Can the DOW make a New Local High or the 90% Level ??

One thing about Elliott Wave analysis is that it helps teach one how to be flexible in viewpoints and look at different markets in different ways at different times. Some people will find this maddening. Others might liken it to solving a crossword puzzle, waiting for certain clues to fall into place. Now some people absolutely hate to do crosswords; they don't want to waste their time - especially when it comes to just trying to figure out someone else's obscure references. I've often suggested they should pay you to do crosswords - as an incentive to get especially younger people to broaden their view points. Well, sometimes, the market does offer such compensation, if the clues can be figured out.

So, we have suggested that Monday might be a day that sees price inflows. But we don't know if that will be the case. And, even if it is, what stocks will the buying be centered in? Will it be Boeing or Apple? No one can know except the people doing any such buying. Will they sell the Russell again to buy the Dow in a somewhat defensive move against any potential down turn? With that question in mind, I had a fresh look at the Dow chart this weekend, and it appears below.

DJIA Cash Index - Daily - Potential Triangle

In a previous post, (see this LINK) we noted how the Dow might be making an expanding diagonal downwards. But, that count seems to have a degree violation in it - that the third wave's sub-waves are too long compared to the first. 

And so that leads to the conclusion of the logical opposite - that the venerable Dow might be making a very sideways triangle instead of a downward diagonal. All we can say at this point in time is that the DOW has, indeed, make a validly formed triangle. It has not made the downward diagonal, although such a potential diagonal has not formally invalidated, yet, either. And that means there could be an attempt to pop up out of the triangle.

We certainly have seen market periods where the indexes diverge from each other for days, nay, weeks at a time. This might be one of them.

Readers concerned about degree violations might note that in this count, wave ((b)) would now be longer in time than wave ((a)), meaning that the degree of the waves definitely turned. This is shown by the Fibonacci ruler, below where you can see where this potential triangle pattern is now more than 100% x ((a)).

Then, too, there appear to be no degree violations in the triangle as each of the triangle's green minuet waves ( ) is smaller in price and time than the minute degree  (( )) wave.

So, in this index, as in all others, we must be flexible and patient. It is possible for the Dow to pop up out of the triangle. Readers of yesterday's post know we are expecting at least one more wave series up in the S&P500 (based on the ES E-mini S&P500 futures). What does this mean for the Dow? Perhaps the above chart helps explain it. Only time will tell.

Have a very good rest of the weekend.

TraderJoe

Truncation Averted and a Caution from Crude

11:25 am (ET) Friday

In yesterday's chart of the half-hourly S&P50 cash index, we showed a very clear alternate to the failure wave. We did that because of the potential of "window dressing today", as the last day of the month, with potential fund inflows on the first day of the new month. We have written about this often before, including  in respect to this very chart, so we won't repeat ourselves.

First, the good news: the potential double-flat did not truncate. Today, so far, has made a slightly higher high than the (W) wave. It is shown below in the updated chart. Prices then halted temporarily at the 62% retrace level.

S&P500 Cash Index - Half Hour - Potential Flat Completion

We are now trying to count "five-waves-up" to a C wave, as shown. Also shown at the left on this chart is the Neely guideline relative to when a trend change should start to be counted. As you know, the guideline is the first waves down ((B)) should take less time than the prior fourth wave ((A)), and it does. Overall, the rest of today might wind up be a triangle in the "window dressing", trying to bide time for those first of the month inflows.

None-the-less, other markets are starting to count very well. Gold is one of them. Crude Oil, too. Below is my count on Crude Oil from the same location as the Dec24th low that the stock market made. Notice anything in particular?

Crude Oil Futures - Daily - Three Wave Move

So far, the potential ending diagonal has "all" of the right measurements and zigzag structures. Yes, there could be one more new high in the near future to do the "throw-over" of the upper diagonal trend line, but price has already backed off, and is yet overlapping again. Also, notice that while waves ((A)) and ((B)) are similar in time, wave ((C)) takes much more time than either. That is very good alternation. Further, wave ((A)) is an impulse, and if wave ((C)) is a true diagonal, then that would be nearly perfect alternation.

So now Crude likely counts as a "three-wave", GOLD likely counts as a "three-wave", the NQ likely counts as a "three-wave" in the chart we showed in the comments section yesterday (LINK here). If there is a message here, it should be getting clearer by now.

Have a good start to the day!
TraderJoe

Time to Watch Closely

With today's stock market movements, it's time to be on the watch-out for a failed combination upward as a second wave. These types of movements have been observed in the past to start strong down drafts. The 'reason' for the potential failure is that the as yet unobserved third wave down is exerting significant downward pressure on the upward wave.

S&P500 Cash Index - 30-Minutes - Watch Closely

Any movement below wave ((1)) would be better confirmation of the count shown in black.  The alternate still allows for a flat to complete, but not below (X). It's wave ((2)) is in red.

The alternate count is that since the (X) wave, then A is 1, and B is a smaller degree 'a' wave, with C as a smaller degree 'b' wave, and this morning's down-draft is the smaller degree 'c' wave of a flat for wave 2 of C, upward. This would try to avoid the truncation.

I have no preference which occurs as either are acceptable Elliott Wave Counts from what I can see. The trend line is tentative, and any further lower degree second waves should respect it. If a higher wave ((2)) occurs, it should limit to a 0.618 retrace, and the trend line would be re-drawn.

Have a good start to the day.

TraderJoe

Neutral - 2

The hourly S&P500 cash index, the chart of which is below, continued in a mixed picture. It was correct to call yesterday's chart as neutral. There were no fractal breakouts today in either direction, and 2,765 has continued not to be broken to the downside as of this time. The result was that two more hourly fractals, one up & one down, were added closer in.

S&P500 Cash Index - Hourly - Neutral

At least today, we can present a more well-rounded look at the chart from the March 22 interim high. From the five waves off the high, i - v, there appeared the flat wave that we called for after the end of Monday's session. Then, yesterday and today, the chart counts best like there are only three waves down, so far, to yet another 90% wave at the low of today. So, the first flat may only be the a:3 wave of a larger flat, and today may have ended the b:3 wave.

So, there could be another overnight gap up and some follow-through to either a c:5 wave to end a larger overall flat, or there is a less likely probability of a triangle - only less likely because usually triangle waves are not 90% retraces.

Once again caution is the by-word, and patience & flexibility are your key tools to success in wave counting right now. Any close below 2,765 would still turn the chart much more negative.

On another note, from the double zigzag upward in Gold we pointed out on the 4-Hr chart, there has been another higher high, and a retrace to the lower channel line again. From strictly a 'rhythm' or 'time' perspective this seems like the a & b waves of another zigzag. But this needs to be watched closely as any close below $1,300 would likely mean the triple zigzag has already ended. If there is a high above $1,320, first, then that means the triple zigzag is continuing, but just remember, it is an oddity of "z" waves that they have a propensity to fail.

GC Gold Futures - 4 HR - Potential Triple Zigzag

Have a good start to your evening.

TraderJoe

Neutral

The hourly S&P500 is about as neutral as they come. The hourly chart of the cash S&P500 index is below. Notice that the EMA-34 is currently "flat-lined" sideways, and the two nearest hourly fractals are about equidistant apart. The Elliott Wave Oscillator is quite close to the zero line with the price bias slightly to the up side.

S&P500 Cash Index - Hourly - Neutral

The flat wave written about in the last post did come to pass. There is a near 0.618 retracement upward. But, the flat does not have to be over. It could easily be, but there are ways for it to extend in time, such as by making a diagonal c wave within the flat.

After today's gap-up open, prices got down tantalizingly close to overlap on the S&P500, but did not actually overlap.

The market could be stalling here waiting for the Brexit votes tomorrow, or news on any trade deal with China. It could even begin waiting for the "end of the month" infusion of funds from pension funds, 401k, company bonuses, and dividend reinvestment plans, with the beginning of the month next Monday.

With the market so neutral, it might be best to see if the Elliott Wave count can clear up in the next few days or not. As long as price is above 2,765 it is difficult to claim that downside wave counting should begin.

Have a very good start to your evening.

TraderJoe

Lower Low and Short Term Support

Prices, as measured by the daily ES E-Mini S&P500 futures made a lower low today, and then bounced off of short term support from prior highs as shown below.

ES E-Mini S&P500 Index Futures - Daily - Lower Low

Prices initially broke the rising wedge line on the cash market we showed over the weekend, and then bounced, as above, off of the blue dashed line representing prior highs, lows and closes.

The daily slow stochastic indicator (shown) turned lower but not decisively. Because there was a near perfect double-bottom on both the DJIA and the S&P, it is possible a flat correction has started. This is a very suspicious pattern because we can currently count ways to make a new high, and ways to make new daily lows.

All-in-all, the 2,765 was not take out lower today, and that still remains a key level.

Have a good start to the evening,
TraderJoe

Wedging, Overlaping and Diverging - Either Way

Here is the daily chart of the cash S&P500 index. As we noted yesterday, a top 'could' have been in place with yesterday's waves. We'd like to better define that.

S&P500 Cash Index - Daily - Overlapping, Diverging and Wedging

We have been noting for weeks the difficulty in counting the up wave as an impulse (because any number of 0 - 2 trend lines have been broken).  We have also been noting the divergence with the new price highs and the daily Fisher Transform Oscillator shown on this chart.

Right now, the cash index, while closing on the low of the day, also closed exactly on the lower wedge trend line you see drawn in here. Today was a rather large red down candle, one of the largest if not the largest of any down candle since the December 24th rise began. But, what we'd like to point out is that IF the 2,765 level is exceeded lower, the Fibonacci ruler shown indicates that the degree of the waves would likely have to change from up to down. Barring that, there is one last chance for a new high - but I'm not holding my breath. And, such a new high could be a failure high or a truncation high, as well.

Caution is the by-word. There was one way to count five-waves down to a new low today, so that must be respected.

Let's see how it goes and take it step-by-step.

Have a good start to the weekend.
TraderJoe

S&P new top; Dow not

Today, as the banks and 'smart money' decided what they wanted to do in relationship to the FED's newest and greatest "easy money" policy, the S&P500 cash index "went over the top" of the prior hourly high. The Dow Jones Industrial Average has not yet, but it could. Towards the end of the session the cash markets backed off ever-so-slightly, allowing the continued drawing of a potential wedge-shaped pattern, as below, which might still be incomplete.

S&P500 Cash Index - Hourly - Potential Diagonal

There is one way to consider the pattern as completed, by including the March 4th high as wave (i). But, the trend lines on that pattern would be skewed, so, with the new higher highs today, I am making a conscious decision to publish the longest pattern in time (knowing full-well it 'might' break down early).

Something else has been added to this diagram. For wave (iii), I think you can see that it is true that it is currently entirely above a line from ((B)) to (ii). But, notice within each of the sub-waves of (i) that you can see that each of the third waves ((3)) are above a line from their respective origins to the respective second waves ((2)). And, the same is even true within wave ((1)) as well, in regards to wave (3).

Hopefully, this helps you in the wave identification process. 

Also, we must note that yesterday's tentative confirmation of the spinning top - as a high - was invalidated in this index, today. I had called it tentative, because even though technically correct, the point drop that resulted was quite mild.

Have a very good start to your evening,

TraderJoe

Pow-ell throws in the Tow-ell

The FOMC meeting results were announced today, and the FED announced several action steps.

There will be no more interest rate hikes this year, and they will complete the balance sheet roll-off at the end of September. Interest rates were kept the same, and the outlook for employment growth was reduced.

If you ask me, the FED is running full-on scared of a recession dead-ahead. Why else would they take such a clear reversal of policy?

The markets started out the day making a lower daily low, and popped on the FED news but did not make a new daily high. Then an intraday retracement began which darn near made 78.6%. The overnight needs to be watched closely to see whether the upward wave invalidates lower.

S&P500 Cash Index - Daily - Spinning Top Confirmed

For what it's worth, today's lower close did provide tentative confirmation of the "spinning top" candle after the Fibonacci 55 days of uptrend we pointed out yesterday. Is the entire move, upward, over? It is too early to say for sure, but the evidence is gathering. The Dow and the Russell still have not made a new high, and today the ES futures did not make a new higher high day, while the NQ futures did. The market seems to be splitting in a way that requires a great deal of attention at the moment.

All-in-all, we'd have to grade the market's reaction to the FED actions as "lack-luster" today. We will also note, this high currently has no unfilled gaps.

Have a good start to your evening.

TraderJoe

FED plays with Spinning Top

What will the FED do or decide tomorrow, at its meeting, and what will it announce in the press conference that follows it?

SP500 Cash Index - Daily - Fibonacci 55

As we had noted in comments section in prior days posts, yesterday was the Fibonacci 55th day since the up trend began. You can see this on the horizontal ruler for yourself, above. It seems fitting, then, that at least some sort of down movement occurred today. 

But, a spinning top is just that - one of several sorts of candles that could indicate a topping area. As a standalone candle it would not mean much, although downside follow through including a lower closing candle tomorrow might provide a better indication of a high in place.

As usual, the powers that be (the banks, the 'smart money') are leaving it to the day of FED meeting to make the determination on what happens from here. Do they do that because they know they can likely maneuver through the volatility better than the retail trader can?

In the Dow, today's candle created overlapping waves, and in the S&P500, it did not. Remember, the Dow has not made a new high since February as the S&P500 cash index has played power forward. Today, the Dow went back down to touch it's 18-day simple moving average (SMA), or it's line in the sand before price rebounded off of it.

This is a good time to start watching the slow stochastics on the daily ES, as well as overlaps on first waves. A price overlap on 2,825 would likely be of some significance.

Have a good start to the evening,

TraderJoe

One Pattern Reasonably Clear

This thirty-minute pattern on the Dow is reasonably clear. But, unfortunately, it too, provides a slippery alternate.

DJIA Cash Index - Half Hour - Reasonable Counts

Because the (A) wave of the triangle starts with a flat, the triangle can also be interpreted as w-x-triangle y. So, the alternate ((1)), ((2)) count is in blue.

Yesterday, I had called out the possibility of a potential diagonal wave,  but I had said that there was a FLAT wave in the making, so it might not be over with. This morning, due to lengths, and with alternation an impulse can now be counted.

S&P500 Cash Index - Half Hour - No Overlap Impulse

Wave ((4)) does not overlap wave ((1)) in the above chart.

TraderJoe

P.S. Because of downward overlap, the Dow's current ((C)) = ((A)) count could be complete with as close a Fibonacci as you will see.

DJIA Cash - Half Hour - ((C)) = ((A))

It would be another one of those "short fours" for alternation, and a break of the channel on an hourly basis should provide increased confirmation.

The SAME Three Waves Down

I have written about this before in the early days of the blog, and during the days when I was making YouTube videos. I am writing this post to re-emphasize the point and introduce some who may not have seen the earlier information. I specifically coined the term, "The Fourth Wave Conundrum" to recognize that when a down movement starts with only three-waves-down, then the number of Elliott wave possibilities explode (to thirteen or more).

During this time, people get "testy" with each other. You will recognize people who just "want to know when this up movement is over, and when the big down waves will begin". Everybody wants to "know what the count is." They don't care how to analyze the waves, they only know they are getting whipped around and their account may be getting trashed. So, they don't care about anything else except who is right, and who's count is going to make the agony end by price starting to trend again.

For that reason I show this schematic. It shows the very same three waves down in red, as they start only several of the possible patterns which can be part of a larger degree fourth wave. Assume the three red waves are from the October, 2018, all time high.

The Same Three Waves Start Multiple Elliott Wave Patterns

By now, if you have followed my work, you know that each of these patterns is possible from the start of three waves lower. So are the expanded flat, a truncated flat, an extended flat, a FLAT-X-Triangle, a FLAT-X-Zigzag, and, yes, even just a simple impulse up to new highs.

Your chances of determining the correct pattern by random chance are about 1 in 13, or less than an 8% chance. Those are not especially good odds. About the only thing I know that can 'help' in this problem is degree labeling and the break of upward sloping trend lines.

But, during this time, be especially kind to your Elliott analyst - especially if it is You! This is the true science of Elliott Wave as few others will take the time to describe to you. Do you have the patience for this? Does it help you in your trading or investing? Maybe so. Maybe not.

The market is just providing you with information. What you do with it and how you use it is totally up to you. Maybe the reason the current up wave is so hard to describe is that it's an "X" wave. They can be really tough. But so can a B:3 wave. And so can wave (ii) in a diagonal. And, clearly there are other possibilities.

This is what the Elliott Wave Principle means by (paraphrase) "sometimes the analyst just has to let the situation clear up".

As of this time, we have not broken the upward sloping trend line from the December 24th low through the March 8th low in the S&P500 cash index. Maybe we will soon. That would be an event to watch for. If it doesn't break, it will tell you "something" about the count.

Have a great rest of the weekend.

TraderJoe

P.S. As I said over the weekend, we have no right to assume upward movement has ended. We just have no "proof positive". We have not broken the lower channel line in the chart below. MotiveWave has no issue with the count shown, and the alternate is shown too.

S&P500 Cash Index - 4 HR - Needs Resolution

The longest correction in time may be the ((b)) wave. A second S&P500 15-minute chart was added below.

S&P500 Cash Index - 15-Minute - Potential Diagonal

Notice the declining AO within the wave. That's a good signature for a diagonal, but it would need to prove itself. Because we have not exceeded the time of (iii), yet, then (v) could go longer as a flat b wave and c wave up to follow, but does not need to.

Out-of-Synch Time-Wise Again ?

Based on degree labeling considerations, I was wondering, perhaps, if the Dow and the S&P are just "out-of-synch" time-wise. It has happened before - maybe it's happening again. I want to preface this post by saying we do not have "proof positive" that the upward movement in equities is over. But, we do have the Dow and the Russell providing a different message than the S&P500 Cash Index. Let's assume for the moment that the upward movement is over, and the 90% level upward in equities is NOT reached, which means the waves since October 2018 would not qualify as a flat.

That would mean that the downward diagonal can be back on the table, and in that case, both the Dow and the S&P500 would be seen as zigzags, upward, since the December 24th low. So, play along for a moment. Here are the degree considerations on the Dow.

DJIA Cash Index - 4 Hr - Close Only

If we remove some of the noise from the charts by just using a line chart, then we see the DOW 'might' be able to be counted as five waves in a channel for a minuet (a) wave, followed by a break of the channel, lower, representing a minuet (b) wave, followed by a re-acceleration upward in five waves for a minuet (c) wave of Minor 2.

Now if we look at the S&P500 Cash Index in the same manner, we might find that the main difference is the nature of it's minuet (b) wave. Perhaps this wave just "takes longer" in the S&P500 than it does in the Dow.

S&P500 Cash Index - 4 Hr - Close Only

In this case, the S&P makes a (b) wave that is much more proportional in time to it's (a) wave than the Dow does. The S&P has 470 more stocks than the Dow. Perhaps that is what accounts for the difference.

Again, there is no proof, yet, that upward movement is over. But, what I am saying is that if the 90% level is not met to qualify for a true flat, then a schematic like this might explain it. Yes, the Dow and the Russell 'could' re-accelerate higher. But those are not the patterns we are not seeing yet in those indexes.

Are there aspects of this count I don't like. Yes! One would be a third wave not reaching a 1.618 extension. But, again, if this is a 'corrective sequence' then that may go a long way toward explaining it.

Have a good weekend.
TraderJoe

Potential Diagonal and Risk (Of a Wrong Count)

Below is the current two-hourly chart of the Dow Jones Industrial Average, and a potential count of an expanding diagonal (or alternatively) triple zigzag.

DJIA Cash Index - Two Hour Chart - Potential Diagonal

First, it needs to be very clear that this is a potential pattern. To emphasize that point, I have shown only a dotted trend line above. Including the ((A))-((B))-((C)) pattern we have have uncovered today where the ((B)) wave is a triangle, there is some justification for looking for the expanding diagonal pattern, or its alternate cousin the expanding triple zigzag lower (shown in red below the waves).

The primary and only purpose of this chart is to show you how to define your risk of an incorrect count. We know in an expanding diagonal that wave iv may not travel above wave ii. That would invalidate an otherwise correct pattern to this point in time - which, in the cash market is composed entirely of zigzags.

Notice, too, in the cash market that sub-wave ((B)) of iii is just points shy of  exceeding the length of ii, adhering to wave degree considerations.

So, this is how knowing the Elliott Wave patterns can help you objectively define your risk of an incorrect count. It is also a clear example of why there are alternate patterns in the market. Downward overlap on ((A)) downward, or trading below the recent ((B)) would be better confirmation of the pattern counting out correctly.

Have a great start to your weekend.

TraderJoe

A Question

Is it true the count below has no issues with either degree labels OR with the third waves being completely above the 0 - 2 trend lines as per the Neely guidelines. Please study. I don't like to wind up violating either degree labeling or trend line guidelines, and this doesn't seem too.

ES E-Mini S&P500 Index Futures - Daily - Degrees in Place

Let me know your thoughts. This count was spurred by a comment in yesterday's post by trader Gerald who noted that (ii) is longer in price and time than b. This would fix that issue. Help us stay sharp, Gerald!

Have a good start to your evening,

TraderJoe

Re-examination of a last option for Minute ((c))

The idea of violating Neely's guideline regarding wave three being entirely above the 0 - 2 trend line is and was still disturbing. So, in the work of Elliott Wave, I took a look with fresh eyes, and found that one of our commenters had posted the best solution. That solution is shown below, and it was first posted by Erik B. I couldn't see the entire chart at the time, and couldn't see the entire count in my mind, but now it is pretty clear.  So, before I post the chart let me give kudos and full credit to Erik for this idea.

S&P500 Cash Index - Four Hourly - Ending Diagonal Minute ((c)) Wave

What makes this chart possible is the clear and unmistakable zigzag down from the Mar 4th high. And yesterday's higher high reinforces a potential diagonal pattern.

Because minute ((c)) is not yet 62% x minute ((a)), then there is no degree violation between (i) of ((c)) and minute ((a)). There is also not a 'time' violation between (ii) of ((c)) and minute ((b)), but there is definitely a price violation between (ii) of ((c)), and minute ((b)). Now, the question is, does that matter in a zigzag? After all, we are not counting increasing extensions within a third wave in this count.

Importantly - all of the wave 3's are above their respective 0 - 2 trend lines. Yay! Again, will all thanks and due credit paid to Erik.

Have a good start to the day.
TraderJoe

(a)-(b)-(c) became (i), (ii), (iii)

With today's higher high, and in significant agreement with The Eight Fold Path Methodology, we must simply allow that - where we were counting the waves up from the Dec 24th low as a zigzag sequence - that "five waves up" must now be counted instead of only the three-waves up. The daily chart now looks like the following, with each of the prior peaks labeled keeping its internal label from December 24th. Only the exterior labels have changed.

S&P500 Cash Index - Daily - Five Waves Up to Minute ((a))

Like it or not, waves (ii) and (iv) have alternation, and although wave (iii) does not break a base channel higher, it does not break any rules, and likely signifies just an impulse in a corrective sequence and not an impulse in a larger impulse. Clearly, it breaks Neely's guideline that all of wave three in a true impulse should be above a line from zero-through-two. But, that is a guideline.

The up wave from Dec 24th is exceedingly choppy, and has very short pullbacks, and this is characteristic of ((a)) waves, as well. That's the best I can tell from the data we have. And none of the interior waves from the October 2018 high to the Dec 24th low have changed their labels. The label at the Dec 24th low, itself has been changed from Minor 1 to Minor A. It might be expected that a B wave could reach 90%.

Have a good start to your evening,

TraderJoe

Brexit Mish-mash

The House of Commons voted down Prime Minister Theresa May's revised proposal which was to provide certain legal assurances and offer a defined 'deal' to the process. By being voted down, the stage is set for continued uncertainty in the U.K., including calls for the P.M. to step down. We don't know how this will go in the end. 

Yesterday, we cited the count of a likely 'a' wave up. Today during our comments we cited the possibility of starting the 'b' wave down. A chart is below.

S&P500 Cash Index - 15 Minutes - Possibly into b lower

This sideways wave, with marginally higher highs is one of the longest waves in time since the recent up turn began. For this reason, we think the degree of the wave has turned from 'a' to 'b'. Filling the gap made today would help provide confirmation. Sometimes, 'b' waves stop at the fourth wave of a lower degree, and  that would be about a 38% retrace. (But, it could also go lower). Then, we might expect a 'c' wave up to begin.

All-in-all, with the exception of the gaps, the trade has been real grinding and choppy.

Have a good start to the evening.
TraderJoe

One-two-three became a-b-c

As per The Eight Fold Path Methodology, the three-waves down we described in the last post, became a-b-c once there was upward overlap in the cash market. That likely means if there is to be any further downward movement, it would continue as another diagonal. At the present time, we can not say whether that would be a contracting or an expanding diagonal as there are insufficient waves to base that on.

As of the end of the day, we were able to count "five waves up", with the third wave as a solid 2.618 extension. (That's what we did not get on the way down, not even a solid 1.618 extension. We came two points within that level, but never crossed it.) Today's up wave could not be confirmed to be over at the end of the day, but given the shallow pull-backs it can easily be another "a" wave up.

There is not much point in updating a chart today until there is more information.

Have a good start to the week,

TraderJoe

Lower Close, But Only Three Waves Down

According to The Eight Fold Path Methodology with 128 candles on the S&P500 Cash Index 15-minute chart, below, there are only three non-overlapping waves down from the top, so far.

S&P500 Cash Index - 15 Minute - Three Waves Down

Based on degree labeling requirements, we are very sure that wave ii / b is a sharp wave. Wave iii / c down is in five non-overlapping waves. Wave ((3)) of iii / c is on the low of the Elliott Wave Oscillator, and wave ((5)) of iii / c diverges from it. Wave iii / c is just 2 points shy of a 1.618 extension on the first wave down. Not too bad.

The Elliott Wave Oscillator for wave iv? is already above the zero line. And the b wave of the possible wave iv did exceed the 90% level to qualify for a potential true flat. For this count to hold, it would be good to see wave iv end in the vicinity of the prior wave ((4)), and it must not overlap wave i / a down for the impulse count. Otherwise, one-two-three is the same as a-b-c until it is not.

IF for some reason there is overlap on wave i / a on Monday, then yet another diagonal count would have to be considered lower as the alternate.

Have a very good start to the weekend,

TraderJoe

Below Zero

Although some might think so depending on their locale, but I'm not talking about the weather. Instead, I'm talking about the fact that the Fisher Transform indicator in the daily S&P500 Index chart, below, has now made it's first close below the zero line. Although the histogram bar is too small to see, the black arrow in the lower right points to the indicator flag now showing a negative number.

SP500 Cash Index - Daily - Fisher Transform Closes Below Zero

We stated that once this indicator finds it's divergence it is a relatively smooth transition to it's lows. That said, depending on the exact Elliott Wave count lower, you can see - as in November and December of last year - that a few smaller term and smaller height humps might be made on the way down.

Prices traded low enough today to close the first gap from the top - now shown in the black circle on at the upper right. There is another gap at 2,709.80 which represents the 62% retracement of the entire move upward from December 24th. (It is not circled). That gap, too, is likely to fill.

Just as we did on the way up, we are looking to count five minuet waves down to a minute ((a)) wave lower. We have not yet completed the minuet wave i, but have a good start on it.

This is just a reminder that tomorrow is the payroll employment report before the market opens, and the count we have allows for some volatility and whipsaw around today's close. So, as always, be calm, patient and flexible.

And have a good start to your evening.

TraderJoe

The Weight of the Evidence Prevailed

Yesterday we cited five criteria why more downward movement in prices should be ahead of us. Today's lower low tends to confirm that view. Prices initially played with higher futures just shortly before the open, but lost the gains as the market opened. Prices declined largely for the balance of the session with moderate backing-and-filling.

SP500 Cash - Daily - Fisher Transform Lower Low

As well as the lower back-test line we cited yesterday holding, the lower close today sent the Fisher Transform Indicator to its lowest low since the double-divergent peak. 

The chart shows only a few of the larger several gaps that could fill. The serious student should highlight them all.

By the end of the futures trading day (5 PM ET) each of the Dow (YM), S&P500 (ES), Russell (TF), and Ndx (NQ) futures had lost their embedded daily slow stochastic reading. It is now below the 80 level on each of these equity indexes. And only the NQ has not crossed the "line in the sand" or the 18-day SMA. Each of the other markets now has the "negative bias" from doing so, and the Russell seems the weakest. It is already half-way down to its lower daily Bollinger Band. 

Here is the daily chart of the Russell futures.

Russell 2000 Futures - Daily - Weakest of the Group

The red arrow on the above chart points to a peculiar failure we noted where the S&P500 cash, ES and NQ futures made a new high, but the Russell 2000 and Dow futures did not. So, this chart has lower daily highs and lower daily lows. And that means the "swing line" is bearish. Price is also below the 18-day SMA so the bias is down. The two are not fighting each other. Further, momentum is down and the daily slow stochastic is not yet in over-sold territory.

Because of the length of decline in the Russell (i.e. number of price points traveled lower), in this index we can say that the degree of the wave has turned. We can also - just barely - say this about the Dow (YM). We can not yet say this about the ES, or the NQ futures. But, even so, IF the week closed here, the ES would have a large weekly bearish engulfing candle. I hope people are paying attention.

I should add today that we were able to count five-waves down as a contracting leading diagonal on the intraday chart. If you'd like to look that one over, you can find it at this LINK.

Cheers and have a very good start to your evening.

TraderJoe

Slightly Lower Close

Today's slightly lower cash close was not much, but was sufficient to confirm yesterday's outside key reversal day down. As most technicians know, the outside key reversal day - whether up or down - is one of the strongest technical signals there is. That is because it indicates that a group of participants were caught at the highs, and they are looking to get out (in the case of an outside key reversal day down.) Or, on the flip side, in the case of an outside key reversal day, up, there is a group of market participants that got caught at the lows, and they are looking to get out, too.

Today, we have have several things: 1) we not only have yesterday's key reversal day down, but, 2) we have a confirmation of that day with a lower closing low; 3) further we had at the end of the day a near exact 62% retrace of the down wave - from the truncation - on the cash S&P500 index, 4) as the daily chart below shows, we also had a back test of that lower wedge line - and so far - that back test has held. Finally, 5) fifth and Fibonacci last - there was a countable ending contracting diagonal at the end of the day that met all of the degree requirements. Elliott analysts know the significance of that pattern, so I do not note it lightly!

You can see the contracting ending diagonal and the intraday chart at this LINK. The pattern has an excellent 'time signature' as each of the waves is contracting in time, just as expected!

SP500 Cash Index - Daily - Fisher Transform Dropping

Because of the lower closing lows, the Fisher Transform is dropping and further confirming the divergence with price.

Next, as of the futures settlement all of the Dow (YM), S&P (ES) and Russell (TF) futures had lost their daily embedded slow stochastic readings. Only the NDX (NQ) futures had not. So, this likely means many stock indexes will begin to interact with their "lines-in-the-sand", their 18-day SMA's, and there might be some battle there between the bulls and the bears.

Some have said, "today was clearly a consolidation day for a move upward." To the contrary, the evidence above suggests today was a consolidation day for a further move downward.

Have a good start to your evening.
TraderJoe

Likely Completion of Minute ((c)) wave of Minor 2

Here's the daily chart from today. During the day, we called a likely truncation at the high, after a triangle we described in the last several posts. We waited just a few bars to see if yet a smaller degree fourth wave triangle would form. It did not. After the truncation, we were able to count five waves down, and three waves up, on the intraday chart. (Here is what that intraday chart looked like LINK. The red star is the truncation.)

S&P500 Cash Index - Daily - Likely End of Minute ((c)) of Minor 2

Notice that this minute ((c)) wave did have a divergence on the Elliott Wave Oscillator, and there is no third-wave peak on the daily chart. Because of the lower closing low, the Fisher Transform continues to confirm its divergence, as well.

SP500 Cash - Daily - Lower Fisher Transform

As can be seen from the above chart, the retracement at the end of the day was back to the lower trend line shown on the right of the chart above. It will be interesting to see if the back-test holds. What is critical is that the downward bar is clearly one of the longer ones, and that it occurred with nearly precise timing in relationship to the triangle completion.

As of the close of futures trading at 5 PM ET, both of the Dow and the Russell 2000 futures had lost their embedded daily slow stochastic readings. The ES and the NQ had not (yet).

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

TraderJoe

When the Count is Working ...

... you just keep on counting.

On Wednesday's post we showed the possibility of a fourth wave triangle using The Eight Fold Path Methodology as indicative of a fourth wave in progress. If you did not read that post, then you may wish to review it now. But essentially with 140 candles on the chart, the Elliott Wave Oscillator had gone below the zero line, indicating a likely fourth wave in progress.

The triangle played out on Friday, and we also indicated in the comments on Thursday, as follows.

"A reminder that today is the last trading day of the month - which often sees 'sloppiness' which is sometimes termed 'window-dressing'. Then, tomorrow is the the first trading day of the new month which 'often', not always, sees inflows from 401k's, mutual funds, pension funds, company bonuses, dividend reinvestment and other sources. However, according to the Briefing.com Economic Calendar, tomorrow is not a payroll employment report day."

So, Thursday was the sloppy end-of-the-month window-dressing day, and Friday did provide the often expected inflows. Here is the unchanged, but updated, chart using The Eight Fold Path Method on the minute ((c)) wave.

S&P500 Cash Index - Hourly - The Eight Fold Path Method

So, the triangle completed on Friday, with the expected e:3 wave overlap of the wave (iii) as required. The triangle is shown in brown in the upper right of the hourly chart. That means that wave (iv) is likely completed as we were able to count a five-wave sequence up at the end of the day on the five-minute chart. You can view that smaller chart at this LINK.

Given that wave (iv) is completed, then a new trend line should now be drawn from wave (ii) to wave (iv). That new "Applicable Trend Line" is shown on the chart in black and labeled as such. Any impulsive break of this trend line, lower, and failed back test should at least put the market into corrective mode if not full-on down trend mode.

But first, the end of wave (v) must be found. The first five waves up shown in the chart at the above link are likely wave i of (v). Space should be given for a wave ii, down, followed by a iii, iv, and v, up. OFTEN, not always, the typical triangle target is "the widest width of triangle added to the break out point". I'm going to let you do the math on that one as an exercise to see if you have any interest at all in wave analysis or you just want to continue to receive "free stuff".

Meanwhile, above the prices at specific points you can note some very small red arrows pointing downwards. Those red arrows show how tiny their fifth waves were compared to their first waves. Here I am referring to the unlabeled v of (i), and v of (iii). 

This being the case, it would not be out of the realm of reason to expect that a shorter-than-typical fifth wave could occur. So, be aware that a (v) = (i) might not be expected.

Here are a couple of additional points of reference. The first is the now familiar daily chart with the Fisher Transform indicator that still shows divergence.

SP500 Cash Index - Daily - Fisher Transform Still Diverges

And the second chart is the daily S&P500 cash index along with it's Chaikin Money Flow indicator. Readers should be able to see the divergence - even if higher prices occur.

S&P500 Cash Index - Daily - Chaikin Money Flow Diverges

So, from this chart, the volume is also starting to 'bail-out' on the rally too. This does not mean that further highs are not possible. It does mean that the rally is beginning to run out of support from volume. 

There is one additional "third leg of the stool" that I would like to see fall in place, and that is sentiment-related. Perhaps it will by Tuesday of next week. If it does, I will let you know.

Have a good start to the weekend.

TraderJoe