Same Count - Was Just Waiting on the Dow

We noted earlier on that the Dow had not made it's five waves up just yet. Today it looks like the Dow got its fifth wave well underway. Here is a comparison of the Dow and the S&P futures.

S&P500 (ES) vs DJIA (YM) Futures - 2 Hr - Five Waves (xi)

 

Today, the S&P again made another marginal new high. Based on the Dow's count, it suggests the S&P500 is in its fifth wave also. Today, was the end of the month and the end of the quarter. There wasn't much in the way of the proverbial window dressing except in the overnight market - as shown by the futures. The cash markets do not show even these mild retrace waves. Tomorrow is the first of the new month and the new quarter. Often, not always, these days show the typical inflows from company bonuses, 401k plans, pension funds, dividend reinvestment schemes and the like.

Yesterday, we counted only three-wave-down in the cash market. We said we could go over the top again. We did. The daily bias remains up. The ES daily slow stochastic is embedded. The up wave of minuet (i) or minute ((v)) is not over until it's over. 

Because we can count an impulse without overlaps, we do not see this portion of the wave as a diagonal. In the Dow, wave v should remain shorter than wave iii. Same with the ES futures.

Comments remain on moderation to foster discussion on the wave count and its technical indicators only. Have a good start to the evening.

TraderJoe

Same Count - Just On Cash

This is the same general count that has been shown for the past several days. This chart just shows hourly cash SPY for more clarity. It is still an extended first wave (xi) count.

SPY Cash - 1 Hr - Extended First Wave

Today gapped up to a marginal new high, then the gap was filled throughout the day.  So, the gap might be an exhaustion gap. It is 'possible' that the correction started today, but we could only count three waves down by the cash close. Since there was only "three-down" the correction could still take the form of either a flat wave that goes over the top again, or perhaps a diagonal to start the wave lower.

Comments remain on moderation in an effort to keep people on the topic of wave counting, and the technical indicators that assist it. In terms of technical indicators, yesterday we showed the weak advance-decline line. That continued today with another price high but another day of divergence with the adv/dec line. Another technical indicator is 'time'. In that vein, tomorrow is the last day of the month, and the last day of the second quarter. This often (not always) brings window dressing and attendant sloppiness.

Have an excellent start to the evening.

TraderJoe

First Time in A While

Some indexes eeked out marginal new highs today. The DOW was not one of them (yet). While there could be new higher highs eventually, today was the first day we saw a real divergence between the S&P500 and the $NYAD, the NYSE Advance-Decline line. The chart is below.

NYSE Adv/Dec - Versus SPX - Daily Divergence

 

Again, we think it is likely we will experience some of this divergence as part of the topping process. We could not see any divergence before - we can now. As for the shorter term, we are still looking for a reasonably-sized correction following the rise from 21 June. By reasonable, we mean 38% or greater. So far, that hasn't happened, in full, but it may have started today or may start tonight.

During the first part of the session, the ES futures made only three-waves-down - which we showed in the comments for the prior post. With only the three-waves down, prices exceeded the high again - either as the end of wave v of (i), or as a 'b' wave, with wave v having ended last week.

Have a good start to the evening.

TraderJoe

 

Summary

The chart below is the second post this weekend. If you have not read the first post yet, you may wish to do so. There are now 164 bars on the chart, and another higher high on an Elliott Wave Oscillator divergence. I have numbered the A & B waves for reference with the text. The C waves are not shown for clarity but are at (W), and will be at (Y) when completed.

ES Futures - 2 Day - Wedge

 

Have an excellent rest of the weekend. And in the future let's commit to be smarter and to act before having to deal with the fate of what has happened in the Miami collapse. Similar things have happened with other infrastructure in this country (bridges, water systems, etc.). The failure to deal with the reported structural deficiencies is just one measure of the extreme complacency and disdain of the wealth in this country for the rule of law and lack of fairness for some of the people who helped get them there.

TraderJoe

No significant Correction Yet; Perhaps soon

Here is the ES 2-Hr Chart. The wedge-shaped wave has not made a significant correction yet (meaning 38% or greater).

ES Futures - 2 Hr - Wave in a Wedge

As configured, wave iv does not have an overlap with wave i. That is OK because this is likely an impulse wave with an extended first wave, and not a diagonal. This is likely minuet wave (i) within minute wave ((v)). The DOW has not made a new all-time high yet, so it might be that the full extent of minute wave ((v)) may wait for the Dow to make that new high.

In this configuration sub-minuette wave v should remain shorter than iii. Up waves would invalidate only below the 21 June low. 

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

TraderJoe

A Different Fourth Wave Option

After the overnight rally, when the cash market opened, it popped a bit, but then began to form what looks and counts like a regular triangle on the ES 5-min chart, below.

ES Futures - 5 min - Triangle

By the settle, the triangle did not provide a clear breakout, hitting the upper wall at 4,261. IF the up wave pops in the overnight, it would suggest the better count is five-waves up on the hourly chart - which we showed in the comments. If there are five waves up, then that might suggest that the best fourth wave count for the ES is this running flat wave.

Remember, we noted the DOW made the lower low at wave ((iv)). Maybe that's all there is to it. No muss, no fuss. As I'm writing this, I see the futures have broken 4,262 in the overnight session. This lends more credence to being in wave ((v)), now. 

I do not yet think that any diagonals are involved, as the current proportions for a diagonal would not be typical, and we do not yet know the up wave is ended.

Have a good start to the evening.

TraderJoe

Every Which Way But Loose

If you were looking for big breakouts today, they didn't happen. Both the ES and the SPX initially made marginal higher highs. In fact, the SPX is now pretty darn close to that prior (b) wave if the pattern is still the barrier triangle. But, the rest of the day was spend largely making 78% retrace waves, until near the close, where, so far a double-bottom is holding for the moment.

In terms of the hourly wave count upward, we are waiting on resolution of the pattern below to determine if there were five-waves-up or three-waves-up.

ES Futures - Hourly - Monitoring

We are monitoring the hourly fractals to see which breaks first. Actually, the first down (red) fractal was broken near the close, but the second down (red) fractal back is still holding. If that one gives way, then it might lead to overlap which would provide a warning that an impulse wave might not be made.

It's summer. People have vacations, fun & being outdoors on their minds, and volume fell off a bit today. The RSI and MACD aren't much help. While they have both broken uptrending lines from their recent lows price is not responding yet. So, we need to see what the overnight and tomorrow brings. 

Have an excellent start to the evening.

TraderJoe

All Fourth Wave Options Still on the Table

From the daily chart, below, there is still a way an upward (d) wave could bang into a horizontal barrier. However, depending on what happens in the overnight, the red-dotted line indicates that perhaps the running triangle variation would happen instead. And, if the up wave goes significantly over the prior (b) wave, then perhaps the diagonal is forming.  

With regards to the potential diagonal, rather than the potential triangle, the rule would be that if (b) is (i) of a diagonal, and (d) is (iii) of a diagonal, then wave (iii) must by rule make a higher high than wave (i), the current wave (b).

The internal wave count of this up wave has a couple of options, some of which we showed in the comments for the prior post.

Let's see how it goes.

TraderJoe

Back over Line in the Sand

While many Elliott Wave or "technical pattern" posters on YouTube and other media were going off the rails over the weekend again warning of "the crash", we held back and tempered our opinion with a possible triangle (or, alternately, a diagonal) forming. We said, however, we would not begin an up count until price closed back over the "line-in-the-sand" or the 18-day SMA. It did that today in what is likely the 'a' wave, up, of the (d) wave up.

Look closely at the (c) wave of the chart, it made a new  lower low today, and then almost exceeded the prior bar's high. It still could as trading is not closed as this is being written. Today shows the importance of one of Ira's guidelines - which is not to enter new shorts below a lower daily Bollinger Band, particularly if the slow stochastic is not embedded below the 20 level. If that occurred today, the result would not have been pretty.

Again, today was a good strong up day. And, if this pattern is a triangle - or the alternate diagonal - then, after some backing-and-filling, price should try to hit that upper barrier line, or go through it - if it can.

Have an excellent start to the evening.

TraderJoe

Un-blowing a Bubble

The bubble didn't exactly 'pop' yet. But, the FED knows what you know. It is unsustainable for the U.S.A. to carry $28.4 Trillion in debt - more than 100% of GDP - in the long run. History shows (according to Ray Dalio) that countries that undertake such an endeavor wind up actually needing an undertaker. So, the U.S. Federal Reserve trotted out St. Louis Fed President James Bullard to say he might see a rate increase sooner rather than later. Of course, they do this early in the morning on a Friday, when people might have left town for their new holiday - Juneteenth Day. I'm all in favor of the holiday: couldn't they have announced it sooner? Don't think there was anything spontaneous about this at all. The FED knows who will speak, when they will speak, and what they will say.

Of course, we were expecting stock prices to drop in the (c) wave of a triangle - at least. They did. As the daily ES chart shows below, prices got down to the 50% retrace level of the prior up wave.

ES Futures - 1 Day - 50% Retrace So Far

 

The Dow Jones Industrial Average on-the-other-hand exceeded the May low, even lower. If the Dow was in a Flat wave, then both can be the (c) wave down. The ES futures got below, and closed below, their lower daily Bollinger Band. Nothing says price can't go lower. The problem with triangles, and the diagonal we discussed yesterday is that they can't be called until all five of their waves are in place.

So, we will have to monitor to see how much more downside there is to these waves. A 62 - 78% retrace in the ES futures would not be unreasonable. But, more than that will call into question a triangle.

Unfortunately, for our part, while we might try to parse the nature of some short term waves, we can not begin an up count - not even the (d) wave of a triangle - until price closes up back over the 18-day SMA. That's right. Right now, the price bias is down. While the swing line is not in a trend (still on a higher high and lower low), the daily bias provides caution until it does not.

The daily slow stochastic has not curled up, yet, and so there could be more down movement. There is no good hourly divergence downward to work with, yet, so there may be more follow-through on Monday. If you held me to it, with y = w, I would say the current move is a double zigzag lower, as below on the hourly chart.

ES Futures - 1 Hr - Double Zigzag Lower

There is nothing that says that a triple zigzag could not ultimately resort, but supposedly the triple is much more rare, so one has to - as always - keep probabilities in mind.

Have a good start to the weekend.

TraderJoe

Battle for the Line in the Sand

Both the ES futures and the Dow futures made new daily lows. In the Dow, it was sufficient to make a 78+% retrace wave. Here is the ES daily chart, below. In the ES futures, it was enough to near the lower daily Bollinger Band without hitting it.

ES Futures - Daily - Settle at the 18-day SMA

Then, with a lot of whipping around intraday, prices rallied toward the end of the session to close just under or on the 18-day SMA, "the line in the sand". The DOW can still be in a triangle since the all time high (or a Flat wave as an alternate). In either case, it is likely the (c) wave lower in the Dow.

I also said that if the ES futures made a new all-time-high (which they did three days ago), then it might be possible to consider a diagonal in addition to the triangle. Right now, there is not as good evidence for a diagonal as a triangle. If it were to be a diagonal, then the first newer all-time high should only be (i) of a diagonal with the May low reverting to all of minute ((iv)), down. The down legs right now seem to be a bit more complex than simple zigzags, so that is keeping the diagonal count at bay for a bit. 

Ignoring the diagonal discussion, above, for the time being, this can still be the (c) wave down of a barrier triangle in the ES futures, as we have shown before on several charts. In the end, it might wind up looking like a diagonal in many respects.

Have a good start to the evening.

TraderJoe

Loss of Embedded Status

The ES futures backed further down from the high in fear of the FOMC report today. By noon, the market was already breaking hourly fractal lows, and we called them out as they occurred. Then, after the statement was released, the ES futures dropped from the S1 daily pivot point to through the S2 daily pivot point and on down to break the S3 daily pivot. At 4,190 there was a 'stick save' that prevented the market from making five-waves-down, and prices rebounded strongly to the intraday 18-period SMA. The drop was enough to cause the daily slow stochastic to lose the 80 level, and thereby lose its embedded status.

ES Futures - Daily - Triangle?

 

In the process, prices first pierced the 18-day SMA lower, then traded above it, then settled just about on it. The move and its overlaps - plus the whippy price action - is enough to at least suggest the minuet (c) wave down of the potential barrier triangle is underway.

The DOW cash index got down far enough today to have it's (c) wave register a nicely proportional 62% retrace within a triangle. It can go lower towards 78% if it wishes.

On the above chart, if prices wish to continue lower, they certainly could head towards the lower daily Bollinger Band.

Have an excellent start to the evening.

TraderJoe

Higher High Overnight, then Sputter

Stock futures made a higher high overnight and got within points of the upper Daily Bollinger Band, which kept the swing line temporarily higher. And then they attempted to reverse. By the cash close, the reversal was only counted as three waves.

ES Futures - 1 Day - Higher High Day

The DOW, meanwhile, made a lower low day and may still be in a triangle. There are still ways the market can go higher. There are certainly ways it can start lower. The assumption is the market is on temporary hold pending the results of the FED conference tomorrow.

Have a good start to the evening.

TraderJoe

NQ Proves it Case

With today's higher all-time-high, the NASDAQ 100 futures have proved its case for three overlapping zigzags up, which can be counted as a diagonal, or simply as the three zigzags. The 2-Day chart is below.

We first showed this chart back on May 18th (chart at this LINK). The chart predicted a higher high and that has occurred. Yes, it can go further, but should not become longer in price than wave (3) or else the formation is not a diagonal (it could do so and remain three simple zigzags however.) This is one of the few markets where the lengths of the waves and overlaps make the diagonal count 'legal'  from an Elliott Wave perspective.

The wave doesn't look much like a traditional diagonal, because the first B wave is a very shallow retrace. But, at this point, it is what it is.

The DOW today, made lower daily lows and did not go over its all-time-high as of the close. It may well be in a triangle. The S&P 500 may be caught somewhere in between. Its count right now is still up in the air. Nothing in the S&P500 has yet ruled out the (b) wave higher.

Have an excellent start to the evening.

TraderJoe

 

10-Yr Note Follow-Up

I have shown this count before as the Interest Rate view (you can see it at this LINK). Here is the same count shown as the 10-Year Note view.

ZN (US 10-Year) Futures - 2 Day - EWO Crosses Zero Line

 

The position of the Elliott Wave Oscillator seems to bode well for a fourth wave, probably a "running triangle".  The recent up wave since the beginning of June is sufficient to validate the triangle by crossing back-over the low of Minor 3, as required by the 'rule' for running triangles.

A fifth wave down is possible which would be shorter than Minor wave 3, because Minor 3 is shorter than Minor wave 1.

This is the second post this weekend, and if you haven't seen the first one, yet, you might want to read it now.

TraderJoe

Nothing has Changed Yet - 3

There remains nothing definitive yet in the price structures, and it is often said, "It's lonely at the top". The ES futures (June contract), left, and cash S&P500, made a new closing high, as below.

E-Mini S&P (ES), Dow (YM), NASDAQ 100 (NQ) Futures - Daily

The Dow Futures, middle, and NASDAQ 100 futures, right, as of yet, have not. As a result, nothing has ruled out a (b) wave higher, or a triangle just yet. The daily Bias is still positive with price over the 18-day SMA. The NASDAQ has, in fact, come far enough along to validate this diagonal count shown in May (at this LINK). It can go higher, within limits, and we think it might.

During the week, the daily put-call ratio got down to 0.35, approaching a lower extreme. We will also note the position of the upper daily Bollinger Band.

ES Futures (Jun/Sep) - 1 D - No New High

Futures contract roll-over now presents some charting challenges, above, as some of the charting services show the roll as of Friday, and do not show the new high, see last bar, above. During the next week, see if the daily slow stochastic - which is currently embedded - travels below that 80 level or not.

Have an excellent rest of the weekend.

TraderJoe

Nothing has Changed Yet - 2

Market still moving sideways until some of the more important fractals on the ES 4-Hr chart, below, are exceeded lower or higher.

It is an interesting question, why, if the market wanted to, it could not take out the highs in the light volume.

Have an excellent start to the evening.

TraderJoe

Nothing has Changed Yet

In the daily count of the ES futures, we may still be slogging through a fourth wave triangle - possibly a barrier triangle at this time.

ES Futures - Daily - Still in (b) ?

 

IF it plays out, the significance of a barrier triangle is that supposedly the market has spent so much time beating up against the barrier that it typically makes a substandard thrust out of the triangle (i.e. less  than the triangle's width).

Hopefully, the (c) wave, if an when it begins, will make at least a 62% retrace on wave (b) to express good form and proportion in the wave.

Today, we were only able to count three-waves-down. So if the 'a' wave of (c) is beginning it might have to be a diagonal. And, if a diagonal 'a' wave forms, it is very likely that we are in a triangle.

Have a good start to the evening.

TraderJoe

Tiny SPY and Breaking the 'Rules'

As we showed in yesterday's post, mighty SPY cracked the high by a 'tiny' amount. And while possibly still in a barrier triangle or a Flat wave four, the higher high was enough to prove the case that, way back in June 2020 we called the correct degree waves. With this higher high, on the weekly chart, this Primary wave up is now longer in both price, and now,  time than the prior Intermediate up wave. You can view the original call here in this post called Trillions (LINK1), and see the update on the timing at this post called Primary Week (LINK2). And now we note that some analysts - who didn't even call such things - who didn't go out on the limb to put their reputation on line - sensing a top is near, are now trying to rush the count to try to count a contracting ending diagonal where one is, by Rule, not present!

In our two-day chart, of the ES futures, there is simply no need to break the rules or the definition of wave degrees to count the upward wave in the context of Intermediate (Y) = Intermediate (W) for the Primary ((B)) wave.

ES Futures - 2 Day - Wedge

Note in the above chart, that each wave is well-described and does not break any rules. Further, within Intermediate (Y), wave Minor A is shorter in price and time than the previous larger degree Intermediate wave (W), up, in the same direction as Minor A. So, minor A is a valid subwave. Then, Minor B is shorter in price and time than all of Intermediate wave (X), down, the prior larger degree wave in the same direction (down). finally, minute wave ((i)), and ((iii)), up, are shorter than all of Minor A, the prior larger degree wave in the same direction (up). So, they can be valid subwaves as well.

Further, within Intermediate (W), wave Minor A is an impulse. Yet, in Intermediate (Y), wave Minor A is a contracting diagonal wave. We always called it that way: it was just a question of its starting and ending points. It represents excellent alternation within corrective waves. Now, with Intermediate (Y), since Minor A is a diagonal, Minor C should be an impulse to further that pattern of alternation.

Again, there is no reason to break any rules or degree definitions. And, notice that Intermediate wave (Y) is, in fact, longer in time than Intermediate wave (W). This necessarily means that the two waves 'must' be of the same degree (or else, the former wave is of one degree higher). For now, and primarily because Intermediate (Y) is shorter in price than Intermediate (W), we think the two waves are of the same degree.

This count has been a long time in the making. It has taken an extreme level of patience. We thought some of the corrections might be larger than what they turned out to be. They didn't. But, still, we did not let it affect the wave count. It is still not likely done yet, and we never did call for a crash. Right now we see the possibility of wave ((iv)) of Minor C forming a barrier triangle and, while likely, we will look for other alternates that make sense if any should.

So, where are these analysts breaking the rules? In calling a contracting ending diagonal, they are trying to count it this way.

SPY Cash - 2 Hr - NOT a Contracting Diagonal

They see a wedge. They see overlap. They want to get the count over. So, they break the rules! In case your eye can't judge it, we show the Fibonacci ruler. Clearly, wave (iii) is more than 1.272 x wave (i), but even one click would do it! It's just wrong.

I dropped a link to a YouTube video showing such a count at the end of yesterday's comments. The real question is IF an analyst is going to break the Elliott Wave rules, then why even bother to say that what one is doing is counting using Elliott Wave at all!

Have an excellent rest of the weekend.

TraderJoe

Back Near the Old Highs

Yesterday we indicated we had only three-waves down, and laid out scenarios from there.  Today became a "risk on" day after the Payroll Employment report showed fewer jobs added than the ADP report. Of course, of the two, it is probably the government that can't count, or "is behind" in catching up to those private sector jobs added. As a result, stocks neared the old all-time high, but futures didn't go over it yet. They could at some point.

ES Futures - 1 Day - Green Day

In the process of making their run higher, the ES futures invalidated all downward diagonal scenarios, as did the cash SPY by making a slight higher high over the 1 Jun high, and in the case of SPY a slight new all-time-high. IFF (and that's a big if) price were to stop moving up here, then the up move to (b) could be counted as a triple zigzag, in a wedge, as in the chart below.

SPY - 2 Hr - Slight New ATH

Such a wave is still acceptable for a barrier triangle, where (b) and (d) could be level to the prior wave ((iii)). But, there is no guarantee price has stopped at this level, and it will simply have to be monitored. Right now, with a Fibonacci (b) = (a), the structure could also be a regular flat wave in progress.  Higher prices could lead to an expanded flat or maybe a diagonal, although at this time such a diagonal would be much too premature to speculate on, and the wave structure doesn't look quite right for it.

In any event, a down trending wave is not even indicated until the wave marked as the second 'x' is exceeded to the down side.

Have an excellent start to the evening.

P.S. Wyckoff Method for a Distribution Top with Elliott Wave Labels applied.

Wyckoff Method For Distribution Top With Elliott Wave Labels Applied

 

TraderJoe

Lower Low Day

ES futures gapped lower overnight and traveled far enough to create a lower low day. Before the open, they nearly touched the daily "line-in-the-sand", the 18-day SMA, as the ADP payroll number came in at +978k private jobs added. The daily chart is below.

ES Futures - Daily -

 

As we said yesterday, this was sufficient to turn the swing line from "up" to "neutral" as there is a lower low but a higher high. But, the local trend can not turn down without both a "negative" swing line and a close below the 18-day. By the settlement, it did not do that. Also, during the day, the daily slow stochastic threatened to turn under the 80 level, losing it for much of the overnight session, and then recovering during the day.

Currently, there are only three waves down with upward overlap and many wave options.

1.  We could still be in a flat wave from the high. IF so, a diagonal lower may be in progress.
2.  We could still be in a triangle wave. IF so, a double or triple zigzag lower could occur.
3.  IF we go over the all-time high tomorrow, an upward diagonal could be in progress.
   

It's the fourth wave conundrum - which occurs at all degrees of trend. It is lighter holiday-week volume, and the Payroll Employment report is tomorrow before the open.

Have a very good start to your evening.

TraderJoe

Humble Inside Day

Today was a simple inside day as the daily chart of ES futures shows, below. When prices rallied, we noted that cash and futures stayed inside of 61.8%.

ES Futures - Daily - Inside Day

Because the 62% Fib level was adhered to, we think the bar is still just consolidating the previous drop. And for that reason we were able to post a plausible scenario of an impulse count, lower in the comments for the previous post.

A lot depends on tomorrow's gap directions, and those will likely be influenced by the reactions to the Unemployment Claims (Thursday) and the Payroll Employment report (Friday).

As we said in the prior post, lower daily lows are needed for any downward count. Lower lows would temporarily mean a change in the daily swing line from "up" to "neutral". Those lower lows have not happened yet. But, if they do, things could begin to progress quickly - especially given the potentially light volume in the holiday shortened week. Remember, it doesn't necessarily take a ton of volume to continue a slide. It can occur just on the withdrawal of bids for whatever reason.

This is a time to pay attention to some economic reports. Have a very good start to the evening, and a continued good vacation if you are currently on holiday.

TraderJoe

1st of June

First trading day of the month that is. We suggested that the first of the month could see typical inflows from roll-over sources like pension funds, 401k's, company bonuses,  dividend reinvestment plans, etc. If you were watching the overnight you know that when the futures market opened last night, that money poured in literally from the opening tick until the cash open this morning - and then it vanished. Cash and futures reversed a bit near the high. Cash can be counted in the following manner, at present.

SPY - 1 Hr - Double Top

Futures count a little differently as the triple zigzag we have shown earlier. The daily futures changed from having an outside range bar, up, early this morning, to having an outside range bar, down by settle. If we are making a Flat wave, then, it warns to look for lower low days. 

But, more importantly, it really depends how large the flat wave gets. In one version, the Flat could be a fourth wave. In another version it could be a larger (X) wave. First, the lower lows are needed.

Have an excellent start to the evening.

TraderJoe