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

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

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

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

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

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

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

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

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

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

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

Watch Today's (b) Wave Low

Two days ago, in the last post, five-waves down were shown in the S&P500 cash index. Over the last two days, there has been an up movement with a higher high today, likely making at least an a-b-c sequence higher. The Dow's chart, below, shows that sequence as well as any other. I include the Dow chart today because many are or were having difficulty counting it.

DJIA Cash Index - 30 Minutes - Three Waves UP

As far as I can tell, and keeping all the degrees of the labels correct, the Dow made a leading diagonal lower which can be counted as an (a) wave. Then there was a flat (b) wave up. This was followed by a sharp (c) wave down. The new (c) wave down proves the Dow's leading diagonal (a) wave, and preserves the meaning of a "zigzag" even though the (b) wave of the zigzag is a flat wave. That is allowed by the rules. 

I don't know, but could surmise, that to keep the Dow and the S&P in synch, these three waves could be the first three waves of a larger potential diagonal. To keep the degrees correct, then these three waves would comprise the larger degree wave ((i)) down. The three waves up to today in both the Dow and the S&P would be a larger degree second wave ((ii)) because this set of waves takes more time than any previous correction.

Whether the upward correction is over or not depends on exceeding the (b) wave lower. Why? Yes, the Dow made a wave today that can be counted as an ending diagonal. If it is, then fine! But, if not, then the very same diagonal could also be a leading diagonal wave i, of a larger (c) wave of a higher ((ii)) wave.

There is nothing I can do about this amount of nondeterminism in the count. This is the true nature of alternates in Elliott Wave: the same exact wave structure can have two opposite meanings in the current context. Perhaps volume, advance/declines and/or tomorrow's gap direction can help separate the two scenarios, but at this point all we can say is that the "minimum" retracement needed for a second wave has been made.

Yes, the market is messy at the moment. We can see how people might throw up their hands at a wave count. We are trying to use the relative degrees of the waves - and time as well as price - to keep us on track.

Have a good start to your evening.

TraderJoe

Down Wave Has a 1.618 Extension

When the cash market only is considered, an impulse wave with alternation, and including a 1.618 extension in the third wave can be counted.

S&P500 Cash Index - 5 Min Close Only - Likely Impulse

There is no overlap between waves iv and i, or between waves 4 and 1. The 1.618 extension is located in the third wave, and the fourth wave can be considered a Flat wave that alternates with the second wave sharp (or zigzag) wave. Within wave 3, wave iv can be considered a flat wave that alternates with wave ii because wave iii is longer than wave i at the location shown.

There are a few things not to like - like the almost too exact fit to the channel. But, this is cash, and it is harder to count any diagonal in cash than it is in futures. The cash market has markedly different measurements than the futures market does. Further, it is tough to find 'three-waves-up' in the a wave of 4, but that wave was not exceeded to the upside, so it, too, may be a portion of a flat from 3.

The ES futures closed below the lower daily Bollinger Band today - which only happens about 5% of the time. And, the Russell did too, but the Russell also hit the 100-day SMA. So, it would be best to see if "five-waves-up" from here turns the short term trend in cash.

Have a very good start to the evening.

TraderJoe

Back in The Channel Again

With a nod towards the well-known Aerosmith tune, and a chart we showed previously, we must note that prices are now back inside the long term channel again.

S&P500 Cash Index - Monthly Close - Back in the Channel

Even on a monthly closing basis, in linear chart mode, prices have crept back inside the channel again. This will likely be a precursor to further weakness at some point. So far, the "sell May, go away" adage is working.

Further, we note this outstanding Fibonacci relationship in the rise since the December low.

S&P500 Cash Index - Daily - Golden Section

While not precise to the exact day, the relationship is close enough to be meaningful. We were following this potential relationship when we noted the corrective action around day 55. Its significance now is that a Golden Section has been completed, and the price declines began just before the Fibonacci 89th day.

Further, we note the Fisher Transform Indicator never did break the divergence from the January high, and now has made a new low.

I will note that other Elliott Wave sites are already switching from the primary impulse counts to back-up impulse counts. And they are not being honest about their incorrect counts. We, on the other hand, have always considered this rise as corrective, and we admit again now, and have admitted earlier, we were incorrect as to the extent of the rise.  We will always try to 'level' with you about the real nature of wave counting. 

And we hope to show you some simple studies - like that above - that few others consider in their Elliott Wave work.

Have a good rest of the weekend.

TraderJoe

Another Lower Low Day

Today's lower low made for almost an uncountable series of waves, until it became apparent that perhaps the "c" wave of a flat wave was being made at the end of the session. Here are the ES E-Mini Futures along with the predominately diverging Elliott Wave Oscillator.

ES E-Mini S&P500 Index Futures - 2 HR - Contracting Diagonal and Flat

There are five waves down as another contracting leading diagonal, and a retrace to the area of the prior wave (iv), as well as a high above the prior a wave, preventing a truncation. Towards the end of the session, topping tails were made and a possible second wave up.  So, the c wave could be over - or it could extend. Also, these three waves could just be the first three waves of a flat (i.e. a flat of a 'larger' flat). So, the market wants to be cagey, but it can't go on forever.

Have a good start to the weekend,

TraderJoe

Inside Day

Hard to read too much into today, but it was only an inside day with a lower close. That really does nothing to disturb the current recent downward trend. But, from the chart below, we want you to notice some of the current "length of price" relationships in the daily ES futures chart below.

ES E-Mini S&P 500 Futures - Daily - Inside Day

You will note that the current downward wave is already longer than the downward wave at the end of March and it has overlapped it. The current downward wave is also only 1 point away from being longer than the downward wave at the beginning of March, too!

Thus, in some ways it seems like much more downward movement will have a larger technical significance in terms of the degrees of the downward waves.

Have a good start to your evening,
TraderJoe

Time To See If Any Impulse is Around

We said in yesterday's comments that the Dow Jones Industrial 4-HR chart still had plenty of time to validate it's potential diagonal by price exceeding the start of the diagonal in less time than it took to build. We now have to watch the charts with an eye towards ruling-in or ruling out overlaps.

Here is the chart of the hourly ES E-Mini S&P500 Index futures.

ES E-Mini S&P500 Index Futures - 60 Minutes - Acceleration Channel?

So, from the above chart, we can see a way to start a larger degree down count. But, it would be best to monitor the wave in the larger channel, and the one in the smaller channel for potential overlaps.

The count is ambiguous at the moment in the futures because several of the waves shown here did not occur in the cash session. For example, the waves from 1 to ii (yes, ii, not 2) can be counted as a, b where b is a poorly formed triangle, where ii is the (e) wave of that b wave triangle. If so, today was only the c wave down.

So, while it is pleasing to have the short term - and possibly longer term - direction correct, the market is still failing to make clear, countable waves, especially in the cash market.

So, we need to remain flexible and patient and see if a more definitive pattern emerges. I'm tending to watch the futures for this a little bit more because they are going places the cash market is not.

Have a very good start to your evening.

TraderJoe

GIGO Day

There's an old expression: garbage in, garbage out.

You pretty much knew from the outset of a -60 point overnight movement in the ES E-Mini S&P500 futures, that they would not allow a futures gap of that magnitude to stand. Well - as has been a typical case - after the first bar of the cash session in the morning, they spent the rest of the day trying to buy back that gap.

Today that strategy did not work on the Dow (YM), the S&P (ES) or NDX (NQ) futures. Gaps remained going into the settlement. The Russell (TF or RTY) futures did swing around to make another new high, including an outside day up. Yet, the Russell is up against it's upper daily Bollinger Band, and it's daily slow stochastic is just in over-bought territory.

The result of the day is that the major index charts are just plain ugly. But, there are some things we can discern by measurement. Here is an intraday chart of the Dow Jones Industrial Average.

DJIA - Intraday - Downward Count

First, we know we had five-waves down from the high as an impulse wave that was called for you here in real time. That is likely an (a) wave. Next, we had three ugly waves up to a (b) wave, followed by the sharp overnight drop. That (c) wave down made a lower low, confirming the five wave structure of the prior impulse.

Then, today, we had yet another three-waves up - which we simply can not assume are completed. But these three waves were longer in length than the waves to (b), although they were shorter in time. Therefore, this length violation eliminates a 1,2,i,ii count because it would be a degree violation.

Should the market sport another higher set of waves, that goes beyond the current (b) location, then it would be possible to consider the count at the bottom which is 1-2 where 2 is a Flat wave. There is nothing wrong with that scenario from a degree standpoint because the (b) wave is shorter in length than the wave marked 1 or (a).

Should the last three waves end the rise, then we may have to look for some kind of diagonal lower. But, let's take it a step at a time, and see how it goes. Going into the last fifteen minutes of the futures trading day (16:45-17:00 ET), the index futures uniformly decided to get ugly again. Keep an eye on it!

Bottom line: we only had three waves down, and now three waves up. The market is playing its cards very close to its vest.

Have a good start to your evening and your week.

TraderJoe

Waiting for (B) to Wrap

Please notice the degree labeling comments. We're doing our best to be extremely consistent, and the labeling notations help explain how.

S&P500 Cash Index - Monthly - Degrees

The size of the current moves - both downward into December 2018, and upward to the present helps explain why I think we are in a larger degree move, and not the smaller one as so many other Elliott analysts think. Many have gone back and changed labels since the 2009 bottom, and created other degree violations in the process. I have not.

The third waves, (3) and 3, grow by extension, and are denoted with an x or x. And (5) is just shorter than (3), preserving the comment that wave (3) is the extended wave in the series. It is OK for (B) to be the same size or larger than (1), (2), (4), or (A) because they are of the same degree.

Have a good start to the weekend.
TraderJoe

P.S. In the spirit of the craft of wave analysis, I have again written to a major Elliott Wave service informing them of their likely incorrect count.

Three More Headaches

Besides getting a follow-through downward from the results of the FED meeting yesterday, the Dow handed bulls another headache - a critical overlap.

DJIA Cash Index - Daily - Overlap

The overlap is shown in the chart above as the overlap of minuet (b) wave of minute wave ((x)). This is not good for those trying to count an impulse. The third headache is that the Dow Transports now also have this same overlap.

For those who don't want to dig around for it, here is the chart of the Dow's potential ending diagonal (c) wave, using the four-hour futures.

DJIA Futures (YM) - 4 Hr - Diagonal Broken Lower

The diagonal is perfectly constructed with each of the waves the correct length, wave (v) is shorter in price and time than wave (iii), wave (iii) is shorter in price and  time than wave (i), wave (iv) is shorter in price and time than wave (ii), and wave (iv) overlaps wave (i). There are two internal diagonals as smaller degree fractals in the chart. One is the c wave of wave (iii) - which is telling because that price was never exceeded higher. And the second one is the leading contracting diagonal a wave of (v). There is further a perfect signature of a diverging Elliott Wave Oscillator (EWO or AO) all the way up. The red * indicates there was a very minor truncation at the top, which is completely acceptable in this size of wave.

The chart was updated today only to show that the down wave now exceeds the length of wave (iv), exceeds the length of wave (ii), and exceeds the length of wave (b) near the March low. While price has not yet exceeded the length of the (x) wave down, we have "turned a degree" in some manner and that must be respected. For those who are following degree closely, please demote each of the degrees of the diagonal one level so that it fits in with the daily count above.

Lastly, we are beginning to see the expected post-pattern behavior of a diagonal: a rapid drop out of the diagonal that should exceed the start of the diagonal in less time than the diagonal took to form. This is a four-hour chart, and there is a LOT of time for that to happen yet.

Have a very good start to your evening.

TraderJoe

P.S. Posted this chart for a questioning reader.

S&P500 Cash Index - Daily - 2018

 

Where did this Dog Come From?

I wrote a previous article a few days ago for a very specific reason. I wanted to acclimate readers to "out-sized B" waves. The article I'm referring to is at this LINK. So, we're going to use this article to try to answer the question, "Where did this Dog Come From?".

No, actually, I love dogs, but we have a whippy market which some have claimed is impulsing. I have avoided that tendency for a long time because of the frequent 0 - 2 trend line breaks that I have written about before. So, when we scan a number of beloved market "high flyers", we notice that, while several are above last year's high, several are still below their October, 2018 levels. Here's the partial list I looked at.

High Flyers - Daily - Eight Block

Look through the names, you will see that a few of them are slightly above their Oct, 2018 highs. But some are still below. Yes, charts of GOOG and INTC are correct. Hey, no worries right. Well, the marginal new high seem to represent the marginal new highs the market has already had, do they not? Um. No. Have a look at this chart of venerable Microsoft Corporation (MSFT).

MSFT - Daily - Island?

If you think about Microsoft, it is one of the few stocks that is in all these indexes: DOW, S&P500, NASDAQ 100. One stock can sure tilt a lot of market averages. Earnings are roughly $4.25, so one is paying nearly 29x earnings for this guy. And what has this performance been due to? Folks, this company is now a "utility company". They have to operate their ever expanding Azure server farm, and keep updating the public copies of the signature Microsoft Windows operating system "for free". Yep. Now, I'm not saying they don't have a great revenue stream on the business side, currently. But, they are a failed hardware company and people are buying fewer and fewer PC's to put their operating system on.  If I could, I would personally switch to Linux on all my PC's, but several programs just don't operate without Windows - yet.

Regardless of the fundamentals, this one stock, and one other, has been almost single-handedly a driver of market averages. And part of the reason is STOCK BUYBACKS. Mr. Softy has been a leader in this category. In fact, stock buy backs in general surged to an all-time record in 2018 after the greatly ill-advised tax cuts. If you didn't get as big of a refund this year, guess where part of it went to? You guessed it, the deep coffers of MSFT.

Oh yes. There is another stock you might want to check into. And that is Disney. Have a look at that stock price. I'll let you figure out the fundamentals.

In case you missed it earlier in the comments section, here is my latest count on the Dow Jones Industrial Average futures.

Dow (YM) Futures - Daily - Outside Day Down

This count was posted before the larger afternoon slide, and now there is a yet another bearish engulfing candle to the down side. And, at the highest high, it can represent a "key reversal day". Still no other significant lows were exceeded on this index, and down-side follow-through would be needed to claim an interim or longer term high in place.

Have a good start to your evening.

TraderJoe