Thursday, March 1, 2018

The Jury is Still Out

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

I just finished a tour of jury duty, so pardon my pun. It was on my mind, and I'm sorry I could not post over the last few days. But, the phrase aptly applies to current market environment.

As I spoke about in my YouTube video, A Critique of Elliott Wave for Trading, it's at times like this while the market is mid-range between a major all-time high and a recent significant low that people want to know what the wave count is. In one way, the answer is easy: today we were able to count five-waves down live in the chat room. Here is that chart, using the ES E-Mini S&P500 Futures - Half Hourly, as the cash market was closing today.

ES E-Mini S&P500 Index Futures - Half-Hourly - Five Waves Down

But, five waves down does not necessarily clear up the larger wave count, for sure. The five waves down could either be a minute ((i)) wave down, or a sub-minuet c wave down or a minuet (a) down. It depends if the market is still making a triangle in a Minor 4th wave, or whether the market has topped in a second wave or truncated. I 'think' it is the former, the triangle, but am also very open to the latter.

One issue with today's initial 586 point down day, was the advance-decline ratio at the lows was about 1 to 1.8 or only 1,069 to 1,893 which is not very impulsive. Usually 1:4 or more is getting into the more impulsive levels.

So, if we are in a Minor 4 triangle, then today could just be the c wave of a FLAT (b) wave, with a further (c) wave up to come to the minute ((b)) wave high of the triangle. Or it is the minuet (a) wave down of minute ((c)) of the triangle. To continue with the triangle, the market would eventually have to clear the 2,735 level, and then, likely the 2,790 or previous high on the above futures chart. 

Yes, this is The Fourth Wave Conundrum. The purpose of the c wave of a (b) wave would be to generate enough bearishness for the triangle upward to continue AND to waste more time. We are fine with these reasons. Potential triangles take time! The purpose of a minuet (a) wave, down, would be to start the minute ((c)) wave down of the triangle. Since almost all markets exceeded a 62% upward wave, which could be the extent of the minute ((b)) wave, then we are also fine if the minute ((c)) wave down also makes a 62% retrace to the down side.

Currently, the ES daily is below the 18-day SMA and so has a negative bias. But, it also went down to the 100-day SMA and bounced off of it And, while one more lower low is possible in this down wave to burn off the over night excess, the best judge of positive and negative bias will be the 18-day SMA, "the line in the sand". One item of concern is that, as shown on the chart, the EWO did not make a divergence yet with about 105 bars on the futures chart, above.

This is still a very good time to let the wave count shake out if you have uncertainties. There are plenty of reasons to be uncertain at this time. Take it easy. I'm glad that one jury is in, while another one is still out. Have a very good start to your evening.



  1. I still think the initial decline ended at 2593 on 2/6 in SPX, and was then followed by an expanded flat that ended at 2790. There are 5 waves down from 2790 in SPX too, and the 5th wave can extend because wave 1 was the shortest wave.

    1. Cool .. but there is not a lot of downside momentum yet.

    2. True, not yet, but what a difference a new year makes. SPX declines 130 handles in 3 days and we complain that it's not moving much. :)

      In 3 days it has retraced 50% of what was a very powerful 10 day rally.

  2. Joe, you have a good weekend. If there is a update? Thank you.