Fake News or Not? Russian 'Cure' Story

As the comments in the prior post will show, we maintained a very flexible posture throughout the trading day today, and we posted a chart of the ES 30-min time-frame, which is our intraday wave counting screen, assessing 'fractal' highs and lows until fractals began breaking. We watched for a breach of 3,714, and - while close in the overnight - that level was not exceeded lower. Then, with about an hour to go in the trading session, up fractals began breaking higher.

As we noted yesterday, the initial sloppiness was not unexpected, with today as the last trading day of the month. And, a run-up, prior to the possible inflows of new cash at the first of the month has been seen before, too. Prices did run up, and made a new all-time high by the close.

So, earlier in the day, I was on 'Zero-Hedge' which has some interesting news stories, and I saw this one cross the ticker about 11 AM.

Russia Developing "Highly Efficient Antidote" To Fight COVID, Preclinical Tests Show 99% Effectiveness (see LINK, if interested).

 

The story is about an actual cure for the disease while a person is symptomatic - if I understand it properly. So I encourage you to read the story. If true, it is very, very significant. So, let's mark that story on the chart.

ES Futures - 30 Minutes - Intraday Screen

 

Whether this story is fake news or not, is not known by me. But, IF it is true, it could be a game changer, and so it is something to keep an eye on. A cure would be great because vaccines and masks will likely only go so far. Whether this story was a factor in today's run-up, is ambiguous. Maybe, maybe not. Few other news outlets carried the story at the time. And, again, we don't know if true.

Regardless, from an intraday perspective, the result was six candles trading outside of the upper intraday Bollinger Band. So, that lowers the odds to 0 - 1% of successive consecutive candles also closing outside of the upper band.

We'll have more over the weekend. For now, enjoy your evening and the weekend. Here's hoping that all of you have a great New Year!

TraderJoe

Slow, So Far

Likely commensurate with the upcoming New Year's holiday and uncertainty created by Congress, the market today was not in a big hurry to go anywhere. Here is the ES 1-Hr chart as a reminder.

The futures broke the lower wedge trend line, after a back-test of the RSI indicator which we had pointed out in the prior post's comments. But, the down move has not accelerated lower, yet. It could. Further, price has not broken the 3,714 low as of now. If both of these should happen (lower low plus acceleration), it might be possible to see the minute ((c)) wave of the Minor B wave as getting underway.

Until then, it looks like other markets - like the Dollar, or the Euro, might want to make a new low / high. And if so, we must allow that another high is possible here. Perhaps all we have gotten here today is part of triangle which might still point upward.

So, now is the time to remain flexible, calm and patient, and enjoy the upcoming holiday. 

Have a good start to the evening.

TraderJoe

Island in the Sky

Probably a lot of people noticed this potential island on the SP500 cash index 30-minute chart.

SP500 Cash Index - 30 Minutes - Island

While it shouldn't be made too much of, the gap on the right-hand-side could fill, but so far the down move is not impulsive (yet). While today's opening gap up was closed, yesterday's gap up was not. As of this time, the island was contained within the 1.382 external retracement on the down wave. So, at this location it could make and excellent y wave of minute ((b)) up, but such a pattern needs some confirmation.

For example, at the end of the day, the most recent upward three-touch trend line had not been broken or back-tested yet.

Have a good start to the evening.

TraderJoe

Just a Few Facts

Currently, the $NYAD - NYSE Advance/Decline Line - is at an all time high. While not impossible for a bear market to start from a high (see Feb, 2020), the reading does reduce the probability of a larger long-term decline at this time.

$NYAD - NYSE Advance/Decline Line - Daily

Meanwhile, some breadth measures like the McClellan Oscillator are showing a divergence. 

NYSE McClellan Osciillator - Daily - Diverging

Combining the two likely means that while the $NYAD is at a new high, it is likely doing it 'narrowly' or on 'fewer-and-fewer' stocks. This provides some considerable caution.

Meanwhile, in the news background, the market awaits news of whether the individual stimulus amount in the U.S. will be increased from $600 to $2,000.

From a wave-counting perspective, building on yesterday's post, we said that the minute ((b)) wave of a Minor B wave as an expanded flat, reached the needed 105% level of the prior high in order to qualify for an expanded flat. It appears to have done so as a complex w-x-y wave. So, it has met a 'typical' expectation. But, we can see no reason why - if the market chooses - that the minute ((b)) wave couldn't become longer in time and price as a triple zigzag, perhaps if the larger stimulus is passed. But, let's be clear, it does not have to.

Have a good start to the evening.

TraderJoe

Likely a Whippy Minor B

With reference to yesterday's post and chart of the daily ES, here is an ES 1-hour chart for more clarity on how the Minor B wave might develop. As far as I can tell, there were only three-waves down from the Minor A wave. The downward wave does not look like a good impulse.

ES Futures - 1 Hr - Minor B

That means the Minor B wave might be a triangle, a flat or an expanded flat (if price heads over the high again). Having only three waves down means it might be prone to do so. So, we have to try to count upward with the trend until we can no longer do so.

There was a slight higher high today, so it can be the ((A)) wave of a larger w-x-y three wave complex correction for minute ((b)) wave of Minor B. Again, it is acceptable for the y wave to go over the prior high.

A triangle is also sketched in on the chart as the proportions are not that bad at just over 78.6%. Exceeding the x wave low would likely favor the triangle instead of the flat or expanded flat.

With regard to today's ((A)) wave upward, the futures had made an acceptable "five up" before the cash market ever opened. Therefore, the ((B)) wave of this sequence may also be a smaller degree expanded flat. The proportions work out nicely, and there was overlap on the 05:00 EST candle where the 'five-up' ended. I'm showing the ((A)) at the high for charting convenience only.

Have a good start to the evening.

TraderJoe

Stuck at the 18-day SMA

Overnight, the ES futures traded on both sides of the 18-day simple moving average and settled very close to it. At the end of the day - while the count is getting quite compressed - a review versus the EMA-34 shows this is probably the best count.

ES Futures - Daily Close - With EMA (34)

 

We're probably waiting for the Minor B wave to cross the EMA-34 again.

Have a good start to the evening.

TraderJoe

Big-Boy Tracks

The Big Boys (or Smart Money) left their tracks all over the ES futures today. Overnight, prices were sinking lower on lower share prices in Europe - due supposedly to a new strain of Covid virus. In the chart, below, that drove prices down about -120 points from Friday's close, and pierced the lower daily Bollinger Band.

ES Futures - 1 Day - Outside Key Reversal Day

 

In the process the smaller daily wedge (dashed lines) was clearly broken, the amount of price travel exceeded that of any downward wave inside the wedge, save the very first one, and an outside key-reversal day down was registered.

Of course, if the so-called 'Smart Money' comes out of the lower daily band, they did so quite assertively and ran prices back above the 'line-in-the-sand' or the 18-day SMA, preventing the daily price bias from turning lower. Further, depending on your quotes the daily slow stochastic may, or may not have lost the 80 level. TradingView shows it as not being lost, other software shows it lost.

The usual caveat applies to the outside-day down: if it's high is taken out within two trading sessions then it constitutes a trap for the bears.

From an Elliott Wave perspective, a downward count is a little strained. While the downward wave 'could be' impulsive, it doesn't yet have a clean impulsive look to it. And, at the end of the day, there was pretty close to a 78.6% retrace in the futures. 

If prices go over the high, today could be a better Minor B wave within Intermediate (Y). This refers to the alternate count previously posted. Since this could happen with light holiday volume, an economic news report, a Brexit deal, or some other news story, I have turned from negative to 'flexible' on this market until we see if today's low exceeded.

Have an excellent start to your week, or to your winter holiday if you have started it.

TraderJoe

Christmas Bonus - NDX

For your Christmas enjoyment, I am showing below a detailed degree analysis of the NASDAQ 100 Index or NDX. Before I show you the charts, I must implore you to understand a few simple facts about the indexes. The first is that below are the "Birthdays" or "Born On" days of some of the major indexes.

DJIA - 5/26/1896

S&P500 - 3/4/1957

NDX -  1/31/1985

Having a different "born on date" means that each index was created at a different time, and for a different specific purpose. The second is that each of these indexes is composed of a different number and type of stocks. The DOW was/is largely 30 Industrials. The S&P500 is half-a-thousand stocks that also mixes in financial, some technology, real estate, retail, and everything but the kitchen sink, while the NDX largerly focuses on the 100 largest capitalization technology stocks. With that as a background, can we at least agree that these major indexes might have different Elliott Wave counts at different times? I can actually prove that case logically, if you like: neither the S&P500, nor the NDX was even invented in 1945, so those two indexes must have had a different count, "0", than the Dow did at that time. Case proved. Now on to the first chart.

NASDAQ 100 Cash Index - 1 Month - Close Only

With a born-on date in 1985, I contend that the NDX is currently in it's Cycle III'rd wave of a count that may be a diagonal - perhaps a "leading" one. This count is slightly different than the Dow and the S&P500 due to its relatively young age. Cycle I crested in the year 2000, and was likely a Primary A,B,C pattern where there are very, very few significant pull-backs along the way, with the 1987 crash being the notable exception (can you even spy it on the chart?). Within Cycle I, Primary-A (or circle-A) is the short wave, and Primary-C (or circle-C) is the much longer wave.

Further, from a degree perspective, within Cycle III, Primary-A increased only  ~580% whereas Cycle I increased by 3,650%, so from a degree perspective, a Primary-A wave is allowed to be this long. Primary-A is also shorter in time than all of Cycle I, so, again, this fits with degree labeling. We don't know where the exact top of Cycle III is located, so at the present time, it is a dotted line. For now, this is the trend line pattern that the market has made. I didn't. I just drew in the lines.

Cycle II is a zigzag or sharp pattern that ended in 2009. We know for a fact that the Dow and the S&P500 made a lower low 2009, but the NDX made only a truncated zigzag arguing for the significant strength in the subsequent rally, one we are still experiencing. Within Cycle III, the pattern of alternation is now that Primary-A is the longer wave, and Primary C is the shorter wave in the sequence - just the opposite of that in Cycle wave I. So, below, let's look at a more detailed chart of Cycle III.

NASDAQ 100 Cash Index - 1 Month - Cycle III

Within Cycle III, I contend that Primary-A counts almost identically to the S&P500 and the Dow Jones Industrial Average in both wave numbers and degree. Wave Intermediate (4) may be a triangle. Intermediate Wave (3) is clearly the extended wave in the sequence. But, I contend that the wave to Intermediate (5) must be an Intermediate wave because it is longer in time than wave Intermediate (1). As such, the two waves must be of the same degree. (The only other possibility is that wave (5) is of one larger degree.) 

Therefore, Primary-A ends at the exact same location as SuperCycle III, in the Dow, at the October, 2018 high. Now, then, we have another wave that truncates in 2020, and that must be within a different degree-sized wave than Cycle II - which truncated - or else it would be bad alternation. And, it is indeed a different sized wave. It is only a Primary wave, Primary-B, so it fits! Still, it is larger than Intermediate Wave (4) in price and time. Therefore, it must be a larger degree wave than Intermediate, and it is. It is a Primary wave!

Finally, the last sequence were are in now is a Primary-C wave. It may well be a diagonal to end this sequence, within the NDX. Being in a Primary-C wave now makes all the sense in the world from a) the speed of the move, b) the choppiness of the move, c) the lack of sustained pull-backs, and d) the historic extremes of sentiment and participation.

Back to the first chart, we know that within contracting diagonals the third wave may be shorter in time than the first wave. We are approaching that metric at about 142 months now, versus about 178 - 180 months for Cycle I.

So, we need to see if a diagonal forms in this index, and whether a significant retracement occurs. If it does, we simply conclude that in the same manner that we are Primary waves for the S&P500 (see my earlier discussion of Primary-B in the Dow and S&P500 in a post way back on June 6th, called Trillions, at this LINK) we are also in a Primary sequence for the NDX.

Have an excellent start to the week, and possibly an excellent start to your vacation if you are beginning one this week. P.S. This is the third post this weekend, and if you haven't, you may wish to read the other two, as well. I hereby state that I have not seen this analysis anywhere else, and it is entirely my own work.

Happy Christmas Season,

TraderJoe

A Real Illusion

People often ask me what I think of some Elliott Wave count, or another. But rarely do they ask me what I think of the phenomenon underlying any Elliott Wave count, and that is - price. Rarely do they ask me about price. So, here is what I think about price: to some extent it is an illusion, but it is an illusion we often have to deal with or chose to deal with. To make my case, let's talk about something you are very familiar with: your home.

Below is a chart from the US. Federal Reserve of median home prices since 1965.

Median Home Price By Year

 

From the chart, since 1965 it is clear that the 'median' home price has gone up from $20,000 to about $320,000. If you've purchased, sold or rented a home any time you know what you are paying, and you know what your parents or grandparents may have paid for a home.

But, IT'S THE SAME HOME. It's the same 980 sq. ft. beach cottage, 2,100 sq. ft. suburb ranch, or 5,800 sq. ft. Beverly Hills mansion. The very same. In fact, some people still live in a house built in the 1800's, maybe with some electrical or plumbing upgrades, etc. That's not bad, huh, a 1,500% increase in the price of the very same asset.

Now, we know to some degree people will say, this is, in part, because people now earn more, so they can afford more house and the upgrades, others will say, there are more people in the U.S. now than in 1965 so they must compete in a market for fewer units. Still others will cite money printing by the Federal Reserve as the operative phenomenon.

But, here is the question: does the very same asset available in 1965 provide 1,500% more value to a person now than it did in 1965? Um .. I'll answer that question with a resounding "no", for the moment. I mean the house doesn't brush my teeth, or massage my sore muscles or provide any other significant service now than it did in 1965. I mean, it might be equipped with cable, or a dish, and it might be wired for internet, or it may not. But, is any of that worth 1500% more? I think not. It is still some amount of heated square footage, with a roof, and a place to eat, sleep, play, and a yard, and a garage, or not, often with a way to bathe or do laundry, etc. So, 1500% more, huh?

This illusion, made possible through the phenomenon of asset Inflation, still often must be dealt with. People must find the funds or not to buy a house and land, pay the taxes, or to pay something similar in rent. It is an illusion and a phenomenon the U.S. Federal Reserve is struggling desperately to keep alive. Like the Wizard of Oz, they don't want people seeing what is behind the curtain or focusing on it. They want steady inflation at around 2% per year. And, why do they want it?

They want it because they fear that people won't know what to do with lower prices. They have seen in the Great Depression and in previous housing crash of 2009, that asset prices can deflate. They are afraid that people will lose confidence in the system if prices decline. So, they perpetuate the illusion. As we all know, it has gotten to the point that they now don't spent billions of dollars to keep the illusion going, they are now spending trillions of dollars.

Since, the Federal Reserve is operating as a quasi-arm of the U.S. Government, and under the auspices of and at the direction of Congress - which the people elect - then, essentially, increasing price is an illusion that we want to keep ourselves under. Don't ask me why. But, we do. Maybe we get more psychological satisfaction for getting a raise each year for doing essentially the same job, perhaps with a little more skill each year. But, do we need to tie that satisfaction to a paper dollar bill? Maybe we do. Here is another phenomenon of price. Bitcoin.

Bitcoin Futures - Weekly Close - Channel

So, over the course of three years you could have the choice of buying/selling Bitcoin at either $16,000, or $3,200, or $22,000. That's not bad, huh? Oh, and what does this thing do? It let's you buy other stuff - maybe secretly, maybe not? And what does it represent? Some computer spending a lot of electricity to solve an algorithm (i.e. going around endlessly in a "Do-Loop"?) OK. That's worth that kind of volatility in price (um..not).

People often ask me what I think about Bitcoin. When I look at a chart like the one above, here is the primary thing I think: I have heard and seen written that most Elliott analysts think that in a zigzag, if the next move after the zigzag is to be up, then the C wave down should be at a less steep angle than the A wave. That is because the C wave down should show a loss of momentum, otherwise it might be the darn middle of a third wave, and watch out, below! The loss of momentum is what is presaging the next upturn.

So, seriously study that downward wave sequence from June of 2019 for a moment. The A wave down takes from June 2019 to December, 2019 - almost a full six months. Yet, the clear C wave down - traveling just about as far in price -  takes like only Feb/Mar of 2020 or two months! So, that means the C wave down occurs at a steeper, more aggressive angle than the A wave down. Yet, the structure of Bitcoin shows such a zigzag was handily exceeded to the upside.

So, what do I think of Bitcoin? I think it has disproved some cherished guideline by some online Elliott Wave analyst or other, or maybe even something someone wrote in a book - at least in this instance. 

And what else do I think about Bitcoin? Should people own it? Well, I will only say - just remember to some extent, price might be an illusion. It might be one that people have to or chose to deal with; or not. Wherein as in the case of housing, it may be a more persistent (or at least less volatile) illusion, in the case of Bitcoin - maybe not so much, no matter how high it goes.

Have an excellent rest of the weekend. P.S. This is the second post of the weekend, if you have not seen the first, you may wish to review it, also.

TraderJoe

Chasin' Me, Chasin' You

Yesterday, we complained about the lack of a pattern in the Eur/USD 15 min chart (see LINK here). Today, the market made two patterns of note. The first one was this exquisite contracting diagonal which worked in every detail and was called in real time (as fast as I could chart, lol).

SP500 Cash Index - 5 Min - Diagonal Lower

 

At the point of two bars after (v), we said it would be "ideal" if the diagonal ended here. And it sure did. In the last half-hour, the market makers or those algorithms I was discussing all decided to 'pour-on-the-gas' and again try chase anyone short out of the market. Again, look at the exceptionally small pull-backs along the way to that typically 'deep' 78% retrace (or possibly more on Monday). So, we know, for sure, the diagonal is there. And while we suspect it is 'leading', we don't know for sure if it is leading or ending. All we can do - like you - is see if the pattern takes out the lows or the highs first. If the pattern is leading we think it just might be the 'a' wave of an a-b-c zigzag to make a fourth wave in a larger diagonal shown in the comments day (here at this second LINK2), which was another pattern we posted.

The third pattern of interest we spotted was in the Russell 2000 futures on the half-hourly chart, below.

Russell 2000 Futures - 30 Min - Wedges

Here you see the breakdown of two wedge patterns. We also noted at the time, that the down wave was much longer than the middle wave in the sequence, and also longer than any of the retrace waves higher up in the pattern. That only leaves the down wave on the 16th in this particular series to exceed lower. Like the S&P cash index, the Russell was aggressively bought into the close, and it is continuing into the after-hours.

Well, at least today was an interesting Friday. Over the weekend we may get news of stimulus, government funding, and/or Brexit.

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

TraderJoe

Can I Put You On Hold ?

One of the reasons I don't like trading during a FED meeting or report out, is I have seen things like the wave that is shown below on the cash chart of the EUR/USD pair - the rough inverse of the U.S. Dollar.

Eur/USD Cash - 15 Minutes - Channel

Anyone who sold the pair into the FED meeting lower-low was quickly reversed. (I did not, and that is why I feel like writing up this observation). OK, the turn-around might be understood as a typical whipsaw. But look at the upward wave - 1,2,3,4,5? Where is the 50 - 62% retrace for wave 2? Where is the clear non-overlapping extension for wave 3? To me, such a wave is the reason wave counters often make statements like, "well, anything 'can' happen - but let's see what is most likely". 

I mean, if this wave was the "thrust from a triangle" then it might be more understandable. But is even the clear (e) wave of a triangle here? Not present - at least not in any reasonable proportion. No, if you measure the retrace percentages, the largest single retrace is the first one in the channel at 23.6%. That is astounding.

Rather, I have become more and more convinced that the reason for waves like these is that the so-called "trading algorithms" are being employed more aggressively. The market-makers know there are wave analysts out there, so they must serve them up something that is very difficult to understand. A computer can keep track of how many people sold at the low, in what size, and how to get the most out of them. A human simply can not. A human waits for the retrace to enter the trade. The computer does not provide one. 

Yes, stops and reversals may prevent ruinous losses, or even recouping or turning around and profiting on the trade. But, it's not that. Look at the pattern. That is the item of concern. Why are such clear squeezes occurring? How can volatility be so compressed? Who is operating systems that slice-and-dice every tick to keep patterns like this in such tight control?

I do think a pattern like this - that puts one on hold until it breaks - is largely A.I. driven. A similar pattern is now being made in the possible ((c)) wave of the ES and NQ futures. And just like Nancy Pelosi and Mitch McConnell can keep the country on hold waiting for economic relief, and like Boris Johnson can keep the U.K. and the Eurozone on hold pending the definition of a Brexit deal, apparently traders just "must wait" until - for whatever reason - until the algo's have squeezed out every ounce and can't squeeze out any more.

In fairness to Elliott Wave, such a pattern might be an extended fifth wave of a third wave, or it might be another one of those out-sized B waves. But, is it worth one's capital to try to discover which? The pattern is bumping up against its upper daily Bollinger Band. Just how long will it bump?

At some point soon, the Dollar and the Euro may turn. I'm looking for a "painful" turn - like an outside key reversal day or something similar. But, until the pattern breaks, it is what it is.

Have an excellent start to the evening.

TraderJoe

Don't Worry Baby...

Well, it's official from the FED, relative to a 1% risk-free return expectation for a number of years, asset prices at an all-time-high are "a good deal". Such pronouncements make a wave analyst first shudder, and then smile.

Below is the daily chart of the Dow Jones Industrial Average futures (YM). It is counted in such a wave as to keep the waves proportional and respect degree conventions as best as I can.

Dow Futures (YM) - Daily - Wedge

I know few people will be a fan of the large minute ((b)) wave in the middle of June, but that is the way I saw the overlap, and the 'over-sized' ((b)) wave in this index that created a "running wave" that has not been fully retraced since. And, just as that Minor A wave, up, should have had that loopy B wave to "take more time" in the correction, then, so too, we think that a five month (W) wave may probably need more time that the two month correction it has had so far.

I could be incorrect. The wedge could just continue wedging. OK, but then it becomes very hard to explain the extreme compression of prices at the high. Sentiment remains rip-roaring bullish, the U.S. Dollar Index is near a low, and was counted for you as five waves down in a previous post. For those concerned regarding degree labeling, the current minute ((c)) wave of the potential current Minor B wave, is shorter than all of the prior Minor C up wave to the September high, so, it does not seem to create a degree violation in this context.

Let's see if more proportional waves begin to be generated. If so, the Intermediate (X) wave would be an expanded flat.

Have a good start to the evening.

TraderJoe

Risk of Exceeding the High

The intraday count today worked out wave-for-wave until the very last bar of the futures session. This can be verified by checking yesterdays comments, and the charts posted. Still, Central Banks are meeting tomorrow & for the rest of the week, and the possibility of a stimulus deal grows. That means there is a risk of exceeding the current all-time-high. Should that occur, it would alter the daily chart slightly, as follows.

 

ES Futures - Daily Close - ALT if High Exceeded

 

Should we go over the high again, it likely means the whole wave up from November is a 'longer-in-time' Minor A wave still within the Intermediate (Y) wave. This might help give a more proportional look to the (Y) zigzag, because a B wave down and C wave up, would yet be needed to follow. Further, it is one of the few ways I can see to maintain degree labeling if the high is exceeded.

Have an excellent start to the evening,

TraderJoe

Gap Up and Gap Fill

Overnight on Sunday, stock futures gapped up considerably. Shortly after the open, they traded up near the 78.6% retrace level - which is quite typical in diagonals - then reversed and started trading lower. Within minutes we said this could be counted as just an (a), (b), (c) sequence upward. The futures closed near the low of the day in some fairly negative action. The gap up, and gap fill represents this count (of a potential continuing diagonal lower) on the ES 15-minute chart.

ES Futures - 15 min Close - Waves Since the High

If correct, there should be a fourth wave up, iv, and a fifth wave down, v, to make the next (a) wave in the diagonal. This scenario holds below the wave-counting-stop, shown. Once the (a) wave is in place, the 3,660 level would not be a hard level for a (b) wave.

We can not say precisely what type of diagonal this might be IF it forms properly. It might be contracting, or it might be expanding. A bit more information is needed to make that assessment. However, in either case, the count currently suggests lower daily lows are probable.

Any lower daily low would shift the daily swing line to negative. A quick review of the daily chart shows price is clearly now in "The Battle for the Line-in-the-Sand", or the 18-day SMA.

The daily slow stochastic has clearly lost it's embedded status, and momentum is pointing lower. (Not to be taken as trading or investment advice of any type).

Have an excellent start to your evening.

TraderJoe

Three-waves Down, So Far

This is all the wave count I have for you on the ES 15-minute chart, since the Minor C wave high.

ES Futures - 15 Min Close - Three Waves Down

 

At this point, there are only three-waves down: a, triangle b, c and possibly a leading contracting diagonal upward. The wave counting is exceptionally difficult. Perhaps these three waves down start a larger 4-hr downward diagonal, perhaps they don't. There have been a lot of diagonal waves short term in this market, so why not? I'm using a close-only chart just to concentrate on wave form here.

The wave counting is particularly difficult for any one looking for five-wave impulse patterns, down or up. 

In case you missed them in the prior post, a four hour chart of the Eur/USD futures (6E) and a daily chart of Gold futures are in that post. Those counts remain on track.

Have a good start to the evening and to the weekend.

TraderJoe

All-Day Struggle

Overnight, the market as measured by ES futures made a lower low, and overlapped the minute ((i)) wave in the series, invalidating the alternate only, and reinforcing the primary count. From the time the cash market opened, there were an initial five-waves-up that we labeled as a diagonal. That appears on the left-hand-side in the ES five-minute chart, below. All-day the futures struggled to get over the high again. Perhaps they will tomorrow.

ES Futures - 5 Min - Diagonal and Correction

After the diagonal, there was a three-wave choppy sequence lower in a channel that made a 62% retrace wave, and we cautioned that it was possible to go back over the top of the diagonal. Price broke out of the channel shown to the up side, and broke the first blue (up) fractal back at the 3,674 level. Then, price retreated into the futures settlement.

In the overnight, one should keep an eye out to see if the last sequence at the end of the waves is a ((1)), ((2)) or not. That means the ((Y)) wave should not be exceeded lower. If the high of the diagonal is exceeded, then it is possible that the second wave up on the hourly chart is trying to extend in time and price.

At the time of the settlement, the ES Daily slow stochastic lost it's embedded reading. The only day it can get is back is tomorrow. Otherwise, it might mean that price and the 18-day SMA try to come together.

Today, we also showed this chart, below, of what is likely the fourth wave sequence in the Eur/USD futures (6E), as price is still in a channel, and the Elliott Wave Oscillator has now gone below the zero line.

Remember, as a fourth wave to alternate with wave ((ii)), it could do several things including exceed the high in a "b" wave, or form a triangle.

Here is my own original observation on what the Gold futures market might be doing. I have not seen a count like this elsewhere.

Gold Futures (GC) - Daily - Diagonal

It certainly looks like all of the patterns to this point are three-wave zigzags, and wave ((iii)) is shorter in price and time than wave ((i)). Further, barely, just-barely, wave ((iv)) is shorter in price than wave ((ii)). Meanwhile it is much shorter in time. As such this pattern would invalidate above 1,882.30 if these quotes are correct. Then, it would be a question of whether wave ((v)) remains shorter in price than minute ((iii)). In any event, with the invalidation level so close in price, it bears watching.

Have a very good start to your evening.

TraderJoe

One of Nine

Yesterday we showed a chart of fully nine hourly up gaps in the cash S&P500 Index. Like a cat with nine lives, today was no exception, and the day started with a gap up. This one turned out to be the exhaustion gap however. A reversal occurred - an outside key reversal - in fact, and the gap labeled as #9 on yesterday's chart was filled by the lower low. Like all outside key reversal days, the primary thing that matters is whether its high is taken out or a retracement wave upwards holds off from breaking the high.

In terms of the Elliott Wave count, the chart we showed second in yesterday's post is still valid with the top at today's high. The chart below is an alternate only to allow one more up wave.

ES Futures - 4 Hr - Alternate Only

Please note this alternate count is hanging on by a mere thread. While it has already overlapped the Minor A wave, up, it has not yet overlapped the minute ((i)) wave of C in the downward direction. Doing so would spell trouble for this alternate view and invalidate it. We note that last night's higher high was still on a divergence with 4-Hr MACD, and it, the MACD, has turned lower - at least temporarily.

Ira Epstein typically says, "the high of an outside day down should not be taken out within two trading days, or it constitutes a trap for the bears." This is not trading or investment advice, just a paraphrase of Ira's observation.

We saw that today did made five countable waves down in the cash market. In the futures on a daily basis, we will note that - even though a higher high was made - the futures did miss their upper Bollinger Band target which is often, not always, a sign of weakness. The chart follows.

ES Futures - Daily - Outside Range Day Down

However, one can see the daily slow stochastic is still embedded, and is over the 80 level. IF the embedded status is lost, then one might expect price and the 18-day average to try to come together. Until then, the daily bias on the chart is up. Since we were able to count five-waves down right now the trend and the bias are fighting each other - which is why the alternate allows another higher high (perhaps on a stimulus bill or news from the ECB, etc.)

Have an excellent start to the evening.

TraderJoe

None Above, Nine Below

Today, for the first time, we were able to count 'five-waves-up' to a new high. As such, the recent up move 'might' be over. See the second chart, below. This first chart however, shows a rather unprecedented "no" gaps above the market with today's new all-time-high, but fully nine hourly gaps below today's price in the cash market. 

S&P500 Cash Index - 1 Hr - Open Gaps

Considering the hourly divergence shown, the gap-and-grind nature of the wave now is even more apparent. Major markets made new all-time highs together (correlated markets). These include ES, YM, NQ, and TF (or RTY).

As noted, 'five-waves-up' can be counted in the last sequence after the triangle or the Minor C wave, shown below.

It is not necessary that wave minute ((v)) of C has ended. Given the length of wave minute ((i)) of C, it is possible for minute ((v)) to make 3,800, say. However, as the third chart showed in yesterday's post, market sentiment is at a new extreme with both the 10-day and the 50-day moving averages of the put-to-call ratio at the lowest lows in the last several years. This, and the facts of 1) five-waves up, 2) correlated markets, and 3) that there are no gaps above the market because of the new all-time-high, yet, fully nine unfilled hourly gaps below the market makes me negative on the current environment - even if 3,800 should be attained.

A reminder that the ECB rate decision, and the U.S. unemployment claims will both be on Thursday of this week (tomorrow being Wednesday), and announcements yay or nay on a new Covid Stimulus package in the U.S. could be made at any time. Patience, flexibility and calm are still warranted in this environment.

Have a good start to your evening.

TraderJoe

Getting Mature

We posted this chart as the third one in the weekend post over the last couple of days. Nothing has changed in the count, so far. We called for a fourth and fifth non-overlapping waves up, and today was a downward wave that did not overlap. I just added the detail in the Minor A wave for clarity.

ES Futures - 4 Hr - Looking for Minor C

It is difficult to see the structure after the Minor A wave as a second wave as the retrace on the A wave is less than 38.2% based on the Fibonacci ruler shown on the right. That doesn't mean it isn't definitely a second wave, but it makes the probability very, very low - even more so if a contracting triangle shape is considered.

On the ES 30-minute chart, today was comprised internally of contracting, overlapping waves with approximate 78% retraces, as below.

ES Futures - 30 Min - Overlapping Potential Triangle

This could easily be the minute degree fourth wave being looked for - and it might even be a triangle. The entire structure - from the overnight gap up and reversal to the lows - was contained within the daily pivot points.

Have a good start to the evening.

The chart below was added just before the cash market open.

 Both the 10-day and the 50-day moving averages are at new lows.

TraderJoe

The Wedge Keeps Wedging

Here is the ES futures daily. Again, for degree reasons, it is hard to count differently. Prices remain in the wedge formation.

ES Futures - Daily Close Only - Still in a Wedge

This is truly a difficult wave-counting structure - which is just what the FED wants - as  the waves are so compressed, and then they expand. Today we were counting the potential short term contracting diagonal, but it's maximum (provided in the comments in the last post) was exceeded higher. As we explained in the comments, that meant that the diagonal we showed yesterday was a valid diagonal, but it was Leading, as a first wave, and today was likely a third wave. A fourth and fifth wave Sunday-Tuesday might cap this portion of the wave.

Based on the daily put-call ratio the market is very, very over-bought at this point. But the larger longer term count options remain the same (as a reminder, see this LINK).

There are possible alternates to this count, but the lower trend line of the wedge would have to be broken substantially, first, for them to be considered. Patience, calm and flexibility remain essential in this environment. 

P.S. Here is the local count. I had to use the ES 45-minute time frame to fit the waves on the chart. 

ES Futures - 45 min - Up Count

The above chart is still attempting to count with the trend upwards - based largely on MACD - until that is no longer possible following the pretty clear diagonal wave i. There is still a divergence on the MACD, including on the 4-Hr chart. The invalidation level is shown. The alternate is also shown, which basically indicates that if you move black ii to the right, where the second micro ((2)) is, then there are enough waves to call a top at Friday's high.

Have a good start to the evening and to the weekend.

This chart was added after the futures open. It is the four-hour chart of the ES futures. With the higher high tonight it is 'possible' to count the five waves up in black as per the primary count.

That means it is possible to see a fourth and fifth wave up to the Minor C wave in this index provided that overlap of the minute ((i)) wave does not occur first. The Minor B wave triangle would indicate 'last five-wave sequence up dead-ahead'. 

From a degree labeling standpoint, it seems necessary to count the wave this way otherwise one of the sub-waves upward of wave C would be 'longer in time' than all of wave A, which would likely otherwise result in a degree labeling error.

TraderJoe

Important Number

Yesterday, we said a higher high was possible, and if it occurred, it would likely start a diagonal sequence. The higher high occurred, and during the day, we showed portions of this chart which was not confirmed complete at the time (see this LINK) but which was showing significant divergence on the hourly MACD oscillator. A potentially completed ending contracting diagonal is shown below on the same ES hourly chart.

ES Futures - 1 Hr - Potential Diagonal

Such a diagonal might end the minute ((c)) wave upward on the ES 4-Hr chart, as discussed in previous posts (see the first chart in the post at THIS link).

Still, while the downward wave at the end of the session tended to act like exiting from a diagonal, a contracting diagonal can not be confirmed as completed until the length of wave (ii) is exceeded. That would occur below 3,646.75, and that is because wave (iv) in a contracting diagonal by the rules can not be longer than wave (ii) of the same diagonal. P.S. If the diagonal does go slightly higher, all it does is raise this number by the same amount it goes higher.

After the down wave occurred a nice 62% retrace occurred, then a slight lower low which might be the b wave of a Flat for wave ii - to take more time than wave i, down. So, we'll watch the overnight and see how it goes. A substantial gap lower in the overnight might be indicative. 

So it is clearly stated, the alternate for this count is that wave (iii) of the diagonal ended at today's high, and wave (iv) ended at the 3,655 late-afternoon low.

Have a good start to your evening,

P.S. Below is the put/call ratio chart, showing a new low both for the raw index and for the 10-day MA

Put/Call Ratio - Daily - New Lows

 Note where the black arrow is at a new low.

TraderJoe

.

On Divergence Watch

In yesterday's post we said there could be a new high. That was because yesterday's down wave after the new high was not very substantial. Further, we could see the possibility for a structure like an ending diagonal or a sloppier B wave.

ES Futures - 1 Hr - New High?

If a new high is made it could be the beginning of a frustrating ending diagonal wave within the minute wave ((c)) shown yesterday. The a-b-c would be to minuet wave (i), and there would be a relatively deep wave (ii). Such a diagonal might occur on hourly and 4-hrly MACD divergences. Or it might just end a sloppier B wave.

If the new high is not made, then the pattern may have ended at the 'a' wave shown as minute ((c)). At this point we are counting with the trend until we can no longer. Still, we have shown a trend line to watch for a break and/or back-test and failure.

Have a good start to the evening.

TraderJoe

First of the Month Money

Continuing with the theme of our posts over the last couple of days, it should be pretty apparent that a lot of today's 40+ point gain in the cash S&P500 index was fueled in large part by the 'first of the month' money, some of which is automatically or semi-automatically committed to the market by dividend roll-overs, automatic payroll deposits in 401k accounts, etc. Much of this money is not "wave count driven". It occurs irrespective of the wave count. It does what it does. On occasion people might intervene in the decisions, but to some extent this phenomenon is on 'auto-pilot'. Today, it helped make a marginal higher high, which might enter into a wave count in this manner.

ES Futures - 4 Hrs - 5-3-5 Wave

The marginal higher high provides some confidence that there has been a 5-3-5 wave upward. This could be a larger B wave within a downward (X) wave. It could also be the (Y), wave, upward. The lack of retracement is astonishing, yet the detailed count suggests there 'could' be one more higher high within this pattern, so the pattern itself would not break until the lower blue trend line of the pattern is undercut as the first stage in confirmation, back-tested and fails as the second stage in confirmation, and until the minute ((b)) wave is exceeded, lower, as the third stage in confirmation.

This is one ugly pattern, made predominately in the overnight. Today's start of a downward movement did nothing to disrupt upward counting. It was quite small.

Today, we also showed our count that - like the inverse of the US Dollar being in a five-down pattern - the EurUSD futures are in a five-up pattern, as below.

EurUSD (6E) Futures - Daily - Into Five Up

It is astonishing to see so many people on-line count this incorrectly. Some are operating professional newsletter services; some are professional people 'running' money, and publishing YouTube Elliott Wave Tutorial videos. Others are more of the amateur bent and publishing their videos for the price of subscriptions, etc. Uh, I just decided to wait to publish anything until I could see if the wave essentially followed The Eight Fold Path Methodology - which you are aware of via this site for free. Oh well, maybe sometimes you don't get what you pay for??!! All I can tell you, is after this one, I fired one popular newsletter subscription service. They have been getting it wrong too often, and their timing has been terrible - their wave counts filled with errors. They tend to ignore degree labeling. They have also gotten the stock market wrong.

Bye-bye. One less distraction to worry about. Have a good start to the evening.

TraderJoe

Window Dressing and Front-Running

In our previous post, we cautioned that today could be a day of 'window-dressing' with its attendant sloppiness as portfolios are reconfigured the end of the month. As you can see from the intraday chart below, that is what occurred at the beginning of the session.

ES Futures - 5 min - Window Dressing Day

Prices declined - during the cash session - from approximately 3,632 to about 3,592 in the first 90 minutes of the session. After that, there was an attempt to buy-back the highs in a likely front-running of the 'first-of-the-month' money which typically enters the market. As soon as the cash market closed, the buying became more serious and continued into the after-hours, so far.

Over the last couple sessions there was downward overlap, preventing a five-wave impulse out of the triangle, so the larger wave count depends significantly on whether a all-time-high is made or not.

Meanwhile, in terms of another market, according to The Eight Fold Path Methodology, today the US Dollar Index confirmed its fifth Minor wave, down, Minor 5, and needs to begin to be monitored closely for a turn.

DX Futures - Daily - Five-Down

In this count, wave 2 is a (w)-(x)-triangle (y), and wave 4 is a Flat for alternation. Wave 5 may be a diagonal or part of one.

Have a good start to the evening.

TraderJoe

Closer Call Yet

From yesterday's post, we continue to look for five-waves-up with a non-overlapping fourth wave. The market made some whippy holiday-light moves, but nothing has invalidated yet. Here is the ES hourly chart, again.

While there was a slight tick downward below the 25 Nov low, there was not overlap with wave ((i)). The market then recovered this morning and made a slightly higher high than the 26 Nov high.

The proposed expanding leading diagonal we showed yesterday played out on the 5-minute chart in the overnight, and played out in the following fashion, having to increase the time-frame to the 15-minute chart to show the subsequent bars.

ES Futures - 15 Minutes - Subsequent to the Diagonal

 

Leading diagonals are often "A" waves. So, there was good reason to suspect this one was too. After, a diagonal - for reasons of alternation - the "C" wave that follows an "A" wave should be an impulse, and not a diagonal. Here you can see clearly labeled are five non-overlapping waves up, likely for the "C" wave, after a three-wave decline that just breeches the lower border of the diagonal.

I should just indicate, this is "as expected". One expects a diagonal followed by a not very deep retrace to be only part of an a-b-c sequence, as you see here.

So, back to the hourly chart. Price still needs to get above wave ((iii)) to confirm a fifth wave ((v)) in progress. But, I am wondering if the deep and long fourth wave, doesn't possibly mean the fifth wave might extend. Notice in the first chart that wave ((iii)) and wave ((i)) are very nearly at equality with each other, but wave ((iii)) is, indeed, the longer wave.

This is a reminder than Monday is the last trading day of November - with the potential for sloppiness due to 'window-dressing' - and that Tuesday is the first trading day of the new month with the subsequent potential inflows from pension funds, 401k's, company bonuses, dividend reinvestment plans, etc.

We'll see how it goes.

Have a very good rest of the holiday.

TJ

Close Call

With the invalidation yesterday of the downward expanding diagonal we showed in prior posts, and conversion of some of it's waves into triangle format, that left a count that we labeled yesterday tentatively as a 5-3-5 structure. On the ES hourly chart, we may now be working on that last -5 as shown in the chart below.

After the ((e)) wave of the triangle, there are currently three-waves up, and a fourth wave down if it doesn't invalidate. Readers should verify that all of wave ((iii)) in this count is above a line from wave ((e)) to wave ((ii)).  The ((e)) wave is the 'origin' or 0 point of the new upward wave. There is a Flat for wave ((ii)), and as it sits now, wave ((iv)) is a longer-in-time sharp wave for alternation - provided it does not invalidate. As it was, wave ((iv)) was so long that it created a 'close call' with overlap.

Intraday today, we showed the Classic Pivot Points, and the support at the low of the day on/near the Daily Pivot Point (PP). We then began counting upward on the ES 5-minute chart, as below.

It was an 'all-day-grind' with higher highs and higher lows which we suggested 'might be' an Expanding Diagonal. It was not until the start of the next session that we were able to verify that wave ((5)) had crossed 3,633 and thereby officially made wave ((5)) longer in price and time than wave ((3)), which was longer in price and time than wave ((1)). We had previously verified that wave ((4)) was longer in price and time than wave ((2)) - meeting all of the minimum the requirements for an expanding diagonal.

There is no guarantee that the upward movement is over. Sometimes wave ((5))'s get very aggressive. But, when the proposed diagonal has ended, then it must by rule stay above the origin of the pattern for a Leading Diagonal - otherwise it is ending.

Again, the ES keeps making these expanding patterns. It may have something to do with the Expansion of the money supply by the Fed. It may not. But, I'm not asking these patterns to be made - I'm just counting what I see according to the rules.

So, do have a good start to the holiday if you are celebrating it. I will be.

TraderJoe

Transition Invalidates Smaller Diagonal

Yesterday, we said there was a possibility of extending the flat wave (shown in the chart below) upward, to extend a correction in price and time. As a triple combination, though, we said the odds were quite low, as this is a fairly rare pattern. The overnight news that the GSA was going to allow the Biden transition to proceed was greeted well by the market, and prices did add another leg higher, but went so far as to invalidate the potential downward diagonal as shown in the ES hourly chart, below.

ES Futures - 1 Hr - Diagonal Invalidated

As you can see, prices went marginally over the high, but sufficient to invalidate the downward diagonal. So, the alternate pattern we showed at the time of the diagonal creation (w),(x),(y),(x), and (z) - the expanding triple zigzag - takes over the labels. Why this expanding type pattern has repeated on a number of occasions is interesting. First, triple zigzags are quite rare. Second, when triple zigzags occur they 'often' form in a strict channel. So, for the pattern not to be valid likely means it is part of a larger pattern - most likely a triangle. Right now the market is making patterns whose odds are quite low.

That being the case, then moving to the ES 4-Hr chart, below, suggests a 5-3-5 pattern may be in the making, as below. Yes, as a triangle, in the center of the pattern it's odds were fairly low too. But it is countable.

Such a pattern might be to Intermediate (Y) of the upward diagonal looking pattern or Minor B in the larger (X) wave pattern. Those patterns were posted at this LINK. Please have a look if not familiar.

With the holiday about to begin and typically strong stock market seasonal patterns just before this holiday, new highs are not out of the question.

Have a good start to the evening.

TraderJoe  

P.S. After the market closed and the data became available, I added this chart. I have shown it many times in the past.

CBOE Equity Only Put/Call Ratio - Daily - Pretty Low

Just 'be aware' of the string of highly speculative readings, and note where the indicator was at the prior market top in February. The 10/50 period moving averages have been lower, but not by much. 

Regards,

TJ