Tuesday, June 25, 2019

A Happy Day

Today is one of those particularly gratifying days. That is because it is not only are some wave counts working out as they should - as I see them - they are also beginning to work out in the eyes of others! I can not tell you how pleasing this is. Let me explain.

Yesterday, reader marc, who is a regular contributor here asked me what the count in futures might be versus cash. This is a very astute question to begin with. It shows that someone has their thinking cap on. So I sketched out the potential expanding leading diagonal, lower on the ES 15-minute chart, but I clearly stated that a lower low was needed to attain a fifth wave lower. And regular readers of this site know that the fifth wave must be longer than the third wave.

So, even as I was putting together the contracting diagonal on cash, shown in yesterday's post, marc commented that (paraphrase) "maybe the contracting diagonal will finish in the overnight session to align with cash", and then we expected a retrace. Here is the chart.

ES E-Mini S&P500 Futures - 15 Min - Complete Expanding Diagonal

Downward price movement now has been from 2,970 to 2,942 - some 28 points. And look at what happened in last night's overnight action. From the a wave of ((5)), the market shot up about 9 points in the overnight to make the b wave, and then collapsed into the c wave of ((5)) all before midnight.

And not a lick of those price movements is seen in the cash market. But, now we do have a completed and perfectly valid five-wave sequence lower that not only adhered incredibly well to its trend lines, but also meets all degree criteria. The first sub-wave a of ((5)) is shorter than ((3)), and that is what helps maintain the degree-related criteria.

Even so, the market this morning made a new lower low proving out the status of the pattern as a Leading Expanding Diagonal. So, the post-pattern prediction is actualized!

And what is gratifying is this: given the same rules related to patterns and degree two different Elliott analysts can reach exactly the same conclusions. That is what my work is about: trying to help readers see that without necessarily doing all the work for them.

In the case of Elliott Wave, it is by doing that you will hone your skills. And, the simplest overall rule that one needs to employ is the same one that Sherlock Holmes did, "when you have eliminated the impossible, then what ever remains - regardless of how improbable - must, in fact, be the case".

Now, it's not all that bad in Elliott Wave work, as many of the patterns you will see here are not at all improbable. In fact, they are much more probable. I hope you get to see more examples.

Have a good start to the day.
TraderJoe

Monday, June 24, 2019

Watch Hourly Trend Channel Closely - 2

In Sunday's post, we suggested that the lower boundary of the hourly channel on the S&P500 cash index be watched closely to see if it held or not. Today, that trend channel was breached lower with more than two hourly candles. The updated chart is below.

S&P500 Cash Index - Hourly - Trend Channel and Divergence

At some point, we will expect the downward move to become more impulsive. The hourly Elliott Wave Oscillator, above, is still diverging from the high and trending downward.

With 136 candles on the chart, below, and in reference to the Elliott Wave Oscillator, there is nothing at all wrong with a count of the type below on the 5-min time scale.

S&P500 Cash Index - 5 Min - Five Small Degree Waves Down

Wave ((5)) is shorter in price and time than wave ((3)), which is shorter in price and time than wave ((1)); wave ((4)) is shorter in price and time than wave ((2)), wave ((4)) overlaps wave ((1)) without going beyond the end of wave ((2)), and they can all be counted as zigzag sequences - albeit the c wave of ((2)) has a very slight truncation.

The five waves down should be respected until there is a clear reason not too. There could be a retrace - even a substantial one - at any time.

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

Sunday, June 23, 2019

Watch Hourly Trend Channel Closely

If the trend channel gives way in the cash market, even printing a couple of full hourly candles below the lower trend channel boundary in the chart below, then it likely means the up movement is over. And there will be one, clear, unambiguous Elliott Wave count that results.

S&P500 Cash Index - Hourly - Trend Channel and Divergence

Yes, there is an outside chance that the futures will lurch up one more time in the overnight, but this is not required for a completion count in cash.

The unambiguous count will be that the third zigzag, Minor Z, of Intermediate wave (B) will have been completed. The market would have topped in a "three-wave sequence".

There are already three points of divergence in the minute ((c)) wave versus the Elliott Wave Oscillator, and the ((c)) wave is between 0.382 and 0.500 x ((a)) at this point.

If this top occurs, then the 2,720 level will likely be revisited quite quickly. Confirmation would come with an overlap of the minute ((a)) wave. Further downward movement would be pending a break of those lows. For now, as usual, let's take things a step at a time, and remain patient, calm and flexible.

This is another good session to monitor the overnight futures and keep a close eye on things. As we said in the previous post, the Dow futures already threw off one kind of invalidation (that of a continuing contracting diagonal). And, as Erik B. and I were discussing yesterday, the smaller diagonal in cash could have finished already.

Why would this count be an unambiguous one if it plays out? It has to do primarily with the 'depth' of the minute ((b)) wave. It really has too small of a retrace on the ((a)) wave to be a second wave. It's that simple. And, in addition, there are virtually no significant retracements in the wave up to June 11, which almost assures that wave is one of  those no-retracement A waves, and not a first wave.

So. Be careful. Keep an eye on things. Have a good rest of the weekend.
TraderJoe


Friday, June 21, 2019

Dow and S&P Overlapped

In yesterday's post, we cited how if a contracting diagonal was being formed, then overlap was required. It didn't occur until the last moments of the trading session, and then it occurred with a minor vengeance. The Dow's cash chart - as an example - is shown below with the potential diagonal.

DJIA Cash Index - 15 Minutes - Downward Overlap

The first thing that occurred this morning was the higher high. That was completely expected from the counts that were posted throughout the prior post. Then, in a wave which is slightly longer in time than wave (ii), a potential fourth wave did form a clear zigzag downward. We showed the divergence on the Elliott Wave Oscillator, and there now appears to be a fourth-wave signature, with the EWO slightly below the zero line. The overlap, too, was expected.

Now, it is critical that in both cash and futures, for a potential contracting diagonal to play out, the length of (iv) in points, must not exceed the length of (ii) in terms of points. Unfortunately, this is going to require monitoring of the overnight futures on Friday/Sunday/Monday

IF a contracting diagonal forms properly in one or both indexes, then it could terminate the minute ((c)) wave, up, shown in yesterday's post. But, in order to make that claim, then it must fully retrace the diagonal in less time than the diagonal took too form. These are the 'rules'. It is not a matter of being unsure. It is a matter of being uncertain - that is uncertain in the probability sense.

With that in mind, one time only I will provide these exact levels where a contracting diagonal would invalidate. In the September ES Sep futures, it is 2,940.25 (we are about 10 points from there). In the Dow futures in  the after hours Friday, the potential contracting diagonal has already invalidated, and a potential expanding diagonal or triangle might be looked for. This might explain the fourth wave that is longer in time than the second wave.

P.S. Because of the after-hours invalidation of the Dow's contracting diagonal, I have shown below what a legal Expanding Ending Diagonal count for the Dow would look like in the chart below.


DJIA Cash Index - 15 Minutes - Potential Ending Expanding Diagonal

Unfortunately, since they are all three-wave sequences, if this expanding diagonal plays out, this must be an ending or "terminal" wave sequence. Wave iv in cash must become longer than wave ii in points. As we said above, it is already longer in time. And the fifth wave can make a new high or fail. And, if this potential diagonal does not form properly, it would be best to look for a larger fourth wave triangle.

Have a good start to your evening.
TraderJoe


Wednesday, June 19, 2019

Powell "Lost" Patience

Nothing much has changed except FED chair Powell took the word "patience" out of the FED statement which some imply sets the stage for a later rate cut. 

ES E-Mini S&P500 Futures - 4 Hr - No Change

There was first a retrace to the 50 - 62% Fibonacci area versus wave i of (c), then a higher high on the day. The price quote shown as wave ii on the chart is off by about five points. Care should be used when using on-line tools.

As long as price remains in the channel, it should result in somewhat higher prices. Since wave (a) was not a diagonal in its entirety, a wave (c) could be - but does not have to be. Only if tomorrow is not a extended third wave should a diagonal consideration come into play. Right now there is no evidence for it. See yesterday's post for the larger context of the count.

Have a good start to the evening.
TraderJoe

P.S. Here is the possibility for the diagonal on the Dow. The specific degree labels have been included. Note that sub-minuette wave a - most recent - is NOT larger than minuet (iii) of minute ((a)) - the previous larger wave in the same direction. I did this measurement. It is off to the left of the chart. You should do this measurement, too.

DOW Futures - 2 Hr - Potential Diagonal

Also note, that minuet wave (i) is shorter than all of minute ((a)), and minuet (ii) is not larger than the widest part of minute ((b)). Further, sub-minuette b is shorter in time and price than minuet (w) of minute ((b)). Minuet (w) is not labeled but it is the lowest low of 12 June.

These are the factors that preserve degree labeling in an up-count, as far as I can tell. If at any time price travels downward to exceed the length of the widest part of minute ((b)), then it would be necessary to say, "the degree has turned".

Easy to get lost

I know it is easy to get lost in the wave count, so I have put the current move in context in the daily chart, below. Whether new highs are made or not, the count suggests the December lows will eventually still be revisited.

ES E-Mini S&P Futures - Daily - Count from Dec Low

The count from the December 24th bottom remains unchanged. Upward price movement since June has already attained greater than 78.6% of the prior high, so even in the event the upward wave should fail - which there is no sign of yet - it would still be considered the Z wave. Notice the time similarity in the X waves. The Intermediate (B) wave has already done what is required by wave theory to do - that is attain 90% of the October 2018 high. That occurred with the new all-time-high in the SP500 at Y. Further up movement is just icing on the cake for the (B) wave, and it could - but does not have to - go to 138.2% of Intermediate (A).

There is an alt: (b) on the chart only in the event that the channel below does not hold.

ES E-mini S&P Futures - 4hr - Up Channel

A channel like this should hold for a zigzag, provided the (b) wave is properly located. Yesterday's large up move suggests that it is, but just be aware that if the channel begins to break sideways, the (b) wave could go on to form a larger triangle or flat to take up more time versus the (a) wave.

Have a good start to the day.
TraderJoe

Tuesday, June 18, 2019

Pop Higher

Note: Please see the second chart (in the P.S.) done after the first one.

In previous posts, we had written "three waves up", and "still three waves up" from the June low. This morning the market popped higher based on Mario Draghi ECB comments which were highly dovish, and based on news on China trade talks (and that's all it is - news on 'talks' - not on an agreement.)

Based on those previous blog posts, based on the Elliott Wave Oscillator, and based on the presence of very difficult to define 0 - 2 trend lines, this wave up appears to be part of the fifth wave. The chart is below.

ES E-Mini S&P Futures - 2 Hr - Impulse

Yesterday, we posted an alternate of a potential triangle and said we were "neutral, calm and patient". We saw how a pop higher could develop as a logical result of a FED meeting. We also saw how a downward wave could develop. The futures were initially lower overnight, then higher on Draghi comments. The pop occurred this morning based on news, making the fourth wave count best as a very sideways double combination.

Note there is indeed alternation between the very sideways fourth wave - who's x wave did not go over the top, and  the second wave who's b wave did go over the top.

The Elliott Wave Oscillator shows the fourth wave signature - having been below, above, and near the zero line at several points (+10% to - 40%). And, now the task is to study the fifth wave and see where it ends. In this count, minute ((iii)) is shorter than minute ((i)), so minute ((v)) should be shorter than minute ((iii)) for the count to hold.

There will be more later. Have a good start to the day.
TraderJoe

P.S. For reasons of time and "Degree" consistency, measurements show that the middle section is the longest correction in both time and price. Therefore, it might be best considered the (b) wave.  This still works acceptably with the 0 - 2 trend line. Chart below.

ES E-Mini S&P500 Futures - 2 Hr - Time and Price Degree

Needless to say, this has been a very intractable wave set to count, especially with the extremely shallow (b) waves. Still they are larger than any correction in the preceding up wave.

Monday, June 17, 2019

An Alternate

On Friday, I showed a potential downward count. While it has not materialized yet, it certainly does have the possibility of doing so. Because of my commitment to show a logical alternate when it presents itself, please consider this Pre-FED triangle as the likely best alternate.

ES E-Mini S&P500 Futures - 1 HR - Alternate Pre-FED Triangle

Such a triangle would have to extend to any announcements on Wednesday. At this point in time, the (b) wave of the potential triangle has more bars than the (a) wave - which is typical of a triangle, and which is why the bar measurement ruler is shown. Also, the (b) wave is just a nick over the 78.6% Fibonacci retrace level, which would be good proportion for a triangle. If this pattern materializes, price movement would be to the up side out of the triangle, and we would consider that in any larger pattern.

Price may not travel below the (a) wave at any time to maintain the integrity of this alternate. This is why a person remains calm, neutral and open-minded about the progress of the waves. At some point soon, the June 11 high or the June 12th low will give way and set the stage for what is next. One really good reason this count is the alternate is that a triangle simply can not be called until all five legs are "in the market", and that simply is not the case yet. But, the idea of a triangle is reasonable given all the eyes on the FED meeting results on Wednesday.

Since the count above is shown in the futures, it is the futures that must maintain validity.

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




Sunday, June 16, 2019

The Ugly 1937 Top

This is the second post this weekend. Readers may want to view the first one prior to continuing.

I thought it would be helpful to review a period in stock market history far removed from our own so we can get the emotions out of the way. In our time period, it is clear "stocks can never go down again" - at least to some. As many people keep their funds locked away in a 401k account or some other seemingly "safe" vehicle, they are confident the Federal Reserve will always be at their backs, and that this will always keep markets levitated. Some see the beginnings of a decline which is not in five-waves, and they assume a larger decline can not happen. A major Elliott Wave service did this just recently.

So, the period I wish to look at is the 1937 stock market top. It is relatively benign in market history. Nobody really cares about it now. Hey, it wasn't 1929, right? Notice how the first waves off of the top simply - because of overlap - can not be counted as a "five-wave impulsive sequence".

DJIA Cash - Daily - Ugly 1937 Top

Yet, after the point marked A in May, there is, indeed, a lower low in September. This is only to advance the point that the initial decline "must" have somehow been in five waves. In fact, the initial decline can be counted as a very ugly five-wave leading contracting diagonal. Some people see an ugly decline of that type and they just think, "naw, that's just three-waves - right?".

But, following the A wave, there is an even uglier three wave rise (including a failure) which is the (a) wave of a larger B wave expanded flat, followed by the new marginal low (b) wave decline. And this is followed by a literally massive (c) wave up. As the Fibonacci ruler on the right shows, the (c) wave is the 2.618 x (a) Fibonacci extension - to the pip! And, this is very near confluence with the 78.6% Fibonacci retracement level of the A wave - shown by the Fibonacci ruler on the left.

These Fibonacci measurements should be highly persuasive that the count shown is correct. How else would these measurements have worked out so perfectly?

My real question for all readers is this: after that massive and rapid five-wave increase in prices, are you still bearish on stocks in August of 1937? Are you one of those who cites the "recent strength in stocks?" Do you automatically assume "stocks are going over the top"?. Or are you calm, patient and neutral? Do you spend most of your time actually measuring and counting the waves? Do you base your wave view on the measurements, or on your internal emotions?

I ask the question only so you can see how these things work out sometimes. I have shown you the lower low only to help demonstrate the point. Interested Elliott Wave students should look to see if they can find how low the actual decline went. It might surprise you.

This can't happen again, right? The FED has the wind at our back, right? A lot of things are different from 1937, aren't they? Well, yes they are. What does that rule in or rule out?

Have an excellent rest of the weekend.
TraderJoe

Friday, June 14, 2019

Paint Drying

If it were not for the fact that 30-handle (or thirty-point) swings in the ES E-Mini S&P Futures could add up to some real money, we would chalk up all of today's move to the proverbial "summer light" volume, and light pre-FED and contract roll-over volume, and not even try to count the intraday swings. We'd say it was like watching "paint drying".

But, some of us stay "true-to-course" and attempt to count what we see. One of those persons was Erik B., and near the end of yesterday's comments, he found a nice way to count the S&P500 cash index. I agree with his count (although not the specific degree labels). Still, you are encouraged to review it.

For my part I found the ES E-mini futures to be a little more interesting, and so I am showing that count from the high, below. From what I can see it can not be counted as Erik counted cash, but it does result in the identical implication.

ES E-Mini S&P June Futures - 30 Minutes - Whippy

What is so dramatically different about the futures - compared to cash - was the very deep b wave which does not appear in the cash market. Readers of the blog will note it caused me to immediately count the five-wave c wave up to wave (w), and that was done to the bar. After that (w) wave is a clear three-wave a wave down, and a clear three wave b wave that goes up over the top, followed by a c wave down in five-waves to end an (x) wave. Parenthetically, this (x) wave is also a flat, but that is allowed. The (x) wave may be almost 'any' three wave shape.

Then, today's pattern was, so far, another three waves up - and because of lack of downward overlap on a certain wave, this wave can still continue higher if it wants, or it could have failed here today. Only the b wave of (x) attempted to reach the 0.618 retracement on wave 1.

So, this pattern is a relatively rare pattern known as a flat-x-zigzag; it is one of the myriad combination patterns that make Elliott wave less fun and more work! The flat is from the end of 1 to (w), the (x) is where noted, and the zigzag is in progress or ended today.

Regardless of the intricacy involved, if the pattern does maintain its integrity, then it would be pointing prices downward because it would, in effect, be saying, "there is a barrier at 0.618 which was attempted to be exceeded many times, but wasn't". All-in-all, the cash market had a pretty poor lower close - again not the rollicking "leave Friday at the high".

I have done my best to see that the degree labeling is consistent. For example, you'll note that the b wave at the bottom is shorter overall than 1, down. And that's important because it preserves wave b's status as just a sub-wave. That's all there is to it. Let's not make it more than it is.

Have an excellent start to the weekend.
TraderJoe

Wednesday, June 12, 2019

Still Below the Pivot Line

Prices are still below the daily up trend line (or pivot line) shown below. If you were expecting a rally today, there wasn't much of one - just a lot of compression in prices.

S&P500 Cash Index - Daily - Still Below Pivot Line


We have seen compression days like this in both directions, both up & down as shown at the arrows. In some sense today's lower close could be considered to confirm the prior daily bearish engulfing candle - but not solidly. So, it still might be useful to watch the overnight futures for some short term clues.

Have a good start to your evening.
TraderJoe

Tuesday, June 11, 2019

Still Only Three-Waves-Up

And the (c) wave is still smaller in price points than the (a) wave, as below. In a "turn-around-Tuesday", after this morning's false break-out, there was an impulsive wave down.

ES E-Mini S&P Futures - Hourly - Three Waves Up

The impulse wave down clearly broke the lower channel boundary any way you draw it, and broke both of the prior wave four lows, with the Elliott Wave Oscillator heading into negative territory. If the count holds it would be possible to revisit the end of May lows. A re-test of the underside of the channel line would not be out of character.

Have a good start to the evening.
TraderJoe

Monday, June 10, 2019

Can Only Count 'Three-Waves-Up'

Much of this cash S&P chart was shown over the weekend as the post-script to the ES E-Mini S&P500 Futures 5-minute count. Here is the updated cash chart.

S&P500 Cash Index - 15 Minutes - Three Waves Up

At present - because of numerous trend line breaks - this upward sequence can only be counted as "three waves up". It would be very difficult to count it as (i), (ii), (iii) because of the trend line break involving wave iv. The upward structure - while impressive in terms of its point gains - is quite choppy and does not sport the typical 'look' of a thrusting impulse wave.  The overall shape of the pattern is in a wedge, and there are divergences at the highs.

The fifth upward wave of (c) occurred this morning on schedule, and then prices began to break the rising up trend line to the down side again. It is likely that if wave iv is broken lower, then most upward counting of waves by others will begin to end.

But that remains until tomorrow to see if it occurs.

Have a good start to the evening.
TraderJoe

Friday, June 7, 2019

Looking at Futures Since the Low

This count seems best to maintain degree labeling in the futures which includes all the hours of trading. The (b) wave should be found at a lower right extreme  - as shown - to be correct. Each of the third waves is above a line from its origin thru wave ii (0 - ii).

ES E-Mini S&P500 Futures - 5 Minute Closes - Two Channels

If this count is correct, wave iv of (c) will likely continue into the overnight Sunday / Monday, and then a fifth wave might wrap up the up move - finding resistance along the 50-day SMA or the upper daily Bollinger Bands. I'm still working on the cash chart.

Have a good start to the evening.
TraderJoe

P.S. I have added the cash chart to this post. The initial trend line break must mean that wave i of .a is just to the left of the red line. Then, ii breaks the red line, and iii is after it. No similar problem in a third wave of (c).

SP500 Cash Index - 15 Min - Trend lines 0 - 2

Notice that price has already broken down the largest trend line on a chart. A wave v could start upward, and it could be quite a wave.

Thursday, June 6, 2019

Outsized B Wave - Part 2 ?

In the comments in the previous post, we showed some potential break down and break up patterns (called brackets) based on fractals and a very neutral EMA-34 on the ES fifteen minute futures chart. We reminded how the EMA-34 is the "chaos attractor" in the market when there is no fresh news. Prices were trading sideways then. After the post, CNBC had a FED interview, and prices broke to through the upside fractal which started a good sized move upward. We said that "when a bracket goes", it usually makes a move greater than most people expect, and prices popped.

As the interview ended, prices reversed a bit as best seen on the half-hourly chart of the S&P500 cash index.

S&P500 Cash Index - 30 Minutes - Outsized b Wave ?

From one perspective, the little a? wave down is just "too short in time" to, in any meaningful way, correct the entire prior up move to (a). We've tried various counts to 'try' to make the up waves past the a? wave a fifth wave. They don't work well. But, we want to remind all of this post regarding out-sized B waves:


From this perspective, we find it interesting that the lower Bollinger Band on the half-hour chart comes in between the 62% and 78% of the upward move from a ? to b ?. Could it be that a running flat wave, or running triangle wave is occurring? It is a good reminder to all, that in strong markets "running flats" and "running triangles", in particular, are quite common structures. So, far, we have counted the b ? wave up as a triple zigzag. If it holds, then the employment report might provide some volatility upon which to make a c ? wave down which would be likely to fail to trade below the a ? wave.

If that were the case, then I would expect - at some point - another five waves up in the form of a larger (c) wave. I am only looking for a (b) wave that takes some time to correct the (a) wave. But to actually correct the (a) wave, the downward wave must at least cross down back over the top of that (a) wave.

If a triangle should form as the (b) wave, well, we'll discuss that if and when it occurs.

For now, have a very good start to your evening.
TraderJoe

Wednesday, June 5, 2019

Clear Impulse Up

Using The Eight Fold Path Method on the appropriate time-frame of the futures provides a pretty clear picture of the impulse up, and the likely start of a flat-wave correction.

ES E-Mini S&P500 Futures - 15 Minutes - The Eight Fold Path Method

Note in particular that wave (iii) of iii occurs on the peak of the EWO, and wave (v) of iii appears on the first divergence, with a little over 150 candles on the chart - well within the typical parameters of 120 - 160 candles on the chart. Then, after a sideways overnight fourth wave which sees the EWO dip below the zero line, the fifth upward wave dies before the mid-channel line, and on a further EWO divergence from wave iii.

There is good alternation, with wave ii as a failed zigzag, and wave iv as a flat. Wave iv's b wave does go over the top, where wave ii's does not.

When the channel was broken only three waves down were counted, therefore, we suggested that perhaps the correction will occur in the form of a flat correction. Prices did go marginally over the high, and may be targeting 2,833 or the 1.382 level from a:3.

On the daily chart, prices today fought a battle all day between the 18-day and the 100-day SMA's ending higher and slightly over the 18-day SMA to now have a positive bias.

While the impulse could only be an "a" wave up of a three-wave sequence for a correction of the downward move, that yet remains as unproven. So take things slow and summer-easy. 

And you have to marvel, don't you, at - how even though wholesale prices for gasoline have tanked - gas prices at some retailers remain as high as if the wholesale prices were $2.06? Folks, they are down at $1.69 for July RBOB! Come on now.

Have a good start to the evening.
TraderJoe

Tuesday, June 4, 2019

1-2-3 Became A-B-C

Today we monitored to see if a larger degree fourth wave would form - perhaps as a triangle. We said that ES 2,795 was the limit for the move, because that is where a c wave would equal 1.618 x a in a triangle. And when 2,796 was reached, we said that if a speedy decline did not begin immediately, we must consider the up move as part of an impulse instead of a triangle.

Such a decline did not emerge, and so the waves over 2,795 are most likely part of a b wave of a flat for the fourth wave of an impulse higher.

That's how Elliott Wave logic works, and so we accept it. From the longer term count standpoint, that means we have only had an A-B-C downward move, as follows.

ES E-Mini S&P500 Futures - 4 HR - The 1-2-3 Became A-B-C

Although the C wave is marginally longer than the A wave, it counts best as C = A, and the 4-hr EWO is on a divergence at the lows. The blue fourth wave (iv) shorter in time than the second wave (ii) is what initially threw the downward impulse off in terms of 'time', and hence, that peak is relabeled for the C wave.

I'll be working on what this means for the longer term picture in the next couple of days. For now, we have to see if a fourth wave and fifth wave of the upward impulse develops properly tomorrow. IF so, then there should be at least another five waves upward. Perhaps more, but at least one more set of five-waves up.

Have a good start to the evening.
TraderJoe


Monday, June 3, 2019

Continuation Lower

The ES futures were lower over night, then traded higher at the open, and then made another new daily lower low around 15:30 ET, before rebounding to close narrowly mixed. The lower lows continue the down trending wave.

ES E-Mini S&P500 Futures - 4 Hr - Lower Lows

The ES daily slow stochastic is still embedded below 20, and the futures settled inside of the daily Bollinger Band, negating any prior lower closes outside of the band. In short, prices may be riding the band lower.

The whippy action during the day, and near the close is suggestive that a triangle might be forming for red wave iv, if it wishes to become longer in time.

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

Friday, May 31, 2019

Late Night Reconfiguration - Still Likely Lower

Unless you were able to follow the comments from yesterday, you might not know that last night was "burning the mid-night oil" when tariffs were announced on Mexico. The problem became that waves were now becoming too long in time, and in price, with smaller and smaller retracements. Here's the ES 4-Hr chart, which is being used so that it contains prices from all-hours trading.

ES E-Mini S&P500 Futures - 4 Hr - Nested 1-2's?

This chart was actually developed and posted last night. Because the next wave down from 2 / B is actually longer in time, but not yet in price, than the first wave down as 1 / A, then these waves must be of the same degree. Of that there is no doubt, and I wrote about that in yesterday's post. 

But, now we see at red ii, that the wave is not longer in time than the prior blue (ii) - as might be expected of a fourth wave - if this were a roughly equal C wave. And that is a problem. A big one. Therefore, until we know more the primary count is 1-2-3 in the downward direction. It is 'possible' a 1.618 wave will form downward, and Monday could see additional price slide. The alternate must become and remain an A-B-C count lower. Note: The degrees posted on this chart are simply for 'relative' wave counting information. Actual degree labeling is pending evaluation.

Prices are still in the channel, above, and the daily MACD is still below the zero line, and the daily Elliott Wave Oscillator does not have a divergence. The Russell 2000 has had it's 18-day SMA cross lower under the 100-day SMA in a bear cross.

On the daily chart, ES prices are still pushing down on the daily lower Bollinger Band. The NQ and ES futures have their daily slow stochastic embedded to the downside. The Russell's slow stochastic has been embedded for several days now. Crude Oil fell more than another $3 today, and that is signalling some kind of slow down in the economy, too.

The message here is that while there may be pull-backs and backing-and-filling, all it may take to send stocks sliding is a lack of buyers: a so-called buyer's strike.

So, as always, take care, be flexible and be patient.

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

Thursday, May 30, 2019

Perhaps Degree Can Help Again

Today, the Russell 2000 made a new lower daily low, while the S&P500 and Dow did not. Here is a four hourly chart of the Russell because it can help answer some questions.

Russell 2000 Futures (RTY) - 4 HR - Potential b Wave or Diagonal

There is no doubting that the Russell has made a diagonally shaped wedge (bullish falling wedge?) as of the end of the day. In doing so, the wedge counts best as all-three-wave sequences. And this wedge is shorter using the measuring ruler than the first wave 1, down. So, while this wave could qualify as a newer sub-wave i of a larger trend based on price, alone, it can not do so based on time. The wave takes longer in time than wave 1, therefore. Interestingly, based on time, it may also not count as a b wave - precisely because as a lower degree b wave can not take more time than the first wave.

Therefore, the only way to count this wave and maintain adherence to degree requirements is this way.

Russell 2000 Futures (RTY) - 4 HR - Waves Must Be of the 'Same' Degree

Think on the implications of this and we'll try to work more on the other indexes. This is just the first one that made sense. These first three waves (a)-(b)-(c) may be the start of a larger diagonal. We'll have to see.

Have a good start to your evening.
TraderJoe

Wednesday, May 29, 2019

Care Still Needed

The Dow and the S&P did gap downward today, and continued lower. Yesterday, we showed this potential head and shoulders topping pattern. It is possible to consider this pattern as 'activated' since prices filled the gap shown by the black circle on the left, and then only returned to the underside of the neck line.

DJIA Cash Index - Daily - Lower Low Day

But, since the ES daily index stopped right on its lower daily Bollinger Band, with the daily slow stochastic in oversold territory, and our measurement showed today's price decline stopped at a 1.382 times the May 16th up wave, it is also possible to consider this more extended version as an 'almost equal'  alternate.

DJIA Cash Index - Daily - Expanded Flat Potential

Counting the internals of the down wave since May 16th provides little in the way of confidence in which form it will be. So, care is still needed, as is paying close attention to the overnight futures.

Have a very good start to your evening.
TraderJoe

Tuesday, May 28, 2019

Care Needed

Although this still may be holiday-light trading, care is needed because the S&P500 did something a little unexpected today. The Dow did not. First, here is the Dow on the half-hourly chart. The second wave, 2, did indeed take a little more time - as we posited on the S&P chart.

DJIA Cash Index - 30 Minutes - Expanding Diagonal and Wave 2?

The Dow - as can plainly be seen had an exact 62% retrace of its expanding diagonal with a higher high (C) wave today. Its (B) wave counts like a triangle. The S&P500 did not make the higher high. That being the case, it is possible to see the S&P as having failed again at today's high. This is not necessarily good news for the market. Now let's look at the Dow's daily chart.

DJIA Cash Index - Daily - Head & Shoulders

To be clear, I rarely call head and shoulders patterns. But I also don't call inverse head-and-shoulders patterns like many were doing at the recent failed breakout above the high. The issue is I'm thinking if we break the daily lows, above, a lot of technicians will begin calling this pattern.

It bears watching - and there are other ways it can develop, such as a larger right shoulder. So real care is needed, and so is attention to the overnight futures for a few days.

Since the Dow never made the higher all time high - just as I expected - it may be that the Dow is providing the clearer Elliott Wave count. Perhaps the Dow is more trade-war dependent and the variety of stocks in the S&P500 is simply causing that index to be harder to count.

Have a great start to the week.
TraderJoe

Friday, May 24, 2019

Have A Super Weekend

Very short post for you today. Try to observe the parallel structures, and the time sequences. It is just about as long from (i) to b, down, as it is in the entire down wave to (i).

S&P500 Cash - 15 Minutes - Likely Count

Also, try to observe the patterns of alternation shown in the cash market. These are really quite helpful in deciding the count. The downward count in the futures market is slightly different to (i).

As noted yesterday, the flat wave in the S&P500 cash index prevents the count of a downward diagonal, or its cousin, the triple zigzag in that index.

Within the double zigzag downward to b wave .y = .w almost to the pip. Notice, too, that the last wave iv was at the same location as the prior wave .iv to a very close approximation.

Have a great weekend.
TraderJoe

Thursday, May 23, 2019

DJIA has the pristine count

The count below on the Dow Jones Industrial Average, 15-minute chart, is very clear in form and structure. The problem is it has two interpretations.

DJIA Cash Index - 15 Minutes - Expanding Diagonal or Triple Zigzag

Notice how - as an expanding diagonal - each of the waves is longer in price and time than the prior wave. Wave (v) is longer than (iii) which is longer than wave (i), and wave (iv) is longer in time than wave (ii), and overlaps wave (i) without traveling beyond the end of wave (ii). Notice also, that each wave is a zigzag, and how exceptionally deep the retracements are. This is probably where the authors of some books get the deep retracement look to diagonals. Sometimes and in some indexes it definitely does occur.

So far, all well and good. Then notice the classic signature of the expanding diagonal on the Elliott Wave Oscillator below the pattern. Notice how wave (v) is deeper than wave (iii), which is deeper than wave (i), and further how wave (iv) is higher than wave (ii) and does not form a divergence. This EWO signature is one of many to commit to memory. But it helps!

So, here's the problem. Because, by definition, the expanding diagonal has three downward zigzags in it, it can not be ruled out from the simple three zigzag pattern. Duh. It is one of the patterns which is its own alternate. The only way we will tell is if the high or the low is exceeded.

The reason I showed you side-by-side the count of the S&P versus Dow yesterday, is the the S&P would somehow have to be counted differently. By the rules the flat wave shown yesterday in the S&P could only be a "b" wave structure and not a fourth wave. But ...

During the comments in the previous post we noted that the S&P500 did, indeed, travel to 90% the length of it's May 13th down wave. This (and a three zigzag pattern instead of a diagonal) makes a potential flat wave possible in the S&P500, if the market needs to spend more time in a second wave. That is absolutely not a requirement, but it often happens. The Dow, it turns out, at this level, did not make the 90% mark. So now we have a "split decision". If the Dow makes a higher high than the origin of the above diagonal, it might have to be counted as w-x-y instead of as a simpler a-b-c, with x as this downward triple zigzag. Time will tell.

The bottom line is while the prior prediction of taking out the low of S&P 2,832 came to pass (in a hurry!), it can not be definitely stated whether the upward correction is over or not. The Russell 2000 is at the 138% mark to the down side of it's prior three up waves. So, it may try to make an expanded flat. And, the long holiday is upon us which means the futures can travel lots of places in the light volume.

Tuesday's cash open gap, and whether than gap fills or not, will therefore help set the direction. This is one of those times  to enjoy the time off and let the market provide a clue.

Have a great start to the holiday weekend, and keep one eye tuned to see if any important news should occur.

TraderJoe

Wednesday, May 22, 2019

Truncation Lives Another Day

Overnight, the futures were lower. They never made a higher high than yesterday during the session today. And so the potential truncation we discussed yesterday lived on to tell its story another day. The updated chart is below.

S&P500 and DJIA Cash Indexes - 15 Minutes - Truncation and Failure?

It was pretty clear to me from the overnight action, that the S&P500 futures (ES) had made a leading expanding diagonal lower - charts of which were posted in yesterday's comments. That wave is labeled as blue i, downward, in the chart above. Then, in whippy pre-holiday action the market spent the rest of the day in correction. The opening gap was filled. Lower lows were made, and then there were five waves up on the report of the FED meeting minutes.

So, the truncation held, but so did the .a wave wave of the correction, potentially making .c of a second wave ii. That means cash S&P might have both a truncation and a failure to deal with. And this is after making only "three-waves-up" in the flat correction, so far. If so, it speaks pretty clearly that there should be additional down side price movement to come. We'll have to see for sure, but at the end of the day there were some pretty serious price overlaps on the part of both the S&P and the Dow.

This would suggest that the 2,832 level - at least - on the S&P500 should be exceeded lower in the coming days.

Have a good start to the evening, and a good start to the long weekend - if you have already started a vacation.
TraderJoe

Tuesday, May 21, 2019

Three Waves Up, So far

The S&P 500 can currently be counted as a flat wave. This was predicted yesterday, and the (c) wave of the flat did occur overnight, and nearly into the close today. That flat wave is shown in the chart on the left, below.

SP500 & DJIA Cash Indexes - 15 Minutes - Flat Versus Zigzag

Please note in the internal count to (c) that all three internal sub-waves are shorter in price than (a) which helps maintain degree labeling, and all of wave iii is above a line that could be drawn from (b) to ii. Further, there is alternation in wave (c) such that wave ii is a brief sharp, and wave iv is a flat which is longer in time. The internal count of (c) is similar in both the S&P and in the Dow.

The Dow Jones Industrial Average, however, made a zigzag instead of a flat wave, as its (b) wave did not retrace the needed 90% like the S&P500 did. In fact, the (b) wave of the S&P made the slight new low which would invalidate any attempt to count impulsively upward. Further (a) wave in the S&P, because of the lower low, must have been only a three wave sequence, where in the Dow it was a five wave sequence.

The likely consequence of these patterns is that if the (a) wave is overlapped in the downward direction, it would be a warning that the upward correction is over - or is turning into a much more complicated pattern (the former is more likely). Why? Because the vth wave of the (c) wave of the correction in the S&P likely truncated this afternoon - whereas it did not in the Dow. On several attempts wave v tried to get through that .b wave high, and it just could not. That is not a good sign.

If you are not familiar with the differences between flats and zigzags, then study these charts, and it may help.

Have a good start to your evening.
TraderJoe


Monday, May 20, 2019

Lower Low Day

Today, the ES E-Mini S&P500 Index Futures made another lower low day that continues the down trending wave. In mid-afternoon, a further lower intraday low was made - but it was marginal and may be the b wave of a flat correction. We were able to count "five-waves down" in the form of an expanding diagonal. Tomorrow might start with the c wave of the flat.

For today, I want to show you some weekly U.S. equity stock indexes that have not made new all time highs.

U.S. Equity Indexes - Weekly - With No Newer All Time Highs

Each of the Dow Jones Industrial Average, the Wilshire 5000, the NYSE Composite Index and Russell 2000 have to this point failed to make a new all-time higher high. The most concerning is the Russell 2000, followed by the NYSE Composite Index.

Have a good start to the week.
TraderJoe

Friday, May 17, 2019

No Friday Rally

What do you mean prices ended the week and didn't close on the high of the day? That is kind of a rare and different turn of events, for sure.  The count remains the same.

S&P500 Cash Index - Daily - Count

Wave ii, up, currently counts like a double zigzag, and that is fine. If it wants to take more time, it could possibly extend as a triple zigzag, but may not go over the Y wave of Intermediate (B) and maintain this count. As long as the SMA-(9) of the MACD - shown as the signal line - remains below the zero level, a downtrend should be respected.

As we wrote in the comments section earlier in the day (on yesterday's post), the Russell 2000 futures (RTY) did complete all the requirements of an expanding diagonal in the downward direction. By the futures settlement, the ES and cash S&500 did not, but they might do so in the after hours or on Monday.

Keep in mind the Dow Jones Industrial Average never did make a new all-time high - as the S&P500 and some other indexes did. And I was quite correct in my call that the Dow would not see a new all time high. I was not correct for the S&P500 or the NASDAQ 100. As I stated before, this prompted me to write a major Elliott Wave service and challenge their call of an expanding triangle for Intermediate (4). I'm still waiting for a reply.

Have an excellent start to the weekend.
TraderJoe


Thursday, May 16, 2019

Last Chance Fourth Wave

In a significant sign that the up trend (which is likely a second wave) is tiring, today - after making a marginal higher high - the fourth wave of (c) may have made a 50% retracement of its third wave. The Fibonacci ruler on the right shows this wave on the S&P500 cash index and its 50% measurement.

S&P500 Cash Index - 15-Minutes - Last Chance Wave iv ?

In doing so, late this afternoon price came back to the upper edge of the base channel formed by the (a) and (b) waves, and bounced a bit. This 50% x wave iii level is about the limit for a fourth wave under The Eight Fold Path Method, so watch it closely. The Elliott Wave Oscillator seems to be providing that typical fourth wave signature being within +10% to -40% of the prior peak.

Yes, there is a downward expanding diagonal there, and it could start a down wave, but it does not have to. It could be a small degree .c wave of a flat, to alternate with the sharp wave ii.

Speaking of alternation in these corrective waves, we currently have a short wave iv within (a) and it alternates with a very long in time wave iv within (c), while their second waves are just the opposite in price. That is really excellent to see. At the current moment, waves (a) and (c) are remarkably similar in time. Adding a fifth wave higher of (c) would provide better time alternation too, but that is a guideline and not a rule.

Because the trend is one's friend until it is not, we should still look for that fifth wave higher. But, under no circumstances can either the i wave of (c) or the (a) wave be overlapped and maintain this count. The best alternate at this time is a double-zigzag higher if overlap occurs before a fifth wave up.

Keep in mind that because this is likely a (c) wave, then the fifth wave of the (c) wave may truncate if it wishes - particularly in cash. So, now is the time to keep an eye on things!

P.S. As far as I can tell, within wave (c) the wave iii is shorter than wave i. I did not change the first wave count from yesterday.

Have a good start to your evening,
TraderJoe