looked like a triangle on the futures. But, we also cautioned very strongly 1) that the risk of an incorrect wave count in the short term was growing, 2) that the proposed triangle could morph into a different structure, and 3) that we couldn't predict the exact extent of the b wave . As it was the retracement was only 38.2%. You had to be watching the pre-market around 8 AM to see it happen, but an upward triangle invalidated to the down side, leaving only a downward triangle in it's entirety, or a 1-2-(i)-(ii). We will show you what we mean.

ES E-Mini S&P500 Futures - 30 Minute - Possible Triangle b wave

One problem in identifying this wave, is that not all of the triangle happened in the real market hours. Therefore, it is very possible to count the high micro ((A)), as just a second wave. But, within the triangle ((B)) remained above a, and ((D)) remained above ((B)) and ((E)) remained below ((C)). One had to be flexible enough to completely reverse their view - which is one of the things stops and invalidation allow.

Having said all that, days and days ago we put the alternate wave (v) marker on the chart, because there is one slippery way still to count the indexes to a top. Just back up minute (iv) to mid-August, and minuet iv to Aug 3. 

Further, we have placed a clear warning on daily chart. The current down wave is long enough that it has now overlapped the x wave of minute (ii). That violates an Elliott Wave guideline but not a rule.

Let me be clear, the only way the bull market can rescue itself from here as an impulse is to immediately form a triangle for minute (iv). These violent down waves could be consistent with that outcome. Yet, the momentum is still pointing downward. There is no sign of a turn as of the close. And once again, the risk of incorrect wave counts is high. Very high.

For a continued impulse wave upward, in no case can there be overlap on wave (i), and consider that an impulse is still in tact. We will have to see if an impulse is ruled out in the next couple of days. If it is, we'll address it.

We were expecting the Elliott Wave Oscillator on the daily chart - which was red and declining - to hit the zero line or go below it. It did. Now, how low will it go?

Have a good evening.
TraderJoe

Tuesday, October 9, 2018

Potential Up Channel

Market Outlook: Interim or Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower; NAS, DJUtil higher
SPX Candle: Higher High, Higher Low, Lower Close - Doji Candle 
FED Posture: Quantitative Tightening (QT)

Today started out with the futures having made a deep overnight low, and an overlap of a prior wave. The DOW cash did the same.

There is still barely a potential up channel for a possible b wave of minute (iv). The channel appears in the chart of the futures, below.

ES E-Mini S&P500 Futures - 30 Minute - Possible Up Channel


The a wave is the end of the diagonal we have been writing about. Now we might get a zigzag upward. That would be a very common structure. The whipsaw action in the middle might be the (b) wave of the b wave. The triangle may not be done yet. It may be trying to waste time to insure there are more bars time-wise in the up move to b than in the diagonal down move.

The triangle isn't the only possible structure for an internal (b) wave, or it's structure could morph by quite a bit, so a lot of caution is needed in wave-counting.

Have a very good start to your evening.
TraderJoe

Monday, October 8, 2018

Degrees Do It Again!

Today's post is occurring earlier than typical; it's just after noon on Monday. If you read the very cogent discussion begun by Marc Spungin in the comments section yesterday on degree labeling, you see that I said that based on only one concept - that of degree labeling - that I thought it was highly possible for the averages to make a new lower low today. Let's examine why.

Here is yesterday's chart of the cash S&P500 Index on a 15-minute time scale. It "looked" impulsive, and has a gap in the right place for an impulse wave. But that is not the whole story.



Incorrect Count - S&P500 Cash - 15 Minutes - Degrees are Wrong!

If you look at the above chart, here is what's wrong using the concept of "wave degree". The supposedly smaller degree wave (i), which is supposedly a sub-wave of wave 3, is larger in points traveled than the entire wave labeled 1! Wave 1 is shown, incorrectly, as a larger degree wave. So what might have looked good in the heat of battle, on calm reflection and review must somehow be incorrect.

So, now that we have the lower today, we have a much better wave count - which we predicted in advance - that can both be shown to you (in near real time), and a clear demonstration of why degree labeling helps make predictions about the course of prices. Here is the corrected chart.


Correct Count for Wave Degrees - S&P500 15-Minute - Leading Diagonal

First on the left hand side of the chart, the corrected degree labeling shows why Neely is such a proponent of a truncation for the ends of significant waves. The degree violation clearly allows one to assess that all of the mid-day hash on 03 Oct was just part of the truncating wave sub-minuet v of minute (iii)! Then, the five smaller degree waves (i) through (v) can clearly make up the larger degree wave 1 (still not sure if this is micro or sub-minuet, but that is not relevant to this example). Then, the large zigzag for wave 2 is much, much larger in points than wave (ii), so this must be a higher degree wave 2. We have already explained the five smaller degree waves now shown inside wave 3, and then over the weekend we measured what is now wave 4 to be smaller than wave 2.

So, we have wave 2 and wave 4 both as sharp zigzags (no alternation), and wave 4 is smaller than wave 2, and wave 4 overlaps wave 1 at the red line. These would be the requirements of a 5:3:5:3:5 Leading Diagonal "a" wave lower. 

What made the prediction possible that we would see a lower overall low today was the fact that in a Leading Diagonal the fifth wave may not fail. And it didn't! The lower low is shown.

Finally, we now have the requirement that wave 5 must remain shorter than wave 3, or else the wave is impulsing, not forming a diagonal (or the diagonal is extending to form a larger 3:3:3:3:3 leading diagonal). So far, the Elliott Wave Oscillator is diverging as it typically does during a diagonal.

Let's see how it goes. We are very, very grateful for having had the opportunity to show you the importance of getting wave degrees correct in near real-time. It led to a correct prediction, and the whole point of Elliott Wave analysis is that, within certain limits, it should be predictive.

You see, the impulse count would have predicted a retracement higher today. The more likely diagonal count predicted lower lows. That's a pretty big difference in views.

P.S. Update after the close. After the low of wave 5, of the leading diagonal, an up wave began and it HAS broken the declining diagonal trend line by quite a bit. Therefore, it appears the b wave up is underway. Again, it can be a zigzag or multiple zigzag, a flat, or a triangle. Most likely it would not be a triangle since we just had a diagonal.

Have a good Monday.
TraderJoe

Friday, October 5, 2018

Onset of Minute (iv) Confirmed

Market Outlook: Interim or Long Term Top Identified
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)

Yesterday we indicated that a lower low today would result in a countable impulse wave lower, depending on the reaction to the employment report. A lower low day occurred after stocks popped and hesitated at the open. First, here is an intraday chart showing how this impulse was counted in real time.

S&P500 Cash Index - 15 Minute - Classic Impulse Lower

Of interest, the gap is clearly in wave (iii) of 3. Further, wave (v) of 3 was identified in real time as a potential ending diagonal wave. And, it turned out to be just that. How do we know? Because wave 4 more than fully retraced the diagonal, and did it in fewer bars than the diagonal took to build.

Wave 2 was a very sideways flat wave, and wave 4 was a sharp zigzag for excellent alternation. Within wave 5 the five clear sub-divisions can be seen but are not labeled. And, there is a five-minute diagonal for wave (v) of 5, if you look at it on that time scale. That diagonal has also been proven out.

The key signature that we look for is the Elliott Wave Oscillator diverging on wave 5, and that is quite clear even on this 15-minute chart. The wave is roughly parallel, with a little undershoot in wave 3 - just as we always expect to indicate where the greatest downward momentum is, and a little overshoot for wave 4. The overshoot for wave 4 indicates the "attack on the Elliott parallel trend channel" I have written about many times before. Wave 5 met a Fibonacci projection of 0.618 x net (1 through 3) once the bottom was broken. That is the second most common target for an Elliott fifth wave.

That's the good news.

The bad news is that this is likely a minuet "a" wave of minute (iv) as some key levels were not broken on some of the charts. (Or it is the sub-minuet "a" wave of a triangle's first leg). And that most likely means a b wave will follow it. And the b wave can literally be "any three" from a zigzag or double zigzag to a flat or even a triangle itself. Good luck in calling that one! A target for wave b? It could be anything from 23% - 78% retracement, so I simply won't guess.

Here is the daily chart again to show that the Elliott Wave Oscillator continued as red and declining today, but is still above the zero line.


S&P500 Cash Index - Daily - Impulse Lower

Keep in mind that even though the channel is currently drawn as it is, wave minute (iv) can easily travel back down to the level of minuet wave iv.

I hope these updates have been of some help.  If so, leave a comment, or more importantly help spread the word to others.

Have a good start to your evening and to your weekend.
TraderJoe

Thursday, October 4, 2018

Minute (iv) - or worse - Likely Underway

Market Outlook: Topping Process Underway
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)

Yesterday we said to be on the watch out for a truncation because the margin was razor thin (only about -2 points) between a trend change and a sub-dividing wave c of minuet v of minute (iii). In the overnight futures markets, it quickly became apparent that margin of error was not going to hold. So, it is likely the minute (iii) wave topped last night, and as we showed before, the minute (iii) wave is a 161.8% extension on wave minute (i) to within points. Here is the daily chart again, with that key measurement.


S&P500 Cash Index - Daily - Gap Lower

It was only wave minuet v, of minute (iii) that had a slight truncation, and only by a point - completely acceptable given that the Dow did make a new all-time high, yesterday. Today's gap lower will likely continue the process of the Elliott Wave Oscillator moving lower toward the zero line for minute wave (iv).

Now, it would be common for minute wave (iv) to get down into the vicinity of minuet iv. Minute (iv) has already contacted and broken the EMA-34 indicating that as a minute (iv)th wave it would have good form and balance. But, it could have farther to travel lower. How it gets there is anyone's guess, and this is part of The Fourth Wave Conundrum, yes, which happens at every degree of trend. What we can say is that since the x wave of minute (ii) "went over the top", then the b wave or x wave of minute (iv) should not go over the top in order to show good alternation. So far, so good.

From the standpoint of an internal count from the high, so far there are only three waves down. By making a lower low tomorrow, the market could impulse. By making a higher high than today's bar, before a lower low, maybe a double zigzag lower becomes a possibility or a larger triangle. The Payroll Employment report is tomorrow, and the market's immediate and longer term reactions will be telling.

We have also cited before that the risk of making an incorrect count decision here is growing rapidly. So, last night's high has also been listed as the alternate wave minute (v), and the end of the entire bull market in a slight truncation.

One thing is for certain: the market left a gap today (see the last red circle). Inquiring minds have to ask why. Why not a key reversal at the all-time high, for example: is that coming up in our future? But that is just one of the reasons why the red count is currently the alternate count, and not the main count.

Have a very good start to your evening.
TraderJoe



Wednesday, October 3, 2018

DJIA new all-time high, not S&P500

Market Outlook: Topping Process Underway
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 chart update today. Yesterday's chart still applies. Today, the market as measured by the S&P500 made a higher high than the (b) wave of the triangle. That implies we are now in minuet wave v of minute (iii). This is supported by the higher high on the Dow Jones Industrial Average. IF the S&P500 had made a new all-time high, it might strongly suggest the vth wave was over. But such was not the case.

Today, prices "popped, then dropped", but still closed positive. This suggests that sub-minuet wave c may be sub-dividing as micro .i to .v and, if so, the wave should not drop below the (e) wave of yesterday's triangle. The low of the triangle was 2,919 and today intraday low was 2,921; so there is a razor thin margin between the up move continuing and a trend change.

This further sub-division of wave v is an option and does not need to occur. The high could have occurred with a truncation today. A lot depends on the reaction to the employment report on Friday. Let's continue to take it step-by-step and have the patience and flexibility required of the topping process.

Have a very good start to your evening.
TraderJoe

Tuesday, October 2, 2018

Dow New All-Time-High & Russell New Monthly Low

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

That's right. The DJIA made a new all-time-high-today. And the Russell 2000 futures made a new monthly low. And the S&P500 was caught square in the middle, closing nearly unchanged. In Monday's post, we said that it was possible a triangle was forming. It is still possible. In fact, the minimum requirement for a running triangle to already have formed was met today. The intraday chart of the S&P500 is below. 


S&P500 Cash Index - Half Hourly - Triangle Complete or In Progress


On the right hand side of the chart are the five overlapping waves of one proposed triangle, (a) through (e). At the end of the day, the last wave (e) in this version both downwardly overlapped the a wave - as required by a running triangle - but also stayed above it's own (c) wave. So, it's possible the triangle is the b wave of minuet v of minute (iii).

If there's a criticism of this proposed triangle, yes, it may not be symmetrical enough. And with a major report due at the end of the week, the triangle might "fall apart" lower by cracking through the current (c) wave in order to move sideways, and take more time. That's what triangles do. In that case, drop the lower trend line below the (c) wave. (Once again, triangle are patterns that must prove themselves, so an eventual break above the (b) wave would be required at some point).

Still, it depends how quickly the market wants to get the upward wave over with to end the contracting diagonal for wave minuet v of minute (iii). That's not up to me. I just try to count waves.

Again, upward momentum in these 500 large-cap stocks continues as awful, switching positions with the Dow which is the high-flyer at the moment. Small caps are declining, and riding their lower daily Bollinger Band as of now.

Let's continue to take it one step at a time, and see if the pattern becomes more symmetrical, even though there are no broken rules in the above pattern.

Have a good start to your evening.
TraderJoe

Monday, October 1, 2018

Topping Process Underway

Market Outlook: Topping Process Underway
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Higher High, Higher Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

U.S. equity market upward momentum continues to be just awful as we wrote about on Friday. As far as I can tell, it is time to consider that the topping process is underway. Today was the first day of the new month. As I have written about several times before, this is often the day that sees inflows from pension funds, 401k's, company bonus plans, stock dividend reinvestment plans, etc. Today was no exception - at the outset - and then it faded. This is in stark contrast to the rollicking days of the bull-market when the the close would be near the high of the day.

Stocks as measured by the cash S&P500 Index had closed Friday at 2,914. With the cash inflows aided by trade agreement news, the futures were higher overnight. The green up fractal (shown as ^ on Friday's chart and below) was exceeded higher, and a new up wave confirmed to have begun.

The cash market opened up (+12) at 2,926, and traded higher to 2,937 (+23) until 10:30 am. At that point, the market began a choppy down trending wave to 2,918 (-19) ran into the gap up area and began overlapping prior waves. The gap was not fully closed in the S&P500; it was in the NASDAQ 100, and the S&P500 wound up closing higher by about +11 points overall. Some would consider that not too bad a day. What makes it so poor is the overlaps, and the other market averages.

While the Nasdaq 100 Futures made a marginal new all-time high (which we said we could easily find a count for), the Russell 2000 futures actually made an outside reversal day down! Neither the DOW nor the S&P made the new all-time high, today as the Nasdaq 100 did.

Here is Friday's chart again.


S&P500 Cash Index - 15 Minutes - Overlap


We had shown you the Coiling Price Squeeze. The breakout was to the upside. There is a clear three-wave sequence up from 28 Sep to today's open. Then the overlap. It's possible we are now getting a 'final triangle' before wave v of minute (iii). Remember, we are counting this final wave as a diagonal. So we need .a, .b and .c up to complete it. If the run up to 27 Sep at 2727 is .a, then it is possible we are getting a triangle as a .b wave. And that is just one possibility. The .c wave of v as a diagonal itself is another one that comes to mind.

The key point is that the market is not impulsing; instead it is overlapping, and that is as real a caution flag as I know. I don't think the market truncated today, as the downward price movement overall was quite meager. But, those are just thoughts, and the market has been known to out-think me.

It's possible in a week or two we might be looking back at some price bar and saying, "that was a top" from a wave-counting perspective. (Remember, nothing here is to taken as trading or investment advice).

Have a very good start to your evening and to your week.
TraderJoe