Odds a Little Better

Trying to see through all the whip & foam of the last three sessions is interesting and difficult. Whereas yesterday darn near made another high, today made a lower low. Now with 120 candles on the ES 8-hr chart, below, the odds have likely increased to 65-35 in favor of starting down in the minuet (c) wave of the minute wave ((iv)) of the Minor C wave, up.

ES Futures - e Hr - The Eight Fold Path Method

With today's lower low, the Elliott Wave Oscillator is red and declining for a second bar now. There is a reasonably good probability that it will come back down to cross the zero line. These are eight-hour candles so the counting really takes patience. But, that's what The Eight Fold Path Method for Counting an Impulse requires. Who ever really heard of charting 8-hr candles? Yet, that is what the method requires. The very first step is that - if one is considering an impulse - one chooses the tine frame that provides 120 - 160 candles. One doesn't just select hourly, or daily, say, because one's charts are all set up that way. One follows the method so the Elliott Wave Oscillator provides its wave-counting ability.

If the odds are 65-35, what is the other 35% for? Well, it is always possible that the minuet (b) wave extends more towards a triple zigzag than the double-zigzag it is now. Yes, this is difficult stuff, but the lower low today seems to have made its statement, and we should recognize it until or unless prices goes over the prior high again.

Further, during the intraday session, and the comments in the prior post, we think it is possible to detect a 5-3-5-3-5 contracting diagonal, downward, which both appears completed with the right form, and which may be Leading. IFF it is truly a 5-3-5-3-5 contracting diagonal, then it may only be leading. But, it's a difficult count, so we'll allow some margin for error.

Have a good start to the evening.

TraderJoe

Whip and Foam - 2

In the overnight and until the cash market opened, ES prices climbed to 4,211, and after the cash market open staged a reversal. As you can see below on the ES 5-minute chart, we could only count three-waves down in the channel shown.

ES Futures - 5 Minutes - Whippy

Then, promptly after noon, prices staged a rally, that we could again only count in three-waves up, so far. And prices did not go over the high by the settle. Prices then broke the channel to the down side and traded somewhat sideways. The down move exceeds the previous ((B)) wave, down, in both price and time. So, there is either a new wave started lower or it would be a fourth wave of an impulse. So, we can not categorically rule out that the high won't be exceeded again. With three-waves-down, it would most likely mean than any such wave starting downward would be a diagonal. There is clearly a "deep retrace" wave at this point. 

Have a good start to the evening.

TraderJoe

Catch-22

Eventually, it will catch up with him. Jerome Powell, Chairman of the US Federal Reserve, that is. At the press conference today, as the market was making new highs, he made some statements that were unsettling. Paraphrase, below.

1.  U.S. Money Market funds were still subject to 'runs' and solutions were still being sought.
2.  Some assets (like stocks) might be perceived to be high.
3.  Treasury market dealers seemed 'less committed' their role..

And a question he darn near choked on, was whether the Federal Government could even operate with higher interest rates if those appear, some day. As a result the market gave up much of it's gains. Here is the ES 60-minute chart. There has been a triangle under discussion for the last few days. This is how I think it all fits together.

 

Please refer to the ES 8-hour chart at this LINK for the larger picture on (a) and  (b). Today's new highs did barely fulfill the requirements of the triangle, but they did. The alternate would likely have to be that the triangle develops a 'flat top' like a barrier triangle, and higher prices result from that, but that seems less likely, and so is a clear alternate, only.

Have an excellent start to the evening.

TraderJoe

 

Whip and Foam

Today's intraday ES futures made some lower lows, but pretty much spent the day creating whip & foam. As a result, three-wave patterns abound. In the window on the left was a potential diagonal working downward on the ES 15-min chart, using three-wave sequences.

On the right is larger time frame ES Hourly chart. This chart could use some of the same three-wave sequences to make a triangle. As I have mentioned before, this is one of the reasons that I refer to diagonals and triangles as "cousin patterns" - because some of the very same three-wave sequences can go to making up both. And it is one of the reasons you will rarely see (not 'never' see) a diagonal leading into a triangle or directly out of a triangle: they are 'too similar' in structure and it would represent poor alternation in a corrective wave.

The potential downward diagonal on the left has not formally invalidated, but it has lost much of the 'right look' and didn't make much downward progress today.

The hourly triangle looks a bit short and stubby at this point, and might take more hours, say going into the FED meeting. IF it should prove to be a valid hourly triangle, then it does suggest somewhat higher prices than 4,200 (say 4,210 to 4,220).

Anyway, they didn't let us know by the settle. Let's see what FED day brings tomorrow.

Have a good start to your evening.

TraderJoe

Reminder of Intraday

After the longer term count posted this weekend, here's a reminder of the intraday chart. The count on this ES 8-hr chart was pretty well explained in the post at this LINK.

ES Futures - 8 Hr - Intraday Count

 

The Elliott Wave Oscillator (or EWO) has began to recover a bit as the market has made three-waves up. When we wrote the post, we noted we did not think the (b) wave up was finished yet. Today, the ES wrestled tantalizingly all day with the high, but did not pop through it. Other markets like the NQ futures did.

If the market starts a real acceleration process, upward, the alternate for this count is likely that we are in (v) of ((iii)) in an effort to make a 1.618 extension. If that occurs, we'll adjust when we see it. As of today, though, prices had very little upward vigor.

A few other reminders for this week:

1.  Tuesday is often (not always) a reversal day.
2.  Wednesday is the scheduled FED FMOC report out on policy.
3.  Many, many S&P companies report earnings this week
4.  Friday is the last trading day of the month (often with window-dressing)

Have an excellent start to the evening.

TraderJoe

Since 1932

Any number of people have asked how the conclusion was reached of having made a SuperCycle and Cycle Top in 2018. This conclusion was simply based on Elliott's requirements. The requirements are these: 1] that waves travel in parallel channels, as below, 2] that one of the waves will likely extend, 3] that, in general there will be alternation between waves two and wave four, and wave four will not overlap wave one; 4] that wave three will 'typically' represent the most dynamic wave, and 5] that wave three (or any impulsive wave) can extend only if the internal waves make progressively smaller degree sub-waves. 

DJIA - Quarterly - Wave Degrees

 

So with those requirements in mind, the conclusion is relatively straight forward. 1] When the parallel is drawn, only Cycle waves II and IV contact the parallel. 2] Within the Cycle waves, Primary ((3)) is the extended wave each time. And, for the Cycle waves, wave xV is the extended wave, both in price and time. Most people have not dealt with extended fifth waves. They usually occur with the momentum indicators "all green", and only after an extended wave base that provides sufficient support for such a dynamic rise. That long, drawn-out base is Cycle IV. 3] For alternation in the Cycle Waves, wave II is a simple sharp. Cycle wave IV is a complex or a non-limiting triangle, which both Prechter and Neely recognized. And within the Cycle waves, for Cycle III, Primary ((4)) is a Flat, while Primary ((2)) is a simple sharp. And within Cycle wave V, Primary ((2)) is a short sharp, and Primary ((4)) is the long-in-time flat. Cycle IV does not overlap Cycle I. Neither does Primary ((4)) overlap Primary ((1)) within Cycle V or Cycle III.  4] It should be relatively obvious that the third waves chosen represent the most dynamic growth in terms of the post-war boom to 1965, and the dawn of the Internet and Financial Engineering to the year 2000.

For item 5] the degree labeling, because Cycle IV is longer in time than Cycle II, the two waves must be of the same degree, or else Cycle IV is of one higher degree. The two waves are the same degree, and the internal subwaves of IV can be broken down into price segments which are log-shorter in price than Cycle II, and shorter in time. And, there is the possibility of a triangle, so there is no degree violation.

Then, counting  forward in time from Cycle II, Primary ((1)) is log-shorter in price than Cycle I, so it does qualify as a sub-wave. Further, each of the sub-waves of Primary x((3)) can be broken down into a log-shorter sub-wave than Primary ((1)), and so qualifies as an extension. In particular, the short choppy interior of Primary x((3)) is where these "shorter in price and shorter in time" extensions are occurring. This same situation exists in Primary ((3)) of Cycle V, so I will not belabor the point. Also note that Primary ((5)) = Primary ((1)) in log-price.  Readers will also note that Primary ((3)) of Cycle V is also shorter in log-price and time than all of Cycle III. If this were not the case, the entire count would have to be revised somehow. I didn't make the waves; they turned out that way. This requirement exists because of the nature of an extended fifth wave. In other words, while wave three of an extended fifth wave can be the extended wave, it can still not violate the definitions of degree already on the chart!

Now counting forward in time from Cycle IV, note that Primary ((1)) is shorter than Cycle III in log-price and time. It is also likely shorter in log-price than Cycle I, but is not required to be because we are counting waves forward in time only. Then, Primary ((2)) is definitely shorter in time than Cycle IV. It is also likely that Primary ((2)) of Cycle V is shorter in log-price than the largest internal segments of Cycle IV. It is also definitely shorter in log-price and time than Cycle II, but it is not required to be, again, because we are counting waves forward in time.

Primary ((4)) is clearly longer in time than Primary ((2)). That means that the waves must either be of the same degree or Primary ((4)) must be one degree higher. The two waves are of the same degree, and the net travel in Primary ((4)) is about the same as the deepest portion (or maximum excursion) within Cycle IV.  Further, Primary ((4)) is shorter in time than Cycle IV, which it is required to be.

From there to the 2018 top, the count has already been outlined, along with the rationale provided in the post called Trillions (at this LINK) back in June 2020.

Certain people may have objections to this count. I, however, can not disagree with Elliott. Where else will you find an analysis that covers both price and time? And, for free, no less. Further, I have stated Elliott's original principles in referring to this count, and merely attempt to live up to the definitions of degree labels.

Some people have tried to advance certain ideas regarding the time relationships among waves. For example, that wave two's must always be longer in time than their wave one's. To me, there are several wave two's in this very long term chart that disprove that hypothesis. Further, you will get all sorts of other counts on this wave because many people doing casual Elliott analysis will almost completely ignore which wave is the ended wave in the sequence. I think it is important to recognize that the extended fifth wave is a case not many have studied. In fact, there are few opportunities to study it.

Further, in my view it is completely economically justified to make Cycle V the extended wave based on the unprecedented easy interest rate policies and quantitative easing of FED Chairs Greenspan, Bernanke, Yellen and Powell. By doing so, they made the extension possible. This is completely distinct from the so-called 'heroic' Paul Volker efforts to tighten interest rates to 18%.

Please remember to count waves forward in time. You can not go back and say, "if I was alive in 1932, I would have been a buyer!" Wish though we might, it just doesn't work that way. On the other hand, we can endeavor to follow as many of Elliott's observations as possible.

Have an excellent rest of the weekend.

TraderJoe

Likely the Running B Wave

Last weekend we posted two plausible options for finishing the Intermediate (Y) wave higher. (See the post at this LINK as a reminder). Today, with the new all-time high, it appears to be the second of the two scenarios as the ES 8-hr chart shows below.

ES Futures - 8 Hr - Impulse Minor C ?

 

In this scenario, the Minor B wave is the "running B wave" option rather than the triangle. Today, we counted the SPY cash ETF as likely having made much of an impulse, up. And we could be in the fourth wave down, with a fifth wave up to follow on Monday. This might allow completion of a minuet (b) wave at the high, to be followed by minuet (c) wave down to make the fourth minute wave ((iv)) of Minor C before making the minute fifth wave up. 

The Elliott Wave Oscillator is still on a divergence and is hanging near the zero line. It might go below zero on the minuet (c) wave, down. 

Have a good start to the evening.

TraderJoe

Monitor Slow Stochastic

Today Bloomberg apparently reported that the White House might seek to increase capital gains taxes on the wealthy. For some odd reason, they didn't seem to like that - or want to pay more - to help make up for all of the windfall profits they have made on stocks, and stocks sold off a bit. They did not sell off enough to draw a conclusion yet, but enough to tip the daily slow stochastic near the settlement below the 80 level at 78. If it stays that way tonight, the only day it can get it back is tomorrow. See the daily ES chart below.

ES Futures - Daily - Loss of Embedded Status

This did not occur before we had counted a potential five-waves-up on the intraday ES 30-minute chart. You can see the comments in the prior post for that count. If the stochastic loses the embedded status then a first target would be the line-in-the-sand, the 18-day SMA. We shall see. Lower daily lows are needed to send the swing line indicator into a down trend, along with a close being below the 18-day SMA.

While we are still somewhat negative on the stock market, we could only count three-waves-down from the high. The means while we maintain that general outlook, we must be flexible. Price could still go back over the high, but it can also go lower.

Other people have miracle answers for how they know the stock market is going up or down. Sometimes they are correct, sometimes incorrect, sometimes partially correct. My suggestion at this time is to do the hard work of counting waves. This is one of the most important times to do it. So, below is the ES 5-minute chart.

ES Futures - 5 Min - Tentative Up Channel

Just be open minded and err on the side, for now, of there being only three-waves down. Then, draw the tentative up channel, and start counting as a/i, b/ii, c/iii and measure both the retracement level and the lengths of the c/iii compared to the a/i. Recognizing that - with three waves down - the only two ways down are by diagonal or for this structure right here to form a triangle that fails lower. Just keep those ideas loosely in the back of your mind while an upward count is attempted. Human minds can handle two thoughts at once, right?

Then, allow only one slight redraw of the channel if the current ((B)) wave low breaks slightly. Otherwise look for a zigzag initially, if not a potential diagonal ((A)) wave up, to the right of the current ((A)) wave location, and, if not, a full-on impulse up. Too much work? Well, it is work. If things get discouraging or breakdown in unexpected ways then remind yourself that it is the very purpose of the market to try to put as many people on the wrong side as possible. Are you going to outwit the market? Maybe. Maybe not.

Luckily, we don't have to try to outwit it. We just have to keep some powder dry until we see wave structures we can recognize, and then try to take appropriate action from there. Am I trying to give you advice? Definitely not. I am trying to remind myself that a couple of the waves recently, including this last one counted up in five waves, really might have two interpretations. This is because of that truncated bottom at the 4,110 level. For example, 1) it is possible it really was five-waves up and represents a new impulse structure to come; 2) it is possible it was five-waves-up and ends some type of flat wave, or is a truncation top; or 3) that, because of the weirdness of the bottom, it is only some type of three-wave structure and is the deep retrace after the expanding diagonal. I am giving this last possibility somewhat lower odds at the moment until or unless we see a full-on five-wave structure lower at this point.

Sorry, but this is the work of Elliott Wave. For those who want quick answers, please see those that have them. What we have here is patience, calm, flexibility - and the rules of Elliott Wave.

Have a good start to the evening.

TraderJoe

Speaking of Reasonable Alternates

The two ES 8-hour charts shown in yesterday's post remain as they are - viable alternates with no emotional investment in either. Yes, as I said, it is certainly possible to go 'over the top' again, but not an absolute requirement.

Speaking of reasonable alternates, I said yesterday it was possible there was a 5-3-5-3-5 expanding diagonal in the process of formation. Here is that chart on the ES 30-minute futures.

Using exactly the same waves, I show the two reasonable alternates. In black, the (i)-to-(v) expanding diagonal. In red, again using exactly the same waves, a reasonable double-zigzag (w), (x), (y). So, here is the question, "why was it so important not to break that 4,110 low again?". I mean the wave on yesterday afternoon missed it by literally a couple of ticks.

Regardless, price is now up to the 78.6% retrace and is back to the prior wave (iv) or (x). It has clearly broken up over the upper diagonal trend line, likely validating that trend line. As an expanding diagonal, the down wave met the typical good form shown by the EMA-34 crossing through each numbered wave. Readers of this blog that have an interest can also verify the expanding pattern in the Elliott Wave Oscillator.

The real question is, "what about that bottom?"  Where does one start a proper up count? Is the up wave also an expanding diagonal or expanding triple zigzag? It's a mess for any wave counter, and so the best guide is whether the high is exceeded or not.

Have a good start to the evening.

TraderJoe

Two reasonable interpretations

There are some times when counting waves, or when trading, when you just have to 'pick-your-poison' as there are times when the same Elliott Wave count can belong to more than one sequence. Here is the ES 8-hr chart, below. The first interpretation is the one in which Intermediate (Y) = (W) in time.

ES Futures - 8 Hr - Interpretation of (Y) = (W) in Time

 

If you recall from earlier explanations, this is the one in which the up wave from 25 Mar 2021 is a thrust from a barrier triangle, the triangle ending the Minor B wave. On this time frame, the Elliott Wave Oscillator has turned red, and is currently headed lower. Should the channel break and be back tested - but fail - then this interpretation gains favor.

The second interpretation is the one below.

ES Futures - 8 Hr - Interpretation of Running Flat

In this interpretation, there was only a "running flat" for the Minor B wave, and the wave up is currently impulsing. In this scenario, it is plausible for wave minute ((iv)) to make a new higher high in a minuet (b) wave of minute ((iv)). Right now, price is down to the EMA-34, and the EWO has not yet gone below zero.

As per yesterday's comments, while we were able to count a 5-3-5-3-5 diagonal downward in the futures, we can not yet count an impulse in the SPY cash. The latter needs a lower low, yet. Perhaps that will occur tomorrow. Without it, going back over the high is plausible, as well.

When roughly equivalent scenarios like this exist, it helps me personally not to get too emotionally invested in either.

Have a good start to the evening.

TraderJoe

Monday Loss

Today gave up some ground in the ES 30-minute futures, albeit begrudgingly. Last night, the opening gap was a third wave. There was a lower low, and that made five waves down. So, it was about even odds that a lower low might follow. It did, but it is hard to make too much of it at this time.

As the chart above shows, all I can realistically count is 5-3-5, down to the intraday S2 pivot point as of now. The second wave down is not a 1.618 wave. Could it become more? It could, but the market would have to prove it's case by breaking today's low. If it does, then the question would be was there upward overlap or not. Right now there isn't yet.

Otherwise, the three-waves-down has to be respected for its possible power to be part of a triangle or just a correction that leads to a higher high. Let's see how it goes.

Have a good start to the evening.

TraderJoe

It's Time to talk about 'Time'.

The first observation I have alluded to before. The two up waves since the 23 Mar 2020 low are now approximately equal in 'time' at roughly 58-59 bars each. See the ES 2-daily chart below. This, of course, is a very reasonable 1:1 Fibonacci relationship.

ES Futures - 2 Day - Time Equality

If the waves are labeled as Intermediate (W), (X) and (Y), then, in fact, in the last two days Intermediate (Y) just became 'longer in time' than Intermediate (W), and that even accounts for the fact that the (X) wave low may have truncated. So, using the principles of degree labeling, that means that the two waves should at least be of the same degree, or else the second wave is of one higher degree. In this chart, I am not interested in price, or a top, just the rough equality of the waves in time.

There is also something else one should note from the above chart: there is virtually no alternation in the wave segments. Each segment (Y) and (W) start off with something that looks impulsive. Then there is a big hump in the middle which may be a running wave, then there is another segment that looks impulsive. Let me diagram that for you.

ES Futures - 2 Day - Lack of Alternation

This lack of alternation suggests there is something very, very incorrect with those who are counting impulsively. The wave simply does not have the right look due to this lack of alternation. Right, but I thought this was about time? Well, it's about time! So, on to the next chart. This is the weekly chart of the ES futures.

ES Futures - 1 Week - Time Comparison of 'B' Waves

Here on the weekly chart, you can see on the left that the Intermediate (B) wave, up, of Primary ((A)) took about 60 bars. What is the significance of that? Well, we are now at 16 April 2021, and in about one month - or roughly 20 trading days - this upward wave would also exceed the length in time of the prior Intermediate (B) wave up, of the Primary ((A)) wave down. IF this up wave is a degree higher - as the Primary ((B)) wave I think it is - then, it stands to reason that it might not only be longer in price, which it is, but also longer in time to express that degree difference.

So, even if the Intermediate (Y) wave ended this coming week, it is still possible that (W)-(X)-(Y), the double zigzag, will extend in time to become the triple zigzag (W)-(X)-(Y)-(X)-(Z). It does not have to happen that way. But it could. The other way for it to happen, of course, is for the Intermediate (Y) wave to last another 20+ days. 

But, being a Primary ((B)) wave, then it can also be another zigzag longer in time that the Intermediate (B) wave, as well. We'll have to wait and see (no pun intended), and so I apologize for taking up so much of your time. Thanks for reading.

Have an excellent start to the weekend.

TraderJoe

Revision to Daily Count

From a degree labeling perspective, the up count to an Expanded Flat Minor B wave lost some credibility today. The upward wave may have gotten too long. As a result, the best idea I have is to keep the ES count compatible with the Dow count, with both indexes in the Intermediate (Y) wave, as below.

ES Futures - 2 Day - Still Intermediate (Y)

At this point, there is insufficient impulsive action lower to assume a second Intermediate (X) wave has started downward yet. From, the first Intermediate (X) wave the count upward is Minor A - which might either be an impulse or a diagonal - barrier triangle Minor B, and now a Minor C wave of Intermediate (Y).

Note that - at this time - Intermediate (Y) is just about as long in time as Intermediate (W). That likely indicates the waves are of the same degree. The slight alternate is that Minor B is back one trough at the beginning of March, as a "running" Minor B wave, and we are in the third wave of C of (Y). However, this wave is beginning to feel a lot like the thrust from a triangle. It has also a slight "throw-over" of the former wedge up trend line.

Have a good start to the evening.

TraderJoe

Higher HIgh on Further Divergence

Yesterday, at 2 PM, as per the comments, my market view changed from neutral to negative - at least temporarily. This is based on a completed Elliott Wave Count, and a break of certain trend lines. Today, after making only a marginal new high, we closed below that level.

ES Futures - 4 Hr - Completed Minor B-3?

 

Better confirmation would occur if prices trade below the EMA-34, if the Elliott Wave Oscillator trades below the zero line, and if prices trade below minuet wave (iv) of minute ((c)).

Have a good start to the evening.

TraderJoe

Outside Range Day Up

In a twist of events, today was an outside range day, up, near the high. This is unusual because most of the outside range days have been fake-out outside range days down.

In a minute ((c)) = ((a)) count for a Minor B-3 wave, it is possible to count a top. So at 2 PM today, my market view shifted from neutral to negative - at least for the short term. The current up wave, minute ((c)), measures between 1.0 and 1.27 x ((a)). And it is now possible - if we are forming an Intermediate (X) wave - that this Minor B-3 wave would be the B wave of an (X) wave triangle. That is because, as the chart above clearly shows, the B-3 wave is now beyond the 1.618 external retrace on wave A-3.

Yes, the wave could still make a Flat, but then it would likely be a "running" or "failure" flat. Further, remember if the low of an outside range day up is taken out in the next two trading sessions, it would constitute a trap for the bulls.

But, right now, the market bias is still up - over the 18-day SMA - and the daily slow stochastic is still fully embedded. So, while it is possible to count a top, it is also possible as was discussed in the comments, that there are a few more waves higher.

Have an excellent start to the evening.

TraderJoe

Nothing New Yet in ES

Same count in the ES 4-hr as in the SPY 2 Hr. Nothing new here. There are still two divergence levels at the marginal new highs.

ES Futures - 4 Hr - Minor B-3?

 

Price looks like it is getting squeezed into a pretty tight wedge at the moment. Earning season is getting underway. So marijuana stocks are under-performing, or well, are just laid-back. Lol. Bank earnings get underway Wednesday morning. I am less concerned about earnings as I am about guidance given or not.

Have a good start to the evening.

TraderJoe

Elliott Not Being Followed?

Some people say that Central Banks are running rough-shod over the Elliott Wave theory - destroying patterns and making wave counts obsolete. What part of Elliott Wave theory is not being followed here? Below is the SPY 2-Hr chart.

SPY - 2 Hr - Channel

Starting on the lower left, there are two approximately equal lows. Moving up the chart, there were some pull-backs, but - after what we think is a truncation low - then there nothing on the order of 50-62%. We thought we had detected a diagonal as part of that wave. But, we noted that the beginning of the diagonal would have to be exceeded lower in less time than it took the diagonal to form in order to be an ending diagonal. It was not. Hence, the risk is that the wave is a Leading Diagonal, and not an ending one. It looks like it was. That is almost always the risk with diagonals.

Leading Diagonals are usually "A" waves. If the usual and typical is the case here, then the up wave can be a minute ((a)) wave, and the down wave is a minute ((b)) wave. As the Fibonacci ruler shows, the minute ((b)) wave retraces exactly between 50 - 62%, as is also typical of a larger retracing wave.

Next, following the minute ((b)) wave, we likely have an impulsive minute ((c)) wave, higher. There are a pretty clear five movements, with a large gap likely in wave iii of (iii), and wave (iii) occurs on a high of the Elliott Wave Oscillator (EWO). The next high occurs on a divergence with the EWO.

Cash prices - right now - are still in a channel, as is typical of a zigzag wave, and price has met a typical zigzag target of ((c)) = ((a)), shown by the second Fibonacci ruler. Volume, as we have noted several times this week, is, well, weak. Further, the pattern of alternation right now is a diagonal for ((a)), and an impulse for ((c)). And that is good form.

So, we must ask, "What part of Elliott Wave theory is not being followed here?". Yes, must concede that if price keeps powering higher so that the up wave reaches 1.618, then an impulse might form. BUT, we must do this on nearly every single zigzag made - every time. It is part of the uncertainty in Elliott Wave theory that allows a market to be a market, and not a preordained pattern. Still, at this point in time, we have what we have.

In particular, we showed weeks ago, the likely Fibonacci confluence area on this chart - shown as it was published back on 28 March.

ES Futures - 1 Week - Prior Price Projections

Futures on Friday got up into the 4,120 zone - or well into the "Zone of Confluence" shown on the chart, this after finding support on the 1.382 Fibonacci level. So again, from a price projection point of view, "What part of Elliott Wave theory is not being followed here?".

Can price go higher? Yes, it is possible. Some zigzags reach 1.27 x ((a)). That would occur at 4,160, and should that level be exceeded higher, then it would suggest a more impulsive wave is at play. That's the interesting thing about Elliott Wave theory. It provides actionable parameters like no other. Further, from a time stand-point, I would even suggest that if a significant retrace is not in play by Wednesday morning, the idea of a zigzag begins to lose more credibility.

People often wonder, what makes me more confident of being in a Primary ((B)) wave, higher, rather than an elusive 5th wave, up, that just won't seem to impulse properly? To answer that question, I will leave you with this last chart of the monthly Dow/GOLD ratio.

As you can see, this chart topped in October of 2018, the wave that in mid-2020 I identified as the top of SuperCycle (III). The next down wave - which I also identified as the Primary ((A)) wave down -  made a low sufficient to undercut the prior 2016 low. The Elliott Wave Oscillator (EWO) measures "too deep" to likely be another fourth wave, and we have since been headed upward in this ratio. I suspect there is more to go, and the EWO has not crossed the zero line yet. It could.

But, a new high in this ratio has not been made yet, although we know it has been in price alone. And, as with any "B" wave, going over the top is a possibility, but not a certainty. So, all-in-all, in terms of "real money", the Dow just does not show impulsive behavior yet. And there are some real social anomalies showing up as well. We know about the virus, and the lack of action by the former administration, blunting overall growth and actually showing a large contraction in GDP.

This has forced the free-money printing which hasn't even resulted in a new high for this measure. But - even with the free money - it has resulted in an insurrection at the seat of government, a period of sustained social protest over racial equality and immigration policy, and the odd phenomenon of offering jobs to workers who will not take them. See this recent article from 30 Mar 2021, an excerpt is below (LINK).

Today, 500,000 manufacturing jobs across the U.S. remain unfilled, open to anyone with the right skills. And wherever possible, manufacturers are also helping upskill workers or provide on-the-job training. 

How the FED and Central Banks will rectify such a situation by printing money and allowing large corporations to incessantly buy-back their own stocks and pay no income taxes in some cases causes one to scratch their head. But, I think it is very reflective of a Primary ((B)) wave, up. It is literally built on the back of printed money and financial engineering - like no other - and it is having a difficult time making economic or social impact,

Have an excellent rest of the weekend.

P.S. The chart below was added on Sunday. It is of my proprietary Bullish Sentiment Index.

Bullish % - Weekly - Nearing Highs

 

I have been keeping this chart up meticulously since 2005 when the data I was looking for first became easily available. The weekly chart above starts with panic lows near the 23 Mar 2020 low, and it tracks the increase in sentiment each week since. There are a couple of weeks missing because with them the chart is too crowded to see the detail, but they in no way detracted from the trend. 

The chart shows that all classes of investors, from professionals to mom-and-pop, are nearing some of the highest levels of bullishness seen. These levels begin to rival the levels at the 2007 top, the 2015 top, and the 2018 top. I am looking for a pull-back around here, at least, and perhaps not yet a major top. The sentiment data would seem to be ripe for that.

An interesting thing happened with CBOE put-call data on Friday. As the market rose, puts became a little more popular. That was interesting, too!

TraderJoe

NQ Too!

As the chart below shows, today the NQ daily futures also made a minimum of a 90% up wave. See the Fibonacci measurement. As you probably know by now, that 90% level is the 'minimum' required if the up wave is to be the B-3 wave of a Flat, as well as the ES.

NQ Futures - Daily - Up Wave at >90%

 

Meanwhile, the ES futures remain in their 4-hr channel and are approaching equality as the chart below shows. 

ES Futures - 4 Hr - In channel

The up wave is still diverging with even higher price highs on lower highs in the Elliott Wave Oscillator. I have gone back-and-forth a bit on the count of this up wave, and noted, "B-3 waves are sometimes very difficult to pin down". It 'still' could be ((w))-((x))-((y)), but this is OK for now.

Have a good start to the evening.

TraderJoe

Complex Minor B ? - 2

Nothing has changed with either the daily count or the four-hour count. Refer to prior posts for those counts. On the ES 30-minute chart, today we focused on this triangle which is likely completed, now, but not for certain (odds about 80%). The triangle currently has excellent form and proportion.

Triangles usually, most-often (not always) precede the last wave up in a wave series. This one can target 4,080 to 4,115. For the triangle to be validated, prices should get up over the micro-((B)) wave. To invalidate the triangle, one has to get below the micro-((C)) wave before establishing a new high.

Have a good start to the evening.

TraderJoe

Complex Minor B ?

As the waves developed over the last few days, this channel in the ES 4-hr time frame, might indicate that the potential B-3 wave, up, of an Intermediate (X) wave is nearing completion as a possible complex double zigzag.

The Minor B-3 wave should be composed of three minute waves up. The first sequence we counted upward as minuet (a), (b), and a likely diagonal (c). Those waves might compose the minute ((w)) wave. So, the initial sub-wave of minute ((y)) should be smaller in price and time than all of minute ((w)) to agree with degree labeling and it is.

Currently, the upward move is on a divergence with the Elliott Wave Oscillator (EWO), but we do not know it is over. It could be. The length of B-3 is currently 1.38 - 1.5% x the A-3 wave down. This is typical. While prices started down a bit today, it likely needs to breech the inner red parallel lower to draw more definitive conclusions.

As I noted earlier in the comments, there are fully 13+ open daily gaps in the S&P cash chart since the October/November 2020 low. In terms of a single wave upward, I can not recall seeing so many gaps at one time. It's possible there is a wave with more, but I don't recall it, and this is astounding.

Have a good start to the evening.

TraderJoe

Easter Candy

Stocks are often seasonally positive around holiday weeks, and then, on this one, the cash market was not allowed to trade the Employment Pop until today, either. So - quick as a bunny - stocks sprinted higher and made new all-time-highs.

Around noon, the ES 30-minute futures made a "spinning top" candle and we called it out, but said it needed some confirming lower candles. Those did occur, and a higher high was not made by the futures settle. Speaking of settlement, today did settle over the upper Daily Bollinger Band - a place where the so-called Smart Money often (but not always) takes some profit off of the table. That daily chart is below.

ES Futures - 1 Day - Over Upper Band

From the chart above, the bias is still up - as price is over the 18-day SMA - and the daily slow stochastic is embedded again. However, as we noted before, price closed up over the upper band, and this for the second day running. The rough probability of this happening is less than 5% of the time.

Soon stocks will face first quarter earnings reports, and it should be noted that stimulus was in place for only a portion of the first quarter.

From an Elliott Wave perspective the Minor B wave can still be within range. Tomorrow is Tuesday, and, often, not always, a strong Monday is followed by a Tuesday reversal. Let's see what the market has in store. 

Have a good start to the evening.

TraderJoe

Employment Pop

In some good news for the US economy, the payrolls report beat expectations (+916k actual vs +675k consensus) and the ES futures popped higher. In doing so, they reached the 1.618 Fibonacci extension, as shown below. This can allow for the third wave, iii, within wave (iii) in the following manner using The Eight Fold Path Method for Counting an Impulse which is the Featured Post in this blog (upper right hand corner).

On this time frame, with about 106 candles so far, the EMA-34 indicates that a fourth wave, iv, has not been made yet. This could occur Sunday night into Monday. If wave iii of (iii) occurred on a divergence with the Elliott Wave Oscillator (EWO) then wave iv would expect the EWO to return to near the zero line. Wave iv should alternate with wave ii and so a wave iv of different, shape, complexity or time might be a Flat or Triangle wave.

As we showed earlier in yesterday's comments, today's partial day (which will likely be combined with Sunday & Monday trading) closed over the upper Bollinger Band again - which happens approximately only 5% of the time. So, the probabilities of closing outside of the band are getting lower. While not impossible to make 5 or 6 closes outside of the band, each successive consecutive close over the upper band fights the odds.

Have an excellent rest of the weekend & holiday.

TraderJoe

First of Month Inflows

Here is the SPY 30-minute chart. Nothing has changed from the daily chart. (You can refer to the daily chart at this LINK, as a reminder.)

SPY - 30 Min - Local Wave Structure

 

Have a good start to your weekend, and holiday if you are celebrating it. Reminder: Friday is a Payroll Employment Report with the index futures open for just a little while, and the cash market closed.

TraderJoe