Thursday, July 19, 2018

Interim Top Possible Not Proven

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

I noted in yesterday's comments section, in response to keen observations by 'Birthday Bill' .. if you will.. that it was possible to see an ending contracting diagonal that would agree with the Elliott Wave Oscillator on the S&P500 30-minute cash chart. Here is that ending diagonal, at the end of the corresponding impulse wave count, as updated with today's price movement.


S&P500 Cash Index - 30 Minute - Potential Ending Diagonal


The up wave did form a parallel - just barely - and prices are now below the parallel so that if wave ((4)) formed as a "running flat" to alternate with the sharp wave ((2)), then the count would make sense as an impulse with good alternation in agreement with the Elliott Wave Oscillator.

However, given the funky nature of fourth waves and the inevitable Fourth Wave Conundrum, we must allow that the fourth wave could still be in progress, and the potential diagonal is only the true (B) wave of the flat. In that case wave ((3)) would have ended on 13 July. The arrow shows the ALTERNATE wave ((4)) still continuing. It doesn't have to continue, but it could.

If a true diagonal was made, it only needs to trade below the current wave ((4)) in less time than it took the diagonal to be built. If the time factor gets stretched way out, then it would more indicate the alternate. With the wave ((5)) price below the mid-line of the channel, it seemed to say that it was "running out of gas". That is now further indicated by price being below the channel.

So.. watch things carefully. I am remaining patient, open and flexible as the count proceeds. It would seem odd to have a "running fourth wave" which usually indicates strength as the next to the last wave in the entire bull market. So, more upward movement is eventually expected. There just may be a 62% retrace prior to the next up move, however. So, let's take this step by step and see with what wave sequences the market informs us.

Have a good start to your evening.
TraderJoe

Wednesday, July 18, 2018

Continued Upside

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

No changes to the current count. The market, as measured by the S&P500 Cash Index made what looks like slowing upward progress today, although another higher high day was posted. As it nears that 2,839 level we mentioned in several posts, it will likely meet a bit of resistance while trying to decide if minute (iii) will be the extended wave in the sequence. I'll have more to say about that later. For now, here is the daily chart of the S&P500 Cash Index for reference.


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

Price still continues above the median line of the channel, and still closes above it. That remains a positive sign for the trend of the market, and the Elliott Wave Oscillator continues with green histogram bars - after only a brief red bar - and that remains a positive sign for the momentum of the market.

Because the daily ES price is nearing it's upper daily Bollinger Band at 2,837, backing-and-filling can be expected at any time.

Have a good start to your evening.
TraderJoe

Friday, July 13, 2018

Cash Breaks Minute (b)

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

The market as measured by the S&P500 cash index had another higher high day, and closed higher. It is still trading above the mid-line of the channel. Below is the daily chart of the S&P500 Cash Index for reference.


S&P500 Cash Index - Daily - Break Higher of Minute (b)

Price got high enough today to break the minute (b) wave of the Minor 4 triangle. As long as price is making higher high days, we will continue to count upward. The Elliott Wave Oscillator remains green, and continues to make upward progress. Even the Dow Jones Industrial Average filled a downward gap from June 19 today, but it still has considerable ground to make up.

Various other web-sites are trying anything they can to get in synch with this count. One has a switched from their full-on downward count, to the a message of "the triangle is the best option now". Another site claims they saw a "Leading Diagonal" from the waves since April 1st - but they are only reporting it now in July!. Folks, just like there was no ending diagonal there - as so many were claiming - there is also no leading diagonal there. Both of those counts break specific Elliott Wave rules. They are thinly veiled attempts to get in synch with the count above and reverse engineer a better answer.

Once again, even while the evidence suggests to us that prices are climbing, we are not bullish. We are simply trying to match the evidence with a fifth wave count - an ending type count. And that simply can not be bullish. It is more like looking for the end of a diving board. Prices may or will pop or hop around. We remain neutral and are counting waves as best we can - following the specific rules of wave theory, and using an objective, easy-to-understand method: The Eight Fold Path Method for Counting an Impulse.

With the cash price closer than ever to the 2,839 level, pull-backs can occur at any time. Backing-and-filling is expected. At this time, the advance-decline line may only just be beginning to buckle, but the speculation indexes are not yet where they typically are for a significant decline. Pull-backs, yes. Significant decline? The evidence says not quite yet. But we are "on-watch" for it, and hope to pay attention if it occurs. Meanwhile price evidence continues to point to the upside rather than the downside.

So for now, one can only be patient, calm and flexible as we watch to see if a new all-time high should be made.

Have a good start to your evening.
TraderJoe


Thursday, July 12, 2018

Up Trend Resumes

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)

After yesterday's some what depressive day, today was 'almost' a manic day upward. Manic-depressive; an apt description of this market, and of 'triangle-type' markets in general. After the gap-up open, the S&P500 cash index continued to rise and finished with a gain of about 24 points. Here is the daily chart again for reference.


S&P500 Cash Index - Daily - Gap Up Continuation Day

In the chart, you can see that price bounced off the mid-line of the channel, and made another higher high over the prior x wave. It has not, yet, exceeded the minute (b) wave higher of the triangle. Continuing to trade over the median line of the channel remains a positive development for this index. Other indexes, particularly the Dow, have not fared quite as well.

As can be seen on the chart, the Elliott Wave Oscillator still has green histogram bars, and the level is increasing in a further indication of positive momentum. In short, not much has changed.

Except it sure is getting hot outside. Stay cool, and ...
Have a nice start to your evenning.
TraderJoe

Wednesday, July 11, 2018

Counter-Trend Day

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

The market had a down day. It is still well within the parameters of a counter trend-day. The daily chart of the S&P500 cash index is shown below for reference.


S&P500 Cash Index - Daily - Counter-Trend Day

After yesterday's new local higher high above the former x wave, it was not a surprise for there to be a pull-back. At the risk of cluttering the chart, above we are showing the 100% x (i) level, which would be the maximum for a minuet wave i of minute (iii) in order to maintain correct degree labeling. That level is at 2,839.91, and price is nowhere near there yet. Further, price is still hovering at the median line of the channel, closing very near it today. Price is also still above the EMA-34, and the Elliott Wave Oscillator is still green and rising further. Those are still signs of positive (although diminished) momentum.

Remember, if we are indeed in Minor 5, it will likely have momentum that is 'just awful', not the rollicking type of "wonder-to-behold" wave three that occurred in December of last year. Many stocks (like the Russell 2000, again today) will not - or are likely not - to participate in the up side.

For those interested, my recommendation for the best charting (not trading) course of action is to switch to a shorter term chart, and see if you can apply The Eight Fold Path Methodology to a wave minute (iii). That way, if price should not follow the method then we might all be able to agree that an upward impulse is not being made.

Lastly, Crude Oil had a dismal day for the bulls today, dropping more than $4 from yesterday's close at one point, and it rebounded only slightly to only $70.38 for the August contract in what is likely some type of third wave action. It will also likely be adding headwinds to the stock market progress from here.

For these reasons, the above stock market outlook is not a bullish one. It is an attempt to complete counting a fifth wave of fifth wave, of a fifth wave, and to look for the reversal point. That is not bullish. I am very, very wary of a top, but the wave structure demands an attempt to complete it. I am still only neutral and counting waves.

Have a very good start to your evening.
TraderJoe


Tuesday, July 10, 2018

Gap Up and Higher Local High

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

In continued follow-through to yesterday's up move, the market, as measured by the S&P500 gapped up and made a higher high than the previous x wave of wave minute (ii). The Daily chart of the S&P500 cash index appears below for your reference. As we warned, not every stock is following in suit, and the Russell 2000, a previous upward leader, had a down day today. The Dow is still struggling to make new highs, and volume was quite low today with only ~3.0 bil shares traded on the NYSE.

S&P500 Cash Index - Daily - New local high over prior x wave


By making a higher high today, a lot of different downward counts were technically violated including some of those from major Elliott wave services. Still, while price is over the median line of the channel, it would be best to see it exceed the prior minute (b) wave of the triangle for continued upward movement in Minor 5. That would occur above 2,802.The Elliott Wave Oscillator is green, still rising, and is now currently above the zero line.

Have a very good start to your evening.
TraderJoe

 

Monday, July 9, 2018

Gap Up and Higher Close

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 opened the week with a gap up and traded higher. The continued daily chart of the S&P500 Cash Index is below for reference.

S&P500 Cash Index - Daily - Gap Up

Today's prices both traded above the mid-line of the channel, and closed above it, as well. There does not appear to be anything out of the ordinary that would rule out being in minute (iii) of Minor 5, as was written about over the weekend. Trading over the prior 'x' wave, and then the (b) wave at 2,802 would likely confirm it.

The Elliott Wave Oscillator (EWO) is green, rising, and continued to make progress.

Price had a good start to the week. I hope you have, as well.
TraderJoe

Saturday, July 7, 2018

Holiday Hi!

Commensurate with the holiday, stocks ended the week with a bit of a sparkler. We had called for a likely flat wave for wave minute (ii), and it looks like we got one. Here is the daily chart of the S&P500 Cash Index for reference.


S&P500 Cash Index - Daily - New Channel

Since exiting the smaller triangle at minute (e), which ended wave Minor 4, the cash index has now formed a new tentative channel upward. On Friday, price closed the downward gap shown in black circle on the price chart.  But there are many open gaps - only some of which are shown - denoted by the red circles.

For the EW purists, the correction is likely a 'complex flat' which is composed of a flat-x-zigzag, with the waves in the week prior the holiday as a zigzag, and that flat technically having ended with the diagonal we showed in prior posts. The zigzag was needed to extend price lower so that minute (ii) would overlap downward with minute (i) within Minor 5.

Price is currently trading very near the (dotted) median line of the tentative channel. Trading above, and closing above, the median line would be a positive. Trading below the lower green channel or closing below it would be a warning.

It looks like the Elliott Wave Oscillator made a second wave signature, with a slightly lower low than Minor 4, and it is now green and rising. Even though things are working out well, it is still time to be flexible, patient and cautious - as a very significant risk is other market sectors (e.g. Russell 2000, NASDAQ 100) might not hold up as well.

As we warned last weekend, Crude Oil did indeed upwardly overlap the $75.00 level. So we are glad we provided a preview of what one might expect.

Have a very good weekend!
TraderJoe


Sunday, July 1, 2018

What IF in CL

With Crude Oil about 50 cents away from a potential critical overlap, it seems like quite an omission for a major Elliott Wave service to not address in their monthly report, "What happens IF Crude Oil should, in fact, overlap?"

First, let's start with the potential overlap, and the problem it would present. It seems fitting to present this chart in patriotic red, white & blue.

CL Futures - Monthly - Potential Overlap

The problem such an overlap would present is that it would no longer be possible to count the waves down from the 2011 low to the present as an impulse wave. The critical level is $74.95, and it hasn't quite happened yet.

But, IF the overlap does happen, and, if CL is to be seen in a zigzag downward then there are four good possibilities.
  1.  The zigzag completed as Primary ((W))-((X))-((Y)) at the 2016 low.
  2.  A running triangle Primary ((B)) wave is forming.
  3. A flat Primary ((B)) wave is forming.
  4. A primary ((C)) wave is still forming as an Ending Diagonal.
Of these, because of the choppy nature of the current up turn, the one that seems most fitting to outline more closely is the Ending Diagonal for a Primary ((C)) wave lower, as follows.

CL Futures - Monthly - Potential Ending Diagonal for Primary ((C))

This chart would diagram a contracting ending diagonal for the Primary ((C)) wave of the zigzag following the waterfall Primary ((A)) wave that occurred in 2009.  The 2011 low would be the A wave of a zigzag lower for Intermediate Wave (1) of the Primary ((C)) wave diagonal. The clearest five-wave pattern from the 2013 high to the 2015 low would be the C wave of the zigzag for the Intermediate (1) wave. A diagonal would be allowed because Intermediate (1) did make a lower low over it's Primary ((A)) wave, showing it's motive wave character,

The 2016 low to the the 2018 high (continuing) would be the Intermediate wave (2) of the diagonal. And the chart predicts a reversal down in Intermediate (3) of Primary ((C)), which would then be required to make another marginal lower low in prices. This to be followed by Intermediate (4) higher, and Intermediate (5) lower. While Intermediate (5) should make a lower low, if it is the last wave in an ending diagonal, it may truncate slightly.

We warn at the outset, that there is no clear sign of downward reversal yet, and before considering this as anything more than a potential pattern, a sign of that reversal should be seen first on no less than a weekly chart.

If the pattern ended at the 2015 low, or if the Primary ((B)) wave does go on to make a flat, then new highs would be expected above $118. The Ending Diagonal is outlined because it seems to fit with the current choppy three-wave upward price movement, and it is apt that a SuperCycle might end with such a large diagonal. A diagonal would also provide excellent alternation for the impulsive Primary ((A)) wave down in 2009.

The Primary ((B)) wave triangle would be a "running triangle" because of the lower low. But that would seem to be too bearish a pattern for the allowed price movement lower (can't go below $0). So, the diagonal seems to fit better than the triangle.

And, while nothing is for certain we take a view based on the waves we can currently see. And, while the overlap hasn't happened yet, the upward wave as a fourth wave is getting very non-proportional to it's second wave. And that's what causes us to look ahead.

I too will take some time off over this summer holiday, so enjoy it to the fullest possible.
Have a great rest of the weekend & a great week.
TraderJoe

P.S. There were two other posts this weekend, in case you missed them.