Monday, April 30, 2018

Five Small Degree Waves Up Completed & Reversal

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

In the post on Friday, we said that because of the tightening range at the end of the day, one might suspect that wave was a triangle sub-wave iv which would mean there was still a higher high to go, today. There was. Then, prices reversed, as we expected from a five-wave up scenario. In the end, the S&P500 ended down -22 points.

Prices as measured by the S&P500 cash index had closed Friday at 2,670. With the futures higher over night prices gapped up to open at 2,675 and traded up to 2,683, nearing tying the all-important 2,683.55 but not quite making it. Still it was good enough for five-waves up in good form from the prior (b) wave low. Here is the daily chart.


S&P500 Cash - Daily - Potential Triangles Intact

With the cash price now below the EMA-34, and similarly with the ES daily futures price below the 18-day SMA, then the bias of the market has shifted downward again. It is possible we are getting either the second wave of minuet (c) of minute ((d)), or since (b) did not take as much time as (a), up, it is possible (b) is making further sub-divisions to take more time.

Only a new low below (b) or a new high above today's wave can help sort out the two scenarios. Until then, this is a reminder that today was the last day of the month, with the usual "window-dressing", and tomorrow is the first day of a new month with potential inflows from pension funds, 401k's, company bonuses, etc., and there is a Fed meeting on Tues/Wed, with the results to be announced at 14:00 ET Wednesday. Then there is the payroll employment report this Friday.

So, we must still remain patient, calm and flexible as the market continues in its volatile ways.

Have a very good start to your evening,
TraderJoe


Saturday, April 28, 2018

Review of the Weekly Dollar Index

In a recent weekend video, I said I would not become bullish on the Dollar Index until it has broken it's parallel Elliott trend channel to the upside. When reviewing the chart, below, that is only the first thing to notice as that has now occurred.

DX Futures - Weekly Nearest - Upward Break of Down Channel Line

Some other things the reader might like to note are these: Wave 2 is a short, Sharp wave, and Wave 4 is a Flat, and much longer in time, for excellent alternation. There is a clear, large gap in wave iii of 3, and another in wave iii of 5 (second red circle lower). Wave 3 can clearly be seen to have the strongest downward MACD reading. This pairs with portions of Wave 3 being clearly outside the lower boundary of the modified Elliott Parallel Trend Channel. And Wave 5 diverges from it (brown dotted line).

Note: the modification of the trend channel occurs when Wave 4 is identified. Then, the first line is drawn from Wave 2 to Wave 4, and a second line drawn parallel to 1. If that doesn't contain Wave 5, then a parallel is drawn from Wave 3.

So, with the caveat that a back-test of the channel can occur at any time, one should look for weekly prices in the Dollar Index to make at least three-waves up. This may impact other currencies, such as the Eur/USD, and commodities such as Gold and/or Oil. The first target for the dollar would be the prior Wave 4, around the 95.00 level.

This is truly a 'model' example of an impulse, and one might want to refer to it often. This is how they are supposed to occur. To have identified the waves using The Eight Fold Path Method, then since there are about 60 weeks in the chart, one would have used a two-day chart to get between the requisite 120 - 160 candles, which was the procedure I used, (60 weeks x 5 days = 300 days. And, then, 300 / 2 = 150 candles), including reference to the Elliott Wave Oscillator.

Have a very good weekend,
TraderJoe

Friday, April 27, 2018

Both Potential Triangles Still Intact - 3

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

Today was a higher high day, then a narrow range day. The higher high was the "minimum requirement" for counting 'five waves up' - likely to a first wave of the minuet  (c) wave of minute ((d)). Here is the daily chart.


S&P500 Cash - Daily Chart - Likely Triangle

One caution we might provide is that due to the narrowness of today's range late in the day, we may still be the fourth sub-wave of the first wave up. Here is what I mean using the ES E-Mini S&P500 Index Futures as an example.


ES E-Mini S&P500 Index Futures - 5 Minute Chart - Possible Sub-wave iv Triangle

Today's higher high is to the left. Like the larger potential triangle, this potential sub-wave triangle can expand and contract a bit, if it likes, as well. Therefore, the labeling is tentative. But, if a triangle does form properly, followed by another higher high, then most likely the first sub-minuet wave up would be complete at that point, and one might look for the sub-minuet second wave downward.

If a triangle doesn't hold, then look for a potential flat wave.

That's it for tonight. Have a very good start to your weekend.
TraderJoe

Thursday, April 26, 2018

Both Potential Triangles Still Intact - 2

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

The follow-through and confirming close candle to yesterday's potential hammer candle did occur today. Both of the potential daily triangles remain intact (the smaller version, not shown, and the larger version, shown below).

S&P500 Cash Index - Daily - Larger Daily Potential Triangle

Prices gapped higher today at the open and closed up +27.54 points. There is no reason yet to conclude the up wave is over, or that this leg of the triangle is completed, based on the work in the live chat room. But, volatility will likely persist.

In the ES futures contract, prices are above the 18-day SMA, so the price bias is currently positive. If futures prices can reach up over 2,688.50, then they would formally negate a swing-line down trend, as then there would be a lower low, and then a higher high. Not an up trend, but negation of a down trend.

Have a very good start to your evening.
TraderJoe




Wednesday, April 25, 2018

Both Potential Triangles Still Intact

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

Summary: Today's potential hammer candle typically requires confirmation by a higher closing candle. If confirmed, and particularly if yesterday's high is exceeded, then that would likely provide considerable evidence that this down leg of the triangle is completed - whether a minuet (b) wave or a minute ((e)) wave.

Here is the current daily chart of the S&P500 cash index, the larger triangle version.

S&P500 Cash Index - Daily - Both Potential Triangles Still Intact

Prices closed yesterday at 2,634, and ticked higher to 2,635 at the open. Then, prices made a slight lower low today at 2,613 - likely the .c wave of the y wave of the (b) wave. In the process, prices filled one of the two open gaps from the low, as show by the red price flag. This .c wave was likely the ending expanding diagonal you see diagrammed on the left side of the intraday chart, below.

We had cautioned yesterday that "Absolutely nothing has said we are done with the volatility yet'". We had also mentioned in previous blog posts, that "any or all of the gaps lower could fill". We have had four of the five daily gaps upward from the (a) wave fill. One remains open at this time.

Today's hammer candle could easily count on the five minute chart, as a contracting leading diagonal, and a then downward wave, as diagrammed following the (b) wave, below. We followed this second potential diagonal as both a potential triangle and a diagonal within the chat room today. In the diagram below, wave ((5)) is shorter than wave ((3)), wave ((3)) is shorter than wave ((1)), wave ((4)) is shorter than wave ((2)) and overlaps wave ((1)), and they are all clear three-wave zigzags. This is an excellent model for you to follow for contracting diagonals, so I hope you will refer to it often.


S&P500 Cash Index - End of (b) And Diagonal

Up until the time of the close, this diagonal had not invalidated. Therefore, this is likely the completed diagonal. The retrace is likely a wave .ii, or part of wave .ii, of the new (a) wave up. The futures have exceeded the high of .i in the after hours.

Because this diagonal took so much time, we don't know exactly how much time the .ii wave will take. With the higher high, it may turn out to be a flat wave again. The market is currently throwing every possible complication at us - likely in order to throw us off the track of a triangle. None-the-less, without lower lows than the 2,554 low, then there is, again, no evidence to conclude otherwise. Certainly, without significant down side follow-through, those with an outright bearish count are not succeeding yet.

So, we will remain flexible, patient and calm, and we will adjust our stance immediately, once we see any likely evidence to the contrary. So far, the evidence is slightly to the up side, not the down side. Further, we now have a very clean invalidation point. Wave .ii may not travel below the low of wave (b). Sometimes in Elliott Wave work, that's all one can ask for.

Have a very good start to your evening.
TraderJoe

Tuesday, April 24, 2018

Bigger Change And More Complex (b) Wave

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 yesterday's post, I completely outlined how a (b) wave lower could become much more complex. It would start with an X wave that made a slight higher high over yesterday, and then trade lower with a further zigzag lower. That is exactly what happened today. The (b) wave down traded to exactly 0.618 times the (a) wave higher, and found some initial support there.

Stocks, as measured by the S&P500 cash index, had closed yesterday at 2,670. In the first half-hour stocks gapped up and traded to 2,684. At that point, stocks turned lower, and traded all the way down to 2,617 before finally trading up to close at 2,634.

So, this (b) wave scenario would be (b) wave of the minute ((d)) wave shown in the daily chart below. This is the Potential Larger Triangle Count.


S&P500 Cash Index - Daily - Potential Larger Triangle Count

So far, we have called almost every turn of this wave of the triangle, and not been surprised by any. Still, I noted in earlier blog posts that there is a smaller version of the potential triangle which must be considered because it is logical. That version of the smaller daily triangle looks like this one.

S&P500 Cash Index - Daily - Potential Larger Triangle Count

The smaller version of the triangle just says that the minute ((d)) wave ended with a slightly steeper upper trend line, and this is now the minute ((e)) wave of the triangle lower. 

Again, other than the fact that the symmetry of the first pattern would look better, and it would take more time, there is not much than can separate the two patterns cleanly. This is just another reason why there is a Fourth Wave Conundrum, and why trading is always risky. 

But beyond even that, the old trader's adage is that "trading is treacherous in triangles". It is precisely because triangles can breathe a bit. That is, they can add an internal sequence that is more complex. So far, we have not yet positively seen that complexity. However, in the smaller triangle, the minute ((d)) wave can be counted as a w-x-y sequence, the more complex sequence.

In any event, there are two possibilities for a triangle to play out - in all indexes but the Dow. With the weekly Elliott Wave Oscillator now at only +2, we must allow that a fourth wave triangle - like the ones above - could play out, with a Minor wave 5 to follow.

On days like today, people tend to get very, very bearish. One reason people get bearish is they might only following the market leading FANG stocks. It is important to realize that the way a market top is built is that some stocks generally, most-often, diverge from the market averages. So, if one is overly concerned about some individual names or groups, this is generally to be expected. Only if stocks immediately gap down and exceed the minute ((a)) wave lower should we assume that we are, in fact, not in a fourth wave triangle count. But, as of this writing, there is just is not clear evidence for that at this time.

Should the latter condition occur, we will immediately adjust accordingly. Barring that we will stay the course, and remain flexible, patient and calm as the grinding pattern continues. Absolutely nothing has said we are done with the volatility yet.

Have a good start to your evening,
TraderJoe

Monday, April 23, 2018

Little Change And More Complex (b) Wave

The overall change in the S&P500 cash index today was +0.15. It is almost hardly worth writing about except to say, that the (b) wave down appears to have gotten or to be getting more complex, which we said was a distinct possibility.

The S&P500 30-minute chart is below. There is a clear Flat wave which I hesitate to label as anything else but because of the location of the third wave gap.

S&P500 Cash Index - 30 Minute Chart - Flat-X-Zigzag for (b)

At this morning's low, then it is possible to label the overall (b) wave down as a Flat-x-zigzag; a very complicated and messy structure, but certainly legal. I have seen them before. But, the purpose of the overall potential daily triangle is to move price sideways and take up more time. That is pretty much what today did. So, the minuet (b) wave of minute wave ((d)) of the daily triangle could be complete today, or it can still become more complicated. How?

It's simple. Suppose today was not the end of the X wave, but the X wave overall became a flat, itself. To do that, it would first need to complete a small five waves up beyond the current X.

Then a zigzag lower could follow it. But, it could be done today - as a wave that would confuse most. If it is, then we will label the end of today as (b).

It would take another lower daily low, sometime quite soon, to conclude the (b) wave was becoming more complicated.

Have a good start to your evening.
TraderJoe


Saturday, April 21, 2018

Review of Week

From the weekly chart, prices remained inside the up trend channel shown, and actually closed a bit higher on the week.

S&P500 Cash Index - Weekly

Of significance, as we noted earlier - with about 114 candles on the weekly chart - the Elliott Wave Oscillator has come back down to the level of about 10. (See The Eight Fold Path Method for why we need the number of candles to be near 120). Since the highest reading was over +200, all it had to do was get back down under the 20 level (10% x 200 = 20). It has done that and more, and may well indicate the fourth wave, Minor 4, being formed.

Of the major U.S. equity indexes, the only one which can not be interpreted as being in a triangle is the Dow Jones Industrial Average. So far, the S&P500, the RUT and the NASDAQ 1000 can still be in triangle shapes. The DOW might be interpreted as having made a double zigzag downward. It may yet attempt a third.

Smaller Triangle or Larger Triangle

There are almost always more than one way to interpret a triangle. In this version below, the 'smaller' version of the potential triangle is shown. We caution, up front, this version does not count as clearly on the intraday wave counts we have provided before. It is provided because there is a logical way to reach this conclusion.

S&P500 Cash Index - Daily - Smaller Potential Triangle

In the above version, one lowers the (b) to (d) trend line and concludes one is in the (e) wave now. This count would suggest the (e) would be relatively deeper. The EMA-34 runs through each of these waves, which is one of the factors that makes it viable for consideration.

However, the larger version of the triangle, the one that takes more time and moves price further sideways, assumes the (d) wave is not yet done, and would push the (b) to (d) trend line even higher first. It is shown below.

S&P500 Cash Index - Daily - Potential Larger Triangle


This larger triangle agrees best with the current intraday counts and suggests that we are only in sub-wave b, down, of (d) up. Other than intraday counting, and using symmetry there are not very good ways to distinguish the two patterns. This second pattern might wind up being the more symmetrical of the two.

Therefore, still being in The Fourth Wave Conundrum, we must still be patient, flexible and calm as we work our way through all the various wave possibilities of which these are only two.

Have a good weekend.
TraderJoe



Thursday, April 19, 2018

Five Waves Down

Sorry I don't have too much time for commentary today. It looks like we got a clear five-waves down for a (C) wave down of the (b) wave we wrote about yesterday. There was a nice divergence at the end of the wave, as well.

Here is the S&P500 Index 5-min Chart.

S&P500 Cash Index - 5 Minutes - Five Waves Down
There are now three waves down in good form and with good alternation. Wave ((2)) was that complicated double-combination. Wave ((4)) was a simple sharp. Now the question becomes does the (b) wave need to be any more complicated or not? If it does, it might revisit the highs, and then revisit the lows again in a more complicated flat wave. If not, we can go up in the (c) wave of minute ((d)) to finish this wave of the triangle.

Have a good evening.
TraderJoe

Wednesday, April 18, 2018

Likely into a (b) wave lower

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

After likely completing the (a) wave up, of minute ((d)) of the larger daily triangle pattern yesterday, since the futures were slightly higher overnight, cash prices initially popped higher, and then quickly reversed course taking out the low of the e wave triangle we noted yesterday. That meant we were likely somehow in a (b) wave lower. 

After the opening gap was closed, cash prices then headed to a new higher high in a three-wave sequence that we measured at 1.382, exactly, from the (a) wave high, yesterday. So, things don't get too confusing, here is the SP500 5-minute chart. Overall, the cash index closed up only 2.25 points.


S&P500 Cash Index - 5 minutes - Possible (b) Wave in Progress

On the left hand side of the chart you can see the e wave of yesterday's triangle, and the lower low at the point marked (A). You can see that 1.382 measurement over on the right hand side of the chart, and it shows where the (B) wave of (b) likely stopped. So, with the higher high, (b) would likely be an expanded flat correction.

For the rest of the day, prices made an expanding leading diagonal 1st wave lower, which was followed by a complicated second wave, 2, higher, that neared the high again in a "deep retrace". The leading diagonal has wave ((v)) longer than wave ((iii)) which is longer than wave ((i)). And wave ((iv)) is longer than wave ((ii)), and overlaps wave ((i)) without exceeding the high of wave ((ii)), and  they are all three-wave zigzag sequences. Wave 2 counted as a sideways double combination. After wave 2, prices started downward and made the first 1.618 wave lower of the whole afternoon.

By the close, cash had not taken out the ((x)) wave lower, but in the after hours, the futures did exceed that level lower.

Why was price so tight to the high? Because the futures were grinding against the daily upper Bollinger Band, and the 100-day SMA for most of the day. So, at some point tomorrow, the expectation is to see a gap lower, and work on finishing a (C) wave lower of a (b) wave. Then the (c) wave up of a triangle ((d)) should resume.

As a reminder, here is the still Potential Triangle Count, with several of the sub-waves now filled in more clearly.

S&P500 Cash Index - Daily - Potential Triangle

Of note, the Elliott Wave Oscillator (EWOsc) has gone dead flat, and is neutral as is typically the case in a triangle. It is worth noting that the weekly EWO has gotten to 11 as of today, below that 20 level we wrote about in the weekend post! That would be a key step in identifying the pattern as a fourth wave.

This is just a reminder, the (b) waves can be quite tricky, if that's what is, in fact, occurring. Any of the chart gaps lower can fill. None has too. The only invalidation point for the (b) wave is that it may not go below the start of the (a) wave.

Have a good start to your evening!
TraderJoe

Tuesday, April 17, 2018

Earnings Day

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

Propelled by higher earnings for Goldman, Netflix, United Healthcare and others, the futures were higher this morning, and the cash S&P500 Index gapped higher. Cash had closed Friday at 2,677 and prices opened up at 2,693, or +16 points. Prices traded higher throughout the day with only modest pull-backs until reaching 2,713. In the last half-hour, prices pulled back -7 points to close at 2,706.

It was a pretty bizarre day to count. From a non-Elliott Wave perspective, ES E-Mini S&P500 futures prices latched on to the upper daily Bollinger Band, traded slightly above it, reaching the 100-day SMA, and stalled there. (You are encouraged to review the daily ES chart to see where some of the 'smart money' was likely letting go of some long positions.) Back to wave counting. In order to avoid degree violations, the count from Friday is shown below on the S&P500 Index Cash 5-Minute Chart.


Figure 1 : S&P500 Cash Index - 5 Minute Chart - Five Up

Today's gap up can only be counted as .iii of a first wave, i,  otherwise, the next wave becomes too long for the next degree lower. That means that wave iii is shorter than wave i, and at this point in time, wave v is also shorter than wave iii, preserving adherence to the rule that wave iii may not be the shortest wave.

It was very hard to interpret this count until the very sideways running triangle was observed. Wave e of this triangle did cross back and overlap wave iii, just as is required for a running triangle. So, the bottom line result is that five-waves up can be counted. It also means that this wave qualifies as the .c wave of the potential hourly diagonal we have shown so many times now. Wave (v) of the diagonal is no longer than wave (iii) at this point in time. Here again is that potential hourly diagonal.


Figure 2 : S&P500 Cash Index - Hourly - Potential Diagonal

A closely as this is diagrammed, this wave is still a potential diagonal. Yes, today's price action helped fill the gap shown in black circle over on the left hand side of the chart. But, to remain true, wave (v) may not become longer than wave (iii). By measurement, that would not occur until 2,738.82 cash. So far, so good. That is quite a ways away. And with the triangle in today's 5-minute wave from Figure 1 - which is almost impossible to count without such a triangle - price movement needs to be watched closely to see if the lower trend line of the diagonal can be broken before the diagonal invalidates upward. Remember, triangles usually precede the last wave sequence in the current direction. At the close, price had not yet traveled below the e wave of the triangle. Price must do that IF it is to signal that a downward wave is likely occurring.

At this point in time, there are sufficient daily waves to suggest that the S&P500 Daily contracting triangle count would count in this fashion.


Figure 3 :S&P500 Cash - Daily - Potential Triangle

We don't know for sure yet whether the potential diagonal is a leading diagonal, as shown by the a wave, up, above to the potential (d) wave - or whether it is an ending diagonal for a second zigzag lower. For the first case, the (c) wave may not be be exceeded lower. In the second case, then it would be likely the (c) wave was exceeded lower.

From visual appearance, and usual Elliott Wave expectations, it is slightly more likely the triangle will play out. The daily Elliott Wave Oscillator (EWO) is still green and rising, so we must give some weight to what it is telling us.

Have a very good start to your evening.
TraderJoe


Monday, April 16, 2018

Smaller Fractal

Here is a portion of today's ES E-Mini S&P500 June Futures contract. It's the part after the cash gap up. Are we getting a smaller fractal of the larger daily fractal? So far, we have had a near-perfect triangle, and a thrust out of the triangle, back-test of the triangle for a 62% wave ii, and now into a third wave apparently. The target for the typical thrust from the triangle is shown.

The triangle would be the smaller fractal I'm referring to. A self-similar pattern on (in this case) a smaller time scale.

ES E-Mini S&P500 Cash Index - 5 Minute - Triangle & Thrust

By-the-way, we called the triangle in real time in the chat room. From later trading it looks like the .a wave up, of (v) of the contracting diagonal ended at 13:50 ET at ES 2,687.00. The triangle thrust target was hit as precisely as might be imagined. The .b wave down appears to be in progress due to overlaps downward. Further update at 16:15. The cash hourly diagonal is still holding it's form as of the future's settlement. There are no issues I can see. The hourly chart is repeated below, because I know people lose track.

S&P500 Cash Index - Hourly - Likely Diagonal (v) Still in Progress

For those following the DAX, here is the potential bullish falling wedge I mentioned in yesterday's comments.

Germany DAX - Daily - Potential Bullish Falling Wedge

As I said in the comments, it would be entirely fine to back-test that upper falling wedge trend line.

On a larger note, the hourly S&P500 cash diagonal is still in very good shape.

Have a good start to the week.
TraderJoe

Saturday, April 14, 2018

Ground Coffee

Today, we step back and we see what the market informs us regarding potential Elliott Wave counts. Not the other way around. We do not start with a preconceived idea and work backwards. It is most appropriate to do this with a nice hot cup of coffee, to relax the mind and open it to possibilities.

Let us first look at this weekly chart of the S&P500 cash index, without any Elliott Wave labels applied. And, again, let us concentrate largely on what is known or what can be seen.

S&P500 Cash Index - Weekly

When we do this, we note two essential things. First, price is still in the green up channel shown. While weekly price has traded below the channel, it has not closed below the channel. So, we should assume that while price is in the channel an up trend is still largely in tact. Second, we note the indicator at the bottom, the weekly Elliott Wave Oscillator (EWO or AO on Investing.com). And, with 113 candles on  the weekly chart (closest time frame to 120 candles for the wave of interest), we note that it peaked out at over 200 in January of this year.

Next, the EWO is currently on red histogram bars and appears headed for the level at which a fourth wave would be indicated. To indicate a fourth wave, the EWO should get to +10% to -40% of the largest peak. That would mean it should get below 20, as 10% of 200 is 20. (That does not have to happen instantaneously, there could be some intervening green histogram bars.) It is currently at 35.

Next, let's look at this equity four-block which comprises many of the major U.S. market averages.

U.S. Equity Four Block - All Potential Triangles

The first objective thing to note is that the downward wave to (c) took more time than the downward wave to (a) in each index. That is more consistent with a triangle than it is with impulsing waves down. Usually, the key characteristic of a third wave is that it accelerates. These waves simply do not show that. In fact, the (b) wave takes more time than the (a) wave, and now the (d) wave has only one less as many daily bars as the (a) wave. If the (d) wave extends in time, at all, it will have as many or more bars that the (a) wave down.

A second objective thing to note is that in each case price has again tagged it's daily EMA-34. And a third objective thing to note is that (as we mentioned in prior posts) the DOW has now broken it's initial down trend line from the highs, although it is currently trading back below it. That may be significant because it may mean it is not a second wave location (per Neely).

One shape that is consistent with all of the charts above, of course, it the triangle. A downward diagonal would also be consistent with all charts except the NASDAQ 100 chart, because of it's higher (b) wave. Why this exception? What is it trying to tell us?

What these charts suggest is that the (c) wave down is at least a zigzag downward.

What is also suggested in the case of the hourly S&P500, therefore, is that we must absolutely allow that the potential diagonal we are now counting in the hourly S&P500 could be a leading diagonal, as well as an ending one. In that case, the daily S&P500 chart would then count like this below.

S&P500 Cash - Daily - Potential Triangle Count

Again, the labeling above is still consistent with proper degree labeling. The only inconsistent fact that this point is that the DJIA has a lower low at (c), as we have pointed out numerous times. But, perhaps the DJIA is making a downward diagonal-like wave to finish it's fourth wave as a triple zigzag. We don't know yet.

Next, let's say on the hourly S&P chart, we do, in fact, have a leading diagonal upward and not an ending one. Well, then, we know leading diagonals are most often 'a' waves . They are sometimes 1 waves, but, most often, they are 'a' waves.

Bottom line: the majority of the equity indexes are telling us we are in a triangle. And we should respect that until or unless there is more evidence to the contrary.

Other than that I will leave you with this daily chart of May Crude Oil to ponder, with emphasis on the signature of the Elliott Wave Oscillator, and the c = a relationship in wave (i).

CL - May Futures - Daily

Further, notice that wave (ii) is the deepest wave. Therefore, any other count would likely be a degree violation at this stage.

Have a very good rest of your weekend!
TraderJoe


Friday, April 13, 2018

Ground Chicken

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

Yesterday, we said to expect likely the fourth wave sequence lower in the S&P500 Hourly's potential contracting ending diagonal c wave of (b). That is what happened after a brief pop to the upside to likely finish the fifth wave of (iii) with a brief extension. The cash index finished down about -7.69 points, but was lower intraday. Here is the chart below.


S&P500 Cash Hourly - Wave (iv) of c of (b)

You can see the clear .a, .b., .c structure in the wave down to (iv), and the retrace was 38% of the prior wave. Also, the wave crossed the hourly EMA-34 for good form and balance. Further, we note the EWO, the Elliott Wave Oscillator, is very close to the zero line now, after a clearly divergent higher wave. So far, wave (iii) is shorter than wave (i), wave (iv) is shorter than wave (ii) and overlaps wave (i) as it should, and now, whenever it can be confirmed to begin, wave (v) must remain shorter than wave (iii). The typical "throw-over" of the upper diagonal trend line would be expected, however.

Here's the tricky part. Although within wave (iv) we can now count a completed zigzag down, the alternate within wave (iv) has to be that we have completed only .a, .b., and i of .c. In other words, even though the pattern looks good, the 38% retrace may be a bit short for a diagonal. Wave  (iv) may decide to extend, particularly if there is some event over the weekend. There might be or there might not be. Unfortunately, my crystal ball is not that good, and I'm not a mind reader.

So again, be flexible, calm and patient. So far, things are working as expected. The market is trying to grind out a conclusion to this wave with a typical Elliott Wave pattern. And grind it does.

Have a good start to your weekend.
TraderJoe

Thursday, April 12, 2018

Ground Pork

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)

Today, we likely completed a five wave sequence, upward, shown on the S&P500 Cash 5-minute chart below.


S&P500 Cash Index - 5 Minutes

In another reversal and grinding wave, the S&P500 cash index gapped up at the open, did not fill the gap and traded higher. In the process, a non-overlapping five-wave sequence with a sharp for wave ((2)) and and very long flat for ((4)) can be counted. The wave has good alternation and (although there are not 120 candles on the chart) it follows The Eight Fold Path Method for Counting an Impulse quite well.

The wave made a slight new daily high today, before falling off at the end of the day, and, therefore, the e wave of the proposed hourly triangle did not survive. Bye-bye. Those are the objective rules.

Still, with today making only a marginal new high, and with all the overlaps, the count has morphed to the cousin of the triangle, the contracting diagonal. The purpose of this potential contracting ending diagonal would be to make a corrective c wave up, as follows.


S&P500 Cash Index - Hourly - Marginal Higher High

The five minute chart above shows the five waves in the blue .c wave to (iii). Remember, we are not showing the .c waves for clarity. Notice that today's slight higher high is currently on a divergence with the Elliott Wave Oscillator (EWO or AO).

IF a fourth wave (iv) down occurs in good form, then it should retrace between 50 - 85% of the prior wave, and it would overlap wave (i) again in the process, and cross back down under the blue EMA-34 for good form and balance.

On a side note, we showed you several days ago the .a wave of (iii) was a contracting triple zigzag which we said could also be a contracting leading diagonal.  Here it is as the .a wave in it's contracting leading diagonal form.

Overall, the objective of the c wave would be to make a higher high than the a wave to avoid a truncation.

Today, the daily Dow ran smack into it's daily declining trend line from the high, and then backed off of that line. It's very interesting, but also very hard to tell what it means just yet.

Bottom line: still whippy go-nowhere waves after the gap. Still grinding, and grinding with little follow-through. That's OK, though, we will remain neutral, patient and flexible - following the rules - until the clearer pattern emerges.

Have  a very good start to your evening.
TraderJoe