Thursday, February 21, 2019

Consistent With

In a daily price pattern that is at least consistent with the potential ending contracting diagonal count we posted yesterday, today the daily ES E-Mini S&P500 Futures made an outside day down as the chart below shows. One does have to ask, "why did it do this today?". Is it because the cash index can not travel any higher? Cash did not make a higher high today as the futures did.

ES E-Mini S&P500 Futures - Daily - Outside Day Down

We are the first to admit that it's not the largest down candle ever, but it did make a higher high than yesterday's bar, and then it turned around and made a lower low - not only over yesterday's low, but also of Tuesday's low, as well.

Again, we said yesterday this price behavior simply is simply not reminiscent of a powerful third wave in an impulse, and therefore, it seems best - at this time - to call it the minute ((c)) wave of Minor 2.

The slow stochastic indicator is shown for reference only. While there is a cross lower - showing some loss of momentum - neither of the lines of the indicator have crossed below the 80 level. There is still nothing overtly bearish on the chart, and even today's price decline was quite choppy. Still, this is the best way that we can count and maintain the required degree labeling, so we'll see what develops in the next couple of days. 

From an Elliott wave perspective, the chart can be counted as if a top is 'in'. Now we need to see if confirmation occurs. An initial confirmation would be making a low beneath wave (iv) of the diagonal. Refer to yesterday's chart if unclear. A second level of confirmation would occur by overlapping the upward minute ((a)) wave in the downward direction. A third level of confirmation would occur by trading below the ((b)) wave in less time than the diagonal took to form. This would be the 'post-pattern-behavior' that an analyst such as Neely would expect us to obtain to call the count correct.

Have an excellent start to the evening.
TraderJoe

P.S.  Early in the morning, the DJIA made a new daily high. Shortly before 11:30 AM ET the S&P500 also made a new high. As a result, the minute ((b)) wave triangle can be re-established as the more correct count, as below. And, there are either five waves up or three waves up to the current high. Price is closing in on the 50%, and possibly the 62% Fibonacci extension on the minute ((a)) wave, as below.

S&P500 Cash Index - 90 Minute Chart - Back to Minute ((b)) Triangle

The alternate is clearly shown in red as minuet (iii), still.

91 comments:

  1. thanks joe

    i have been curious for some time what would be a count from 2008 that is not complete 5 waves up, and has no degree violations. Can you help or make a hint or suggestion. Thanks

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    1. im sorry. the march 2009 low or wherever you have wave starting after 2007/2008 bear market. ive seen your 5 wave count to october 2018 top. im curious if there is an alternate that you could share.

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    2. Just as I said in the last paragraph of this post way back in October, 2018, there are no alternates to be considered until or unless prices cross back up over 2,900.

      http://studyofcycles.blogspot.com/2018/10/confirmation-day.html

      That is still the case today.
      TJ

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    3. thanks joe,
      i was trying to fast forward lol to hear your thoughts

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  2. thanks, joe. always look forward to your end-of-day posts. as someone who is new to EW and has checked out multiple services, there is more "why" to the counts in your posts than all of the paid services I have temporarily subscribed to.

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  3. Thank you again for your work Joe. Might it be possible that circle b on your chart could be moved to (ii) at about 2680, and circle C wave starts from there? That might project to a rising trend line from the Jan 18 and Dec 18 highs as part of a larger expanding structure?

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    1. No. There is no overlap to make the wave corrective in either cash or futures.

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    2. Thank you Joe....
      This is what I was seeing
      https://imgur.com/tdrVfGA

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    3. No, B did not cross back over A to be corrective to it. No more responses to this same question.

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  4. Can the market decline on a day when there are 7 talking heads from the FED slated for today?

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  5. The Dow has made a slightly higher high day. So far, the S&P500 cash has not.

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  6. With today's higher high in both the Dow and now the S&P, a P.S. was added to the post, including a chart. Still just counting higher. Price is 'not' below the 18-day SMA, and the daily slow stochastic is still embedded.

    TJ

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    1. Thank you Joe. Conventional 5 waves up for C now.

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    2. @Roy .. and ((b)) as a 'non-limiting triangle' which both Prechter and Neely cite can far exceed the usual triangle targets. The difference with a 'non-limiting triangle' is that price is squeezed all the way into the apex of the triangle.

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    3. Thanks Joe, I see it clearly. Non-limiting triangles can make for a very nice circle b.

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    4. Thanks for posting/labeling that limiting triangle Joe... it helps me better understand the area I was having trouble with.

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  7. TJ what do you think about ndx cash still in diagonal? In c of ((5)), with ((4)) finished yesterday with the overlap?

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    1. Because of overlap, still OK in the NQ futures.

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    2. Great, it might ”hint” not to far to go in other indices

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  8. Hi joe you can post a complete chart with minuets (i)(ii)(iii)(iv)(v) thank you

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    1. I already posted a complete chart with all of the minuets (i) - (v). See the P.S. to the blog post, above. I just don't know if it's done yet.

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  9. The DOW now has overlap after 'five-waves-up' that meet degree requirements. Can still be upside. Just pointing out the overlap of ((1)).

    https://invst.ly/a3xux

    TJ

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    1. Even with the triangle, we still have a pretty good 1:1 time relationship.

      https://invst.ly/a3y5b

      TJ

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  10. So far I'm not too crazy about the gentle slope of the decline off the top.

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    1. All by design, my friend, all by design...! :)

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  11. Price action a valuable lesson in the virtue of patience and discipline. I wondered where the "overthrow" was hiding! :)

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  12. Charts are good. Knowing bankster pysche is better! :)

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  13. Those ES candles are absolutely hilarious!
    They can run but they cannot hide...!" :)

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  14. PS Count makes for sense to me. The market had around half of the IBD top 20 leader board stocks make new 2019 highs today. From my research, this often indicates the overall market is strong and will continue higher. When these stocks show signs of weakness, the general market often follows shortly after.

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  15. What is noteworthy regarding the advance is its steepness with little in the way of retracements. 2017 also had a virtual "straight up" period the likes of which you would not expect to be repeated so soon, but here it is. Investors can't seem to get enough of equities at the present time and will move in the smallest of pullbacks. The 2017 rally ended with a very sharp reaction in early 2018. This one might end the same way but it's looking like a gap up next week unless a Black Swan comes out of left field. From a EW perspective many indices look deep in the count but, having said that, have looked deep in the count for a while yet continue to find yet another up wave. The equity markets run on forward expectations and the world economy is in a down cycle until January 2020. Has that already been priced in? Not impossible. Certainly stocks are not overly expensive at the present time with the US market P/E currently at 16 and it was 13 at the Xmas low. Personally I never thought we were starting a multi-year bear but by the same token I was not expecting the corrective period to last only 3 months after a 9.5 year bull market. Doesn't make a lot of sense. When the 3 billion Chindians take another economic leg up starting early next year there will be no chance of an equity bear in my humble opinion. So whatever happens regarding a market correction must occur in 2019. EEC elections occur in May. Perhaps the outcome will shake the Eurozone to the core and send shock waves around the globe. That might pull the rug from under equities for a while. It's the primary possibility I see for a serious market shake up at the present time. The other would be some political event in the US.

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  16. Some interesting considerations
    https://www.ccmmarketmodel.com/short-takes/2019/2/22/this-stock-market-signal-has-only-occurred-three-times-in-the-last-seventy-years

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  17. @Joe
    In Ninja charts, do you use some particular indicator that automatically shows the gaps (the red circles when open and the black circles once filled) or do you draw them "free hand"?

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    1. Drawn using the 'drawing tools', but made simpler and quicker by the new versions 'templates' for the drawings.

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  18. Predicting is a precarious proposition, possibly presenting a puerile profile. 😊
    We know WHAT is going to happen, we just don"t know WHEN. Short interest at 12 year lows. The characteristics of this move as a high degree second wave are PICTURE PERFECT!
    Human nature in the future never changes, and most people never learn from the past...

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    1. how do your bankers fit into the equation

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    2. Very simply. They are the the main drivers of price action in equities markets today. I am at a complete loss to fathom how some people deny that fact. Zero Hedge has an article pointing out how the outflows from equities market continue apace during this remarkable run higher and attributes the buying to corporate stock buybacks. I think they are trying to get us to read between the lines on that one. Everyone knows top and bottom line revenues for corporations have been steadily declining for years. Prior buybacks were all fueled by the issuance of billions in corporate bonds. The rally gains fueled by the Trump tax cuts were evaporated in the December meltdown. Vanished into thin air!
      Who then is buying, if not retail investors, hedge funds, and institutions? In my humble opinion, stealth Q.E. has returned.
      How long can this continue?
      I have no idea.
      At some point the structural weaknesses in the economy, such as the imploding retail sector, will overwhelm even relentless CB purchases.
      I think it is going to get ugly. I think KHC and STMP were shots across the bow.
      Short interest is at at a 12 year low, and we have yet to hit new highs.
      The broken log-scale trend line from the 2009 lows remains formidable resistance.
      A close above SPX 2820 along with a RUT reclaim of its own 200 day would for the immediate term put me firmly in the bullish camp.
      Until then, the risk reward ratio of long positions in this market imho remains unattractive. Just one man's opinion.

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  19. thanks. so a 1% move in s&p and 200dma russell reclaim will cause you to overlook all your above stated concerns and look for higher intermediate (months) prices? that would be easy for the bankers to accomplish given what they may have already done.

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  20. Why do vast majority of EW community only try to make money on the way down. You can make money being long or short

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  21. I am currently long and will sell my SPY when SPX hits 2840. Hopefully will find a good place to short or continue to ride the uptrend on a dip.

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    1. Lol! Above 2820 on any CLOSE I do the opposite, switching from conservative bull put credit spreads to more aggressive long calls. I doubt we will see 2840 and expect an interim top next week. The first wave down will leave no doubt, Giddy bulls are going to be shell-shocked if what I expect unfolds. 😊

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  22. Anything is possible Marc, Any trader underestimating the power of CBs to drive price in the short and medium term does so at their own financial risk What they have accomplished the last ten years is truly astonishing. They are not, however, all-powerful. One reason they have been able to get away with it is the ignorance and gullibility of the masses. For example, probably only one in ten people realize that the bond market dwarfs the equities markets, By a lot! And with the coming global recession, there will be massive defaults, including by companies who issued bonds to re-purchase shares. As revenues decline, and interest rates rise due to defaults, debt sevice becomes difficult. What do you think happens to the shares of a company that cannot pay its debts. Many of them are destined to become another Sears. These are big picture considerations. We can get so fixated on day to day market gyrations that we loose sight of the larger context in which it takes place. Poweful as they are, CBs are no match for an imploding bond market...not even close. Forget about the quadrillion in derivatives. As I said, it is all about risk/reward. I don't think it wise to pick up pennies, or even 100 dollar bills on the train track. KHC and STMP are early warnings imho.

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    1. >Any trader underestimating the power of CBs to drive price in the short and medium term does so at their own financial risk

      Verne, you're totally deluded about the CBs, just parroting what you read on ZH and elsewhere. You never produce one single fact to back up your assertions.

      So here are some facts:

      The Fed began easing just ahead of the credit crunch, and eased through to the bottom, and guess what? They were just following the market down with rates, and the market found its bottom anyway. Their actions were both irrelevant and futile.

      >What they have accomplished the last ten years is truly astonishing.

      That is true, but it's not what you refer to. Have you even heard of the BIS and the FSB (http://www.fsb.org/about/ ), and do you ever read about what they actually HAVE been doing these past 10 years?

      I doubt it.

      What they have been doing is bursting the bank credit bubble. You wonder why the big banks are shrinking, in the face of a stock market bubble? Do you even notice such things? I doubt it.

      The banks are being shrunk by FSB rules.

      Next up, they banks in Europe will be resolved en masse, by the ECB, a creation of the BIS. Then we'll move to the new monetary system, and it will be nothing like this one at all.

      All this will have been achieved by the CBs and the BIS despite the REAL culprits: the politicians and big corporations and the masses that have ridden the debt train to the end of the track. Everything as far as QE is concerned has been driven by governments, and central banks have had no choice but to acquiesce.

      But QE doesn't even work Verne. Did you not notice that every single time the Fed paused QE in the past 10 years, rates actually fell, every single time? Yes, QE is irrelevant and pointless too. Rising rates is what the world needed, but markets sniffed out the huge deflation that is now upon us.

      SPX was rising nicely as the Fed was hawkish last year, as we should expect, the US was growing. Now the Fed is dovish (just following the markets and economic contraction) SPX will collapse, has already seen the end of the bull market, all to be expected, nothing to do with CBs at all.

      Eventually, you'll see most major nations (outside of Europe) introduce MMT policies which the CBs will possibly be forced to implement. Will you again blame the CBs for the madness of our times? I expect you will.

      Be assured, every time you write your ridiculous comments about the CBs, most discerning readers smile at your ignorance.

      I'll point out the facts every time now, in an effort to stop you from repeating it, day after day after day.

      If you choose to reply, don't give me your uninformed opinion, give me some facts, if you have any.

      Finally, an aside. This rally has been unprecedented, we all know that. It has now ended, and unlike 1929 and 1987, we will go straight to the crash days, Monday and Tuesday. My blog will have the background to all of this, it is literally God's doing, to blast through two full moons in a row. The unwind will be mighty and brutal, and it'll reap a huge reward for those who are already positioned. Those who aren't will see no pause in the decline, the US market might close before midday on Monday. Watch in awe.

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    2. Delusional...huh? :)
      Keep the predictions coming...

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    3. So....a bursting of the credit bubble thesis would have us believe that global debt has SHRUNK, since the financial crisis.....Wow!
      I am not going to bite....as much fun as it would be...! :)

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    4. >.a bursting of the credit bubble thesis would have us believe that global debt has SHRUNK, since the financial crisis.....Wow!

      As suspected Verne, you have nothing to back up your crazy assertions, so instead you tilt at a windmill. I'll help you out once again. Where is most of that debt that's appeared in the past 10 years? What have CBs got to do with it? NOTHING.

      Give it your best shot, don't be scared man, I know you'll have nothing whatsoever to back up your statements, hence you'll run away from a debate.

      Sad, many such cases.

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    5. No need to engage in Ad Hominem attack Watchman. I noticed that you have invoked the name of God so do try to adorn the doctrine in your conduct.
      Now, as to where that debt has gone that is easy. Just look at how national debt has increased and that will account for the lion's share.
      That is to say, it has been funneled into sovereign debt. A lot of it has gone to fund bonds issued by corporations to fund buybacks, and quite a bit has gone to vacuum up toxic bundled assets that required CBs to be the "buyer of last resort". I am sure you are capable of digging up the particulars on these claims without my spoon-feeding you.
      Then, we need to start talking about Off-Balance-Sheet operations, or did you know about those? :)

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  23. BTW, people would be incredibly foolish to think that STMP suddenly became on Friday, HALF as valuable as it was on Thursday at the close. Pay attention.
    That is what a LEVERAGED UNWIND looks like. Capisce?
    Now I need to be quiet before the gestapo SEC comes banging on my door for letting the cat out of the bag! 😀

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  24. Does anyone know the size of SNB's holdings in tech stocks?
    Does any one know how much of Japan's equity market is directly owned by its CB?
    Interesting facts for anyone interested. :)

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    1. Verne, you're a coward, face me like a man, provide some proof that these purchases have directly affected the markets, or stop making yourself look silly.

      Start with the total size of the global equity market, end with the size of these purchases you mention and the recent price action since February 2018. You'll find zero correlation, and we all know prices are on the way down.

      An example, despite these purchases ny the BOJ, the Nikkei is down by 3,000 in the past year, and soon to be much more when this rally ends.

      So, you say they are keeping it up, yet the fact is, it's already down. Face the facts man.

      I'm always wary of folk who run from debate and especially when those men use smiley emojis, like a teenage girl.

      What have you got to say Verne?

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    2. You have artfully dodged the question;
      Let me repeat it.
      HOW MUCH of the equities market does the BOJ OWN?
      We will talk about leverage if you can come up with the correct answer.

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    3. Verne,you debate in the same way you conduct yourself on the blogs you inhabit, where you frequently present two entirely different facades.

      Yoyre a fake. You need to prove your assertions re central banks now, provide proof of a correlation and a causation.

      You have your chance now, don't blow it by having one of your usual girlie hissy fits.

      Let's see what you've got, my best is literally nothing.

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    4. My bet, stupid phone, a classic though.

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    5. Oh well,can't say I did not try...! 😎

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    6. You did not try, because you have nothing to prove your whacky assertions.

      All you can do is deflect and use girlie emojis.

      Very sad.

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  26. I know this is not a trading blog, but I would like to start a general conversation about the usefulness of EW as an overall trading tool. Now for the faint of heart some of what follows might be considered EW heresy by the purists.
    I've been thinking about the fact that sometimes EW is spot on and quite predictive. At other times, not so much. My question is why the inconsistency? The answer I'm leaning towards is that it's just like traditional technical indicators which are also sometimes spot on and at other times, not so much. Although EW is very different in it's makeup than technical indicators which is a key point and I will explain later, I am led to believe it isn't very good at prediction all on it's own.
    Joe has mentioned in the past that EW works best when used with indicators, and I recently read a piece (which I can't document or find again) that Glen Neely said that traditional EW is not as useful as it once was in predicting the market. So I'm thinking that EW should be considered as just another indicator in the tool kit, but a very important one. The reason is what I mentioned above, it is constructed differently. The technical indicators such as stochastics, RSI, MACD etc are just different variations of the same data and if you put them on a chart they all give similar readings. They are redundant. EW on the other hand tracks patterns, not the same data. So doesn't it make sense that a convergence of the two types of indicators would be more reliable than one type of indicator by itself? Haven't we all seen the market give overbought or oversold readings only to continue on and not reverse. Haven't we all seen what looks like a complete and expected EW pattern change into something else and not behave as expected? Perhaps had we compared both types of indicators we might have been more careful in our expectations?
    I will finish my point with two examples.
    1. At the October top there was a very reasonable completed EW top. If one looks at the RSI and the stochastics there was divergence on both. Two very different types of indicators confirming each other. We all know what followed.
    2. The current rise from the 12-24 bottom. I have seen countless comments all the way up using just EW to predict the end of the pattern. In just terms of pattern alone they were reasonable, but not correct. The reason? Look at RSI. It is on a steady climb with no divergences. Stochastics have embeded and lost it for a day several times only to re embed. My point here is that perhaps it would be wise to wait for a divergence or a break in the technicals as well as a completed pattern before a reversal is considered.

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    1. Tom . . . I agree with much of what you say. It's clear that no one indicator can suffice as we've seen all of the have instances when they fail. But a symphony of proven indicators, where one looks for broad agreement, will rarely fail, especially if one or more of those indicators are measuring different phenomena. I personally emphasize the use of breadth indicators and find them an excellent complement to EW. Prechter has mentioned this occasionally in his writings. Breadth patterns often mirror the EW description of the character of waves. When both line up one has a higher confidence level in their message. Here's a sample of tools I use. http://schrts.co/QaHRkuxG

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    2. Glenn Neely [Referring to EW]: ..."it’s a matter of knowing when it’s going to work and when it’s not. It doesn’t work in the middle of trends. It only works at the beginning and the end."

      (https://www.neowave.com/interviews/interview-201710.asp)

      Hope this helps!

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  27. dumnonia the fall is scheduled for what Monday and Tuesday?

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  28. dumnonia ca starts when the fall

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  29. There is nothing wrong with being incorrect about one's own expectations. It is quite another thing to make bombastic and dogmatic predictions, only to end up looking like a JackAss when said predictions fail to materialize. I would take you a bit more seriously if your very first words on thd forum were:
    "I was wrong"
    Not only have you ckearly demonstrated you have no idea what the hell you are talking about, you lack the integrity to admit your own error, plain for all the world to see. Those facts enough for you?

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  30. As to "inhabiting" forums, I have been a member of Peter Temples forum for many years, and started posting here only recently. Two locations.
    "Thou shaalt not bear false witness.."

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    1. That would be two forums, as in 'inhabiting forums' then?


      Be careful Verne, your gaslighting me is seen by all, including God.

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    2. You are becoming tiresome. Nake a contribition to the conversation or spare readers your B.S.

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    3. More gaslighting Verne?

      You have no proof of your assertions, so you resort to ad-hominems and gas-lighting. I am sure it will become tiresome for you. Perhaps repent?

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  31. Healing begins when one admits its faults. And it is completely acceptable because we are all only humans designed to be flawed and full of mistakes and misjudgments

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  32. With a log-scale chart (hourly), we are still inside the channel up from the 2346 lows.

    Once we get over 2815, it's off to the races again.

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    1. ES 2807 will be the top today, then watch out.
      2814 in December, a perfect 7 point difference.

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    2. OK, Jehovah double-topped it at 2814, nice job indeed.
      That's it now, massive down day tomorrow and overnight for 2 nights.

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  33. really how do you know that - i see 2820-2840 as resistance if it even gets there...
    what is percentage return of "off to the races"?

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    1. New highs. CBs back to form, either dovish or shoveling credit money back into the furnace.

      See what happens if we're over 2815 and Trump announces a trade deal breakthrough with the China (which he will), how quickly we are back at crazy new highs.

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    2. Yep. Balance sheets exploding. especially China...

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    3. >Yep. Balance sheets exploding. especially China...

      Ah Verne, this comment will show how wrong you are. The crash will be mighty, despite 'balance sheets exploding'. No evidence of that btw, just your usual fiction.

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  34. nope. smart money priced in trade deals. we will see.

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  36. Yep. We could see a "Buy the rumor, sell the news" outcome. It is amazing how bearish looks keep getting negated. How many shooting stars and what looked like EDs have we seen....?
    It is beyond strange....and kinda scary...

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  37. One interesting fact is that at major market tops, many people become convinced that T.A.is no longer reliable. Interesting times, and tough remaining objective.

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  38. Could it be that ES is simply having its own delayed "over-throw"?

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  39. @ Pittsburgh Tom...On the daily SPX chart, RSI, sans divergence, tells me that this is still a 3 wave structure from the Christmas low. The MACD(5,35,9) histogram shows significant multiple negative divergence's. Obviously none of this tells us WHEN the upmove will end, but it does imply the end may be near.

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  40. A new post has been started for the next day.

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