Sunday, February 28, 2021

Still the Larger Count & Reasonable Alternates

The ES 2-day wedge count remains the primary count until we see something that does not fit.

ES Futures - 2 Day - Count

In previous posts we have shown how all degree labels 'fit like a glove', down to the most recent Minor B wave and how it remains shorter in both price and time than all of the Intermediate (X) wave - it's most recent higher degree down wave. Now the question remains whether or not a downward wave will overlap the Intermediate (W) wave (at the yellow dotted lines). If it does, then there is a slight possibility the waves can be numbered as (1) through (5) instead of (W) through (Z).

According to measurement calculations a 100% x (X) down wave can still overlap at 3,570 with room to spare on the (W) top of 3,587; again this is if the wave intends to make a contracting diagonal. But, this measurement is to the A wave of (X), not the C wave of (X). If measured from the C wave of (X), then downward overlap with a shorter wave than (X) simply can not happen in the ES.

However, in the Dow futures, there is 'currently' nothing preventing downward overlap with a less than 100% wave from the C wave in it's (X) wave, as Illustrated below in the potential alternate.

Dow (YM) Futures - 2 Day - Plausible Alternate Diagonal

The issue with this alternate as a diagonal is that it does not 'look' very contracting. It simply has less of the 'right look'. Such a pattern would also clearly invalidate below 28,806. And so, this leads me to think another plausible pattern is that the Intermediate (X) wave is not over yet, and might look like this.

Dow (YM) Futures - 2 Day - Plausible Channel Alternate

This construction might allow the Primary ((B)) wave to extend further in time, and still allow for a roughly 25% 'bear market' if interest rates rise. In this case, relative to degree labeling, Minor B-3 is still shorter in time and price than the larger Intermediate (W) wave, and the C-5 wave, down, would be shorter than all of Intermediate (C) to the 23 March 2020, low. In this count, clearly the Minor A-3 wave down can be allowed from a 'price' standpoint. The issue is whether it can be allowed from a 'time' standpoint. More work remains on that point, so stay tuned.

Have an excellent rest of the weekend.

TraderJoe

Friday, February 26, 2021

Very Dicey

Here's a quick update. The wave counting is very dicey. Monday is the first day of the month with possible inflows.


Keep your eye on any stimulus progress over the weekend. Have a good start to it!

TraderJoe

Thursday, February 25, 2021

Lots of Uncertainty and One Objective Item of Many

Without lower lows and lower highs, or higher highs and higher lows there is lots of uncertainty in the count. That will be addressed in short order from comments earlier today. But here is one objective item (of many you might chose).

NQ Futures - 1 Day - Close Below Band

The NQ futures closed the day below the lower Bollinger Band for the first time since the end of October, 2020! Can they continue lower? They can. One target might be the green 100-day moving average also shown on the chart. Closing below the band 'might' be the first step in a true breakdown lower. Still, a lower local low was not yet made.

Now to address the uncertainty in the ES count, this comment was posted earlier in the day..

"I'm sure you have lots of questions at this point. I do, anyway. That's because an awful lot depends on whether we take out the lows or not. I can currently find several ways to count.

ES Futures - 4 Hr - Possibilities

If we count the triple-zigzag upward yesterday as an expanding diagonal, this 'could be' the deep retrace of the diagonal, only. If we count the triple zigzag as just a triple zigzag it could be (x)? If it can be counted as a-b-c, up, some evidence on the 4-hr chart, then it could be (ii), of a contracting diagonal downward.

One item of interest is the 'speed of the decline'. That wouldn't seem to fit too well yet with a continued expanding diagonal, and might better fit with a contracting one, as an 'a' wave down, if an upward count is disrupted.

Bottom line, highs or lows must be broken to better determine the count. And there is a lot of 'algo risk' between 3,800 and 3,900."

So, the uncertainty remains going into the settlement. But even in this index, the daily bias has temporarily turned lower with a close below the 18-day SMA. And, a lower local low was not made, yet.

Have a good start to the evening.

TraderJoe

Wednesday, February 24, 2021

DOW's new high

Here is a chart I did earlier in the day on the Dow futures (2-day interval).

Dow Futures (YM) - 2 Day - Higher High

Given the higher high it is possible the Dow is extending towards the (Y) = 0.618 x (W) level. We said in many posts that such a thing was possible. The Dow futures (YM) settled at 31,958. The chart was done before the settlement. For those counting the potential five-wave contracting diagonal, at 32,445 the futures would completely become incapable of forming a contracting diagonal because a fourth wave down, (4) - if (X) were (2) - could not remain shorter than wave (2), and overlap wave (1) or (W) in this case, and that would break the 'rules' for a contracting diagonal.

Neither the NQ nor the ES futures yet closed over their prior all-time-high.

Have a good start to the evening.

TraderJoe

Tuesday, February 23, 2021

H & S Target Met

Yesterday, we were counting downward, showed the potential Head & Shoulders formation on the ES 4-Hr chart (also below), and suggested there was possibly a very difficult diagonal forming in the downward direction. After the H&S target was met near 3,800 - 3,810, then prices began a spirited rally. The H & S level attained 3,804 was also at the 50% retracement of the entire prior up wave we showed as minute ((i)) through minute ((v)) below.

ES Futures - 4 Hr - Five Waves Up and 50% Retrace, so Far

The upward count is correct in form with five waves including a triangle fourth wave. Now, it is a question of whether they are minute degree waves to Minor C, or minuet degree waves to minute ((i)). As far as I can tell there is nothing in the wave sizes to rule out a further extension of the Minor C wave, and it was clearly indicated this could happen. Prices do need to get over the top for that count to occur.

If prices continued downward, it would likely be as a diagonal. If they don't, the choppy move can be counted as an a-b-c correction. Clearly, the 3,800 level has to be breached lower to continue a downward count.

The NQ futures have a much deeper wave traveling downward to almost breach the 01 Feb low, but they didn't. They also pierced the lower daily Bollinger Band and then rebounded into it. The ES did not touch or pierce the lower band. Neither chart ended the day with the slow stochastic in over-sold territory.

Have a good start to the evening.

TraderJoe

Monday, February 22, 2021

H&S Activated

Over the weekend, a couple of us made the case for a potential head & shoulders pattern on the ES 4-Hr chart, and we indicated that breaking the fractals at 3,880 might set it off. Today, the market broken those fractals below the four-hour alligator indicator, and - as well - the following observation is to be noted on the daily chart.

ES Futures - Daily - Lost Embedded Stochastic
 

As you can see, the daily slow stochastic lost its embedded status, and price immediately and price went down to contact the 18-day SMA, 'the line in the sand'. This may well set up 'the battle for the 18-day SMA'. I will also note that price overlapped the prior January high on the futures.

On the cash chart, the best pattern we are able to count is that of a potential contracting diagonal. If it completes properly tomorrow, there could be a rebound in prices following it, and then lower lows. Here is the cash chart as we counted it, so far, including the proviso that such a pattern 'must' complete properly to be valid.


From an EW perspective, it almost seems as if there is someone purposely trying to make the waves a difficult as possible to count. I mean this wave starts out with a leading diagonal micro ((A)) wave which was itself a real bear to count. I know why this is happening. The powers that be have a vested interest in not letting anyone else know that a turn is possibly coming. They are trying every strategy possible to hide a 'five-wave-structure'. So be it.

Patience, calm and flexibility are still required as we attempt to detect if there is pattern completion, and a retrace that remains below the all-time-high.

Have a good start to the evening. 

TraderJoe

Sunday, February 21, 2021

'Possible' Head & Shoulders

It is sometimes gratifying when two analysts come up with similar conclusions. The chart below is of the ES 4-hr futures. A frequent reader and poster on this site (Greywaver) posted a version of this chart a few moments ago in the comments for the previous post. I'd like to expand a bit.


On the chart in the lower panel is the Elliott Wave Oscillator (EWO). Divergence with the recent high is shown. Also plotted is volume on the futures contract; notice how low the volume was at the highest high. 

Also, on the chart are two red (down) fractals at the 3,880 level, and one green (up) fractal. The significance of these red fractals on the ES 4-hr chart is that if they are exceeded lower, they would be a hit below the third indicator (Bill Williams' Alligator). Based on our count, we 'could' get a smaller second wave up in the futures. If that second wave does not break the green (up) fractal, then it is likely the Alligator is providing the resistance to upward movement.

Regarding the Alligator, notice that is has curled downward, and this is somewhat difficult to do on the 4-hr time frame. Not impossible, just harder to do than, say, on the 30-minute time frame. If the Alligator remains curled over, it will likely provide upside resistance to price movement.

Note that up volume on the last up move to the green fractal was lower, and thus, volume was not confirming the price move. 

So, if as indicated, the pattern is a head & shoulders pattern, then the initial measured move target would be down to the 3,800 level. Breaking the green (up) fractal would spell trouble for the pattern.

Here are some additional technical indications. Once again, there is a McClellan Oscillator divergence.

NYSE McClellan Oscillator - Daily - Divergence

And, here is another look at the NYSE cumulative advance/decline line. 

NYSE Cumulative Advance/Decline - Daily - Lower High

This indicator has recently back-tested a prior up trend line and has backed away from it a bit. Still this indicator does not yet have a 'lower low' or a more significant divergence with price that would signify a much more significant decline in price.

This is the third post this weekend. If you have not read the other two yet, you may wish to. Have an excellent rest of the weekend.

TraderJoe

Saturday, February 20, 2021

BITCOIN Special

I have for the longest time refused to provide an analysis of Bitcoin for one reason - because I couldn't find a data set that was consistent with degree labeling. Today, I found such a dataset and am therefore providing this preliminary analysis that meets degree labeling criteria. Here is the weekly chart of BTCUSD with log scale.

BTCUSD - Weekly - Close (Log Scale)

When you look at this analysis you may not see what I see, so I will take you through it. Bitcoin was invented in 2009; it's earliest price history is difficult to determine from data that can be charted. After much trouble, I was able to pull up this data set of price and volume. So, here's what I see on the chart. (Remember, in text double parenthesis = circle; or ((1)) = circle-1 on the graphic).

  1. Wave Primary ((1)) is the introduction phase; given a birthday in 2009, this 5-year period to 2014 is reasonable. Volume grew a bit during the period, as expected.
  2. Wave Primary ((2)) may be either a Flat, or a zigzag. It is hard to tell without further exploration of that wave in detail. As charted, however, it is longer in 'time' that what is charted for wave Primary ((1)). That makes it a realistic second wave. There is a big down volume spike in the last third of the wave.
  3. Wave Primary ((3)) is the 'wide recognition' phase. This is the phase in which wave volume rises dramatically. Notice the rise in the 50-period average of volume. It is the phase in which the formal exchanges adopt the futures contract, there is widespread coverage of it in newspapers and the financial media.
  4. Wave Primary ((4)) may be a more complicated sharp, or it might even be a triangle. Again, hard to tell without more investigation into this wave. Still, at least on a closing basis, there is no overlap with wave Primary ((1)), which is required for an impulse count. Those who have not investigated the long term price structure may inadvertently place Primary wave ((2)) at this location or at the early 2019 low. Degree labeling argues against that. Wave Primary ((4)) is as long in time as was Primary ((3)), as drawn. Again, this is excellent wave proportion. It contacts the lower boundary of the logarithmic parallel up channel. Average volume falls off noticeably indicating the correction.
  5. Wave Primary ((5)) is the mania phase where a) everyone tries to count it, b) every retail trader tries to trade it, and c) where Bitcoin millionaire hopefuls jump on board. But, look at the volume. It is dropping off drastically, and the volume is providing an obvious non-confirmation signal. Clearly, using log scale, wave ((5)) very nearly equals wave ((1)) in length.

So, there you have it. That is how I see the larger degree labels being logical on Bitcoin. You can now see how each of the sub-divisions of wave Primary ((3)) are shorter than all of Primary ((1)) on a log scale. So, it makes perfect degree sense. Can Bitcoin go higher? It sure can. If it's at $55,000 now can it go to $60,000 or even $100,000 on this chart? Nothing in the wave structure rules it out, BUT, often (not always) some Elliott Waves end near the mid-line of the price channel: near where we are now.

Still, I have no interest at all in following the contract or the coin. One reason is that there are multiple of them now, as the CME looks to introduce futures contracts on Ethereum (called Ether contracts). If you are interested in that story, you can read it at this LINK. I hope some information in this post has been helpful.

Have an excellent rest of the weekend,

TraderJoe

Friday, February 19, 2021

Mostly As Expected

Unless you are counting the waves in real time, it is hard to imagine the differences between futures and cash. The futures are making wild overnight swings that never even show up in cash. Yesterday, we said we might get a failure wave (see yesterday's post). We did. We also commented that the up wave could be over or it could continue. It did continue, and it still failed. Furthermore, we said one of the ways it could continue would be to form an expanding diagonal - even though that was  more rare than a third wave down. That expanding diagonal did form, and the up wave still failed. Here is that overnight diagonal on the ES 15-min chart.


This is a truly staggering wave. Wave ((4)) is a full 30+ points in the overnight market, and it never shows up in cash. And the diagonal formed perfectly in every detail. Wave ((5)) is longer in price and time than wave ((3)), and wave ((3)) is longer in price and time than wave ((1)). Wave ((4)) is longer in price and time than wave ((2)) and it overlaps wave ((1)), but is does not travel beyond the end of wave ((2)). Each sequence is a zigzag.

Because of how overnight stops might have been hit compared to a cash chart, it almost seems like it is time to relegate the cash charts to the rubbish bin. Ira doesn't use them (except for ETF's).

After the up wave, we counted five waves down on the ES 5-minute chart, in an impulse as below.

ES Futures - 5 Min - Impulse

Wave ((2)) is a zigzag and - for alternation - wave ((4)) is a double-combination flat failure that does not overlap wave ((1)) at it's terminus. There is a lower low at the end of the day.

Rarely will you see waves like these. There is a lot of compression in the wave structure. Yet, we are seeing failure waves - waves that fail to meet their typical upside price targets. That is a solid warning to the wave counter: something is going on that is quite different!

So, taking the waves we have so far (in the futures) and putting them all together looks like this on the ES hourly chart.


For the nested i, ii count, then micro  wave ((2)) should remain below the trend line from the top. And, of course wave ((2)) 'must' remain below of wave ii.

Have a good start to the evening.

TraderJoe

Thursday, February 18, 2021

A 1.382 Wave

This morning's lower low wave was very near the 1.382 external retracement level as shown at the bottom of chart below, which is of SP500 cash (15-min). 

SP500 Cash Index - Diagonal i and Correction (Failure?) ii

Because the down wave this morning was shorter in price and time in both the cash and futures than the first down wave, lower, it can either be a micro ((B)) wave or a micro ((X)) wave. The micro ((X)) wave is shown above. If the entire corrective count is micro ((W))-((X))-((Y)) to this location then the wave could be a failure wave and induce a much larger third wave lower.

For completeness, if the up wave we are currently in decides to form a full-on impulse, then the wave could possibly avoid becoming a failure wave, as below.

SP500 Cash Index - Diagonal i and Correction ii

In this case, the fourth wave sub-micro (4) should not overlap sub-micro (1) unless the up wave was to make an expanding ending diagonal - which, again, are pretty rare. 

The first chart has a fair chance of it being correct, show it is shown first. One needs to keep an eye on the overnight futures to evaluate the prospects for either case.

Have a good start to the evening.

TraderJoe

Tuesday, February 16, 2021

Minor C - or Alt: Minute ((i)) - Completed

At present it looks like we have five-waves-up, completed, and have started a down wave in the ES 2-hr futures.


Again, wave ((iv)) might be a triangle in its entirety, or it might be counted as (w), (x), triangle (y). Either way, wave ((v)) is shorter than ((iii)) which is shorter than (i). The wave ((iii)) location has been overlapped downward. The Elliott Wave Oscillator is below the zero line again.

If Minor C is completed, then 3,650 should be exceeded lower. If Minor C is not completed, it might be possible to downgrade each of the wave degrees to minuet degree (i) - (v) and have minute ((i)) of C be at the upper right. I'll be studying the chart later to see if anything prevents that from a degree perspective. Right now, the triangle is telling as it was not a running triangle and is possibly the first regular triangle in quite a while.

A gap lower would help clarify whether new local lows are to be expected.

Have an excellent start to the evening.

TraderJoe

One Objective Measure

In the course of a year, thousands of objective measurements of waves are taken. Is this wave longer in price than that one? Is that wave shorter in time than this one? Etc. Below is just one such objective measurement. At this point, its purpose is to merely inform, not close the door.


Based on the futures movement last night, if measured from wave C, then a downward wave can not overlap and remain shorter than C. It would miss by 10 points. If measured from the A wave low, there is, still barely room for such overlap. There is also room for such overlap in the Dow from its C wave low.

As noted in previous posts, it might be difficult to distinguish a (W)-(X)-(Y)-(X)-(Z) wave in a wedge from an ending diagonal labeled as its triple-zigzag counterpart (1)-(2)-(3)-(4)-(5). The above measurement suggests - but does not yet conclude - that a contracting diagonal is not valid in the ES. And it IS still valid in the Dow (YM) futures.

This is just a measurement for information, and primarily pertains to those looking for a final "five-up" as opposed to a Primary ((B)) wave.

Have a good start to the day,

TraderJoe

Sunday, February 14, 2021

Answer to the Quiz

Yesterday for those blog readers really, really interested in Elliott Wave, I indicated how the current wave structure might also resolve a true conflict that I was seeing between my own work and that of Neely in Mastering Elliott Wave. I provided a hint that the wave structure of interest was nearer the beginning section of the chart.

First, here is the item of interest from Neely: it is that of "running flat waves". I have long maintained that for a wave to be "corrective" to another wave, they must have some overlap in common. It doesn't have to be much, but there must be 'some'. Neely disagrees. Here is a diagram from page 5-38 in his book, Mastering Elliott Wave. See the lower chart, titled, "Running".

Here you can see that Neely clearly suggests in a "running flat" wave, the c:5 can have no overlap with the a:3 wave, or with the initial up wave, and still be corrective to it. I disagree, and I think I see what the source of the conundrum is. Here is a chart of SP500 cash index, versus the futures.

Running Flat - Futures versus Cash

When one examines what I have called the "running flat" wave in the futures on the left, it is shown that there is, in fact, overlap in the futures market of the minute ((c)) wave with both of the ((a))-3 wave and the Minor A wave - allowing it to be corrective to it. And, yet, when one looks at the cash chart, no such overlap exists!

So, this seems to be where the source of the conundrum is. Earlier in Neely's book he indicates that only cash is to be plotted. In fact, he says never plot the futures because there is 'time decay' in the contracts.

I believe it is this item that has led Neely astray to some extent. Just like that gap on the cash chart tends to tell the naive observer than there is no opportunity at all to trade in a gap, the futures show there is clear and perhaps more continuous price movement in some portions of the cash gap. (Yes, it is true there are some 'true' futures gaps with no trading as well - sometimes on a weekend).

The problem with Neely's contention is that there is no way to distinguish the non-overlapping wave with what can be a portion of, say, a larger third wave. And that is a huge problem! No overlap means something very special in Elliott wave, and I maintain that the distinction between overlap and non-overlap must be accounted for in an accurate wave count.

So, I will reiterate two principles of wave counting: 1) for a wave to be corrective to another, there must be some common price territory between the two waves, and 2) the cash indexes - such as DJIA or the SP500 - are a bit misleading in that they do not encompass all price and time that their related individual stocks, components or derivatives trade. Thus, the cash indexes should be 'taken with a grain of salt'. They do not reflect all price action at all times traded. Even individual stocks now have "extended hours" for trading, which makes the situation even more complex. For this reason, wave degrees must use the futures (or extended hours for stocks) which provides a better estimate of the time involved to create the wave.

I hope this quiz was instructive - whether you chose to complete it or not. This is the third post this weekend, and you may wish to read the other two now - if you haven't already. Have an excellent rest of the weekend.

TraderJoe



Saturday, February 13, 2021

Time Study of Correction Degrees - ES Futures

The ES 2-day chart contains the waves as we have labeled them so far. The purpose of this post is to just examine the degrees involved in corrections and confirm whether or not they fit degree labeling concerns. First, here is the chart.

ES Futures - 2 Day - Correction Time Study

The first exercise is to start at the lower left of the chart and count the first five non-overlapping minute waves up to Minor A. The next item to note is the length in time of the entire "running Minor B correction" which is 16 two-day bars. I still contend this correction is the only way to make an approximately equal wave to Minor wave A up in time, as a corrective B wave. This is followed by another five non-overlapping minute waves up to Minor C of Intermediate (W).

Then, we note the Minor A wave down is longer in price than the Minute ((c)) wave down in Minor B and the Intermediate (X) correction is longer in time than Minor B correction. Since it is longer in time it should be 'either of the same degree or one degree larger'.  Since it is the largest correction on the board in both price and time, we initially select Intermediate (X) for this correction, the larger degree than the Minor wave. We note it is longer than 16 bars by comparison (upper measurement), and it is 20 bars in total (lower measurement).

Next, we move over to the right-hand-side of the chart. Here is shown 16 bars from the Minor A wave contracting diagonal. And we note that the Minor B wave in total is longer than 16 bars, but less than 20 bars. The conclusion we reach is that it just fits! In other words, it is longer in time than the first Minor B wave which means it should be of the same degree or one higher degree, but it is shorter in time - and price - than the Intermediate (X) wave. This is shown by the vertical lines clearly delineating the length in bars of the correction. It is one bar (two days) shorter! And, because it is shorter in time than an Intermediate wave, it can, in fact, be a Minor wave.

So far, the degree labels fit like a glove. 

So, we are now in the Minor C wave up. And it becomes a question of whether this wave is subdividing or not.  With that in mind, I had a look at the recent C wave up in view of The Eight Fold Path Method in the ES 2-hr chart, below.

ES Futures - 2 Hr - Impulse with x((i))

As the chart shows, with 119 candles the Elliott Wave Oscillator shows both a shallow second wave and a pretty clear fourth wave signature, probably in the form of the triangle we referred to in earlier posts. The wave would have the form of an extended first wave. So what is not to like about the wave? Well, in this case minute wave ((iii)) would break a line from 0 - ((ii)). This breaks Neely's guideline. But, as the Fibonacci ruler shows, wave ((iii)) could be located at the 0.618 Fibonacci extension. Now, while Neely doesn't specifically say whether the 0 - 2 trend line for 3 must hold for all wave shapes - regardless of which wave the extension is in, I think it is ALSO possible to resolve this conflict if wave ((iii)) ended earlier, and the fourth wave is a complex w-x-triangle-y. In other words, there is a triangle, but it is only part of the correction. This resolution might allow both guidelines to be met.

But, the location of the 0.618 Fibonacci extension is more or less providing blinding evidence in this case of the extended first wave. So, that likely means that the fifth wave, minute ((v)), should be shorter in price than minute ((iii)).

Readers of this blog with curiosity can also use the first chart in this post to resolve another conflict in Neely. (Hint: it's near the beginning of the wave rather than the end). Can you find it? If so, leave a comment. This is the second post this weekend, and if you have not read the first one yet, you might like to.

Have a great rest of the weekend.

TraderJoe

Friday, February 12, 2021

If I know, They Know

In several recent posts, I have written regarding the dividing line between a potential diagonal count and a continued Intermediate (Y) wave higher is the level of 3,943 - 3,950 depending on how much overlap you wish to see over the (W) wave. If I know that, then the quants and the machines know it, too. There are much smarter minds in this game than mine, for sure. Today's higher high allows the Intermediate (Y) wave to continue in some manner but is still not fully sufficient.

Yesterday, I wrote that the bias was still up and a triangle could break to the upside. It 'may' have but it could also be the (b) wave for an expanded flat for the minute ((ii)) wave. Below is a brief illustration.


If the minute ((i)) wave is completed then the up wave for the lower degree minute (b) wave can be theoretically as long in price or time as the minute wave ((i)), up, in the same direction, subject to the usual rules for "B" waves, in general.

So, if the up wave is continuing, it is still possible to see a 38.2% or longer down wave. Then, a third wave up would likely significantly break the wedge upward. This might come on the passage of stimulus or significant vaccine news, for example.

For those of you who wish to see the triangle, I'll leave that drawing and counting to you because the triangle looks stilted to me (with vertices that don't hit trend lines, and a very early break before the apex, etc.). On the other hand, the (b) wave might more easily be counted as a series of zigzags.

Have an excellent start to the evening,

TraderJoe

Thursday, February 11, 2021

Whippy & Indeterminate

We followed the waves closely overnight and today. It would be nice if there was more to tell you. It would be more exciting than boring. But at the moment - on the hourly chart - all there looks to be is three-wave sequences down from the recent high.


Obviously, one pattern could be a triangle that breaks higher. Another pattern could be part of a diagonal that eventually moves lower. As such, it is pretty much dependent on the pattern to see how it finishes. Still, with the daily bias still up, one can't rule out a return to near the upper daily Bollinger Band. But, one can not strictly rule out a move lower here, either. It's just that the latter likely has lower odds than the former.

Have a good start to the evening.

TraderJoe

Wednesday, February 10, 2021

Not even a 23.6% Retrace Yet

Futures popped higher overnight, then began to reverse after the morning economic news reports. The short term chart looks like this. Confirmation is needed of trading below the x wave before having more confidence in a larger move lower. 

SP500 Cash - 5 Min - Back-test of Wedge

The slightly longer term ES 2-hr chart from the Minor B wave low looks like this.


 

It is likely that at least a 0.382 retrace should be made; and a larger decline is definitely possible. In the cash market it is possible to count this up wave with an extended fifth wave as posted in the comments previously. The longer term daily counts remain the same.

Have a good start to the evening.

TraderJoe

Tuesday, February 9, 2021

Minor New Highs

The two best options still remain as below. The first option is that the market is finishing the Intermediate (Y) wave as shown in the first chart, below which is the two-day ES futures.

ES Futures - 2 Day - Wedge

If so, the above option would finish tomorrow or the next day. And, if not, if the Minor C wave is extending in time, then it looks like the chart below, that we have posted before, showing that minute wave ((i)) is very near completion.

ES Futures - Daily - Minor C Subdivision

In this option, a reasonable second wave correction might bring prices back to near the 18-day SMA before breaking the upper wedge line to the upside. What was a little odd today is that we found a way to count cash as having a potential fifth wave extension in this up wave. If that holds, it might have implications for the later count, as they appear more rarely.

Yes, a third option remains on the table for the near-term. That is a contracting diagonal from the 23 March low. But, that count must await an overlapping downward wave of the right length and price can not go above 3,950 prior to making that down wave. We will only show that possibility if or when it materializes on the two-day chart. But, we have shown that possibility in prior posts at this LINK.

Have a good start to the evening.

TraderJoe

Monday, February 8, 2021

More "Running Waves"

As the machines try to reach the upper daily Bollinger Band (tonight at 3,928) the market keeps making more and more "running waves". These look like three waves up in a "b" wave, and five waves down in which prior lows are not broken on certain intraday time frames.

ES Futures - Daily - Minor C Wave

 

The result is we remain in minute ((i)) until the local pattern breaks. The count from the low has been a little squirrel-ly but might count something like this on an ES 2-hr chart now that there is a new higher high.

ES Futures - 2 Hr - Minute ((i)) of Minor C in Progress

In this case, the first wave minuet (i) is the extended wave in the sequence. Both new highs are divergent on the MACD on this time frame.

Make no mistake, the daily bias remains up. A current target is the upper daily Bollinger Band, and sometimes, not always, strong up Monday's lead to a Tuesday reversal.

TraderJoe


Sunday, February 7, 2021

Mind Games & Projections

This is the second post this weekend, and if you have not read the first one, it is sort-of a prerequisite to this one. In that post, we said there are two good possibilities here 1) that a diagonal forms, or 2) that the price structure breaks above 3,943-50 which makes the diagonal much less likely, and the 2-day wedge breaks upward. Here is the daily chart again with the second possibility more clearly outlined.


So, in this case we said that because wave Minor A is likely a Leading Diagonal, then by the Principle of Alternation wave Minor C should be an impulse. We said it is possible for such a Minor C wave to subdivide. We are now at the point where we can deal with that potential impulse because the Minor B wave is "in the market".

The first and most immediate issue for the impulse higher is that the upper Daily Bollinger Band is directly ahead of the market, around 3,896 as of Sunday, but it will likely push outward after the open. Below we deal with the case where the Minor C wave subdivides.

So, if this wave is the minute wave ((i)) up, then there should be a minute wave ((ii)) pull-back, and it would likely be on the order of 50 - 62% of this current minute ((i)) wave. The invalidation level for this wave is shown. A minute ((ii)) wave can not go below the low of Minor B. Then, if there is a strong minute wave ((iii)) one has to wonder where such a wave could go? 

We showed on the second chart in yesterday's post, that the 0.618 projection of the Minor A wave is at 3,964. That would be the wave that breaks the potential diagonal. Could it go further? Yes. Eventually. Here is a weekly chart for you to review.

ES Futures - Weekly - Fib Projections

This chart contains two different Fibonacci projections. The longer lines (toward the left) are the External Retracements (ER) from the Feb - Mar 2020 decline. It is clear price is just peeking through the 1.382 ER at this time. Look at the top of the price bar two weeks ago. It was right at the 1.382 level. Was it wrong to call for a correction there? It was not. The market pulled back more than 200 S&P points in the largest decline since November. Did the price structure develop into a larger (X) wave at that time? It did not. In fact, it appears to have made another "running flat" correction: a potential sign of strength. You can see that the 1.50 and 1.618 ER's are still above this market. Could price go there? It could.

The second type of measurement is the usual forward projection from the (W) and (X) waves. Notice that the 0.618 forward projection and the 1.618 ER form a "Fib Cluster" of about 50 points in width - about three days trading in this market - between about 4,100 to 4,150. That might be a point of significant resistance to upward movement.

Again, I call this post "Mind Games" because first the market must prove it can bust the diagonal. If it can't, then more bullish scenarios are off the table. Second, have a look at this Russell 2000 weekly chart.


Notice that the Russell has just now exactly reached it's 1.62 ER with exceptional precision. So, there is a plausible reason to think that if the ES is going higher, it might be by funds rotating out of the Russell and into the larger caps. It is at least a rational case.

Again, the immediate issue for the ES is that the daily Bollinger Bands are directly over the market. The market often finds resistance there. If the market makes another high Sunday into Tuesday of this week, there will likely be a way to count a C wave of the diagonal at that location. Then the issue is to see how deep any minute wave ((ii)) is. We already know there is a potential 200+ points of risk in that wave. And, from an objective viewpoint, one must be patient to see if that 3,943-50 level breaks before assuming the higher targets. Otherwise one runs the risk of getting caught up in the exceptional bullishness of the moment. 

We shy away from being bullish or bearish in terms of determining wave counts for trading. For that we are more analytic. Being bullish or bearish is more for investment strategies and longer term time frames. And that's one reason why we don't suggest trades or investments plans - because different people have different objectives, time frames, and desired levels of risk.

Have an excellent rest of the weekend.

TraderJoe

Saturday, February 6, 2021

Some Additional Notes

Way back on November 14th (post at this LINK, entitled "For Those Seeking Five-Up"), we said that it might be difficult to distinguish an Intermediate (W)-(X)-(Y)-(X)-(Z) count from a potential contracting diagonal composed of the exact same waves but labeled as Intermediate (1)-(2)-(3)-(4)-(5). The good news is that we can now add some additional notes to that discussion as per the ES 2-day chart, below.

ES Futures - 2 Day - Limitation on Diagonal

The very first note we will add is that we do not know that up movement is over yet. Daily price is still over the 18-day SMA, and so it has positive bias. Each day, the upper Bollinger Band keeps moving out a tad. Second, we will note that the current (X) wave retrace is not anywhere close to the 'typical' 62 - 81% retrace listed in the Elliott Wave Principle for second waves in diagonals. It 'could' be a wave that turns into a diagonal - anything is possible - but it bucks the odds for a diagonal for that reason.

Still, there is a very important measurement that can help separate the two counts cleanly, and that measurement is shown above. In order to make a contracting diagonal, if wave (X) is (2) in such a diagonal, then the current up wave would be (3), and the next down wave would be (4). And, wave (4), as we know must be, by 'rule', shorter than wave (2) and should overlap wave (1) - or (W).

Well, as the Fibonacci ruler shows that means the current wave (Y) or wave (3) - in the diagonal - would be limited to about 3,943 - 50, depending on how much overlap you want to see on wave (W) or (1) in the diagonal. In the sketch above, the Fibonacci ruler gives about five points of overlap. Let's say that for all intents and purposes 3,950 is a 'hard cut-off'. Anyone proposing a contracting diagonal after 3,950 would be violating a basic 'rule' of wave counting, and wave (4) would likely not overlap wave (1).

Does that mean the market can't go past 3,950? It does not. It just means that, if it does, the diagonal is ruled out, then probably the (Y) wave of the contracting wedge is extending. The (Y) wave of a double-zigzag is not required to be in a wedge. It could push the upper wedge boundary outward to form a better parallel with the lower wedge boundary on the two-day chart shown yesterday. How could such a thing happen from a wave counting view-point? Let's go closer in on the 1-day chart, below.

ES Futures - Daily - Status

This chart shows the current wedge line (dashed cyan color) and a strict Elliott parallel channel for a zigzag (solid magenta color). We can see that the Minor A wave is a Leading Contracting Diagonal. It was a stinker of a count taking more than three months, but it has been exceeded higher, proving itself as Leading rather than ending. Then, there was minute ((a)), ((b)), ((c)) downward to the Minor B wave in which the minute ((b)) wave was that next contracting wedge that looked very much like a diagonal, but can only count as it's triple zigzag counterpart, upward, minuet (w),(x),(y),(x),(z). We know this because that wedge was not exceeded lower in less time than the wedge - or potential diagonal - took to build. 

Then, the minute ((c)) wave down is either the contracting diagonal with poor form, as an ending diagonal, that I sketched out a couple of times in prior posts, or it was a 'three' and not a five. In the later case then Minor B can be counted as minute ((w)), ((x)), ((y)). Either is acceptable, but counting in real-time I think it was the former - as it is too complex to have minuet (w)-(x)-(y)-(x)-(z) inside of the larger minute ((w))-((x))-((y)). You can see it as you like, I know what if felt like and counted like in real time.

So, that leaves us with the Minor C wave, up. If the wedge and/or parallel lines hold - for the 'possibility' of a diagonal count, then the Minor C wave could be nearly over: maybe another wave up Sunday into Tuesday. But, if wave C subdivides into five minute waves as is very typical, then the wedge could break upwards. If the current high is part of minute ((i)), then a minute ((ii)) wave down that holds last week's low would likely form, next, before a minute wave ((iii)) forms to break the high again.

So, because the wave (X) retracement was not the typical 62 - 81% retrace wave, and because a Minor C wave could easily subdivide, then we must ascribe some real probability to the wedge breaking upward - perhaps on the passage of a new stimulus measure or some other news. If that occurs then we look to other Fibonacci ratios shown in this chart where wave (Y) becomes 62% of wave (W) or tries to reach for equality with the same.

We have to note that while the Dow has not even made a new all time intraday high, yet, it has bounced strongly higher off of the February, 2020 high on a weekly chart. Blog readers are encouraged to investigate that aspect of the count. For our part, we have no particular bias at this time other than that provided by the relationship of price to the 18-day SMA. Clearly, for the contracting diagonal count, the Dow 'must' make a new high for a wave (3) as also required by the 'rules'.

We remain flexible, patient and calm and are counting waves in real time. Yes, sentiment is over-heated at this time, and volume is declining. But, the sentiment situation is not as bad as it was a couple of weeks ago. Still, it is enough of a problem to keep one on their toes.

Have an excellent rest of the weekend.

TraderJoe

Thursday, February 4, 2021

Still in a Larger Wedge

Here is a two-day chart of the ES futures, specifically for one reason : to show the larger wedge.


 

Still trying to adhere to degree labeling, the best count is also applied - given all of the overlaps from the (X) wave to the current time. The Elliott Wave Oscillator still shows a divergence with today's new all-time-high.

We know that the wave from the most recent minute ((a)) to minute ((b)) - although in a wedge - was not a true diagonal as the start of the wave was never broken lower. We pointed out the important fractals; they were never hit.

Sometimes wedges will pop over the top before they make a low beneath the wedge. We'll see. Price remains above the daily 18-day SMA at this point and therefore has positive bias. Price is not up to the upper daily Bollinger Band, yet. The 0.618 Fibonacci relationship is overhead by a fair bit.

The lack of overlap with Intermediate (W) at the most recent Minor B wave low just barely prevents us from calling this a diagonal. But - that could happen in the future. Showing Intermediate (Y) at or near this location might allow a diagonal count later - if and when overlap with (W) should occur.

Have a good evening,

TraderJoe

Wednesday, February 3, 2021

Just Some Notes

Just some notes on the daily chart for tonight, until we find out if the high is breached. If it is, we do have a count for that as we showed yesterday.

ES Futures - Daily - Notes

 

Have a good start to your evening.

TraderJoe

Tuesday, February 2, 2021

Above 78.6% - Yet Prior Wedge Worked Out Fine

As the result of considerable discussion on the blog, today, I am beginning to wonder if we aren't seeing an extension in 'time' of the Minor B wave, as below. 

SP500 Cash Index - 2 Hr - Minor B


The prior 2 Hr wedge worked out perfectly, and was predictive of a -175 down draft that broke the lower wedge line. However, price has retraced over 78.6%. It remains uncertain if price will make a new high or not.

The down draft in cash can be counted as a-b-c to minute ((x)), or possibly w-x-y to minute ((x)) in the futures.

Since price has retraced over 78.6% upwards, we 'might' be getting an additional extension whether as a truncation or not. Remember that triple zigzags, particularly in 'B' waves do have a tendency to truncate every now and then. If the wave doesn't truncate, that's fine. Either way, it might provide a way to make a regular old impulse down, rather than a larger diagonal downward.

Food for thought: the wave structure is by-no-means clear yet. But we do have to ask, "just why did that prior wedge work out so well?!". Yes, the start of it has not been exceeded yet in less time than it took to build. But, we also have to ask, "if an impulse down did not follow it, was it a 'true' diagonal?!!". The retrace legs were only 38% and 50% - that is short of the typical 62 - 81% retrace guidelines. So, maybe it was a wedge that was just the minute ((y)) wave.

Have a good start to the evening.

TraderJoe

Monday, February 1, 2021

Keep it Simple - 2

We have been proposing that if the market is starting the downward Minor C wave, it is likely starting that path as a diagonal. That's because all we could do without forcing a count was count in three-wave-sequences (shown below). We could not tell before this morning whether that diagonal would be expanding or contracting: it depended on the lengths of various waves. Over the weekend, we also said that today could see inflows typical of 'the-first-day-of-the-month'. It did. We also said Sunday night could provide a gap down. It did, and was quickly back-filled. With that information, here is the hourly chart of the ES futures again.


The only count we can find in the futures that meets the 'rules' is this contracting diagonal. It is satisfactory in that wave (v) is shorter in price and time than wave (iii). And wave (iii) is shorter in price and time than wave (i). Wave (iv) is also shorter in price and time than wave (ii), and wave (iv) overlaps wave (i). So, the typical length & time stamps of a contracting diagonal have been met in full. The only item a little unsatisfactory is the length of wave (iv). It's a little short of the best form, but, still, it meets the 'rules'.

Looking at the up wave in the futures since the diagonal, we count only three waves up so far. That could be it. But don't get confused or frustrated if more upward waves form. Until there are overlaps (downward) that rule out certain wave counts, the three waves could morph into five, as in an impulse. Or, the zigzag could alternatively morph into a double zigzag or it could start a Flat wave. 

The retrace right now is shy of 62% by a bit. It could become deeper if the diagonal is leading. But if the diagonal is somehow ending price could even go over the high once more. We think it's the former, but as always, be flexible, patient and calm. There is absolutely nothing in the above chart that rules anything in or out at this point.

Have an excellent start to the weekend.

TraderJoe