Friday, June 18, 2021

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

39 comments:

  1. SPX (dly) - additional perspectives -

    https://i.postimg.cc/pdj5N380/SPX.png

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    Replies
    1. GW- I think you need to switch to log chart. That TL broke over a month ago. Hope that’s helpful.

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  2. Gold (wkly) - one perspective -

    https://i.postimg.cc/59qpP9M7/gold.png

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  3. MO (mthly) Looks interesting in the months to come -

    https://i.postimg.cc/zGQF46cQ/MO.png

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  4. MSFT (wkly) - observations -

    https://i.postimg.cc/T3ktfQtz/MSFT.png

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  5. Gold DXY - who do you like?

    https://i.postimg.cc/pXrpTNMX/golddxy.png

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    Replies
    1. Weekly chart, dxy looks better. Look at weekly bull divergences there. You can see the same setup up in early 2018

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  6. CSIQ (dly) Solar looking interesting -

    https://i.postimg.cc/sxLhD3kB/solar.png

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  7. https://www.tradingview.com/x/U9RkD4Wn/

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    1. Sort of looks like a break out above the Tline

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    2. Friday closed at a low of right on the trend line, so head fake or not is unconfirmed. Of someone has a quarterly chart or yearly chart to share that might have a better trendline that allows for variability due to the large amount of candles and time on my monthly chart :)

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    3. Here's a yearly DJI - :o)

      https://i.postimg.cc/xj4g8SG3/DJI.png

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    4. Greywaver, Would you possibly put a channel on the above chart for me using that top line?

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    5. I couldn't get channel to work. Wont pull down far enough. The log scale does something to the channel tool. Hopefully someone else here can figure out how to do it. Sorry.

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    6. Thanks greywaver. Looks like if you have your trend line drawn, you can draw a regular Pitchfork with the high low matching the high and low of 1929 and 1932 respectively, and then match the "handle" of the fork to the degree of trendline at the top so they are equal/overlap. Probably the best we can do, but it looks good. I'd post it but I'm not at my computer.

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  8. IWM (dly) - observations

    https://i.postimg.cc/ZKW1TVhQ/IWM.png

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  9. Good morning all. In the overnight, the ES came down a bit more towards the 62% retrace level, without hitting it. Still, good enough for the (c) wave of a 'potential' barrier triangle. It is still a 'potential' until all five waves should be actualized.

    https://www.tradingview.com/x/aYiY3KY3/

    TJ

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    Replies
    1. Thanks TJ,

      Is still 78% retrace a possibility as the move from 4128 looks impulsive?

      How should we count it to satisfy. 5 waves up?

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  10. Bitcoin on its way to making a new low in the 5th wave.

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  11. ES 5-min; first wave up is the extended wave x(1), and it is a leading expanding diagonal. Then, 3 < 1, and 5 < 3.

    https://invst.ly/v76tr

    Now into a retrace wave. None of this, of course, is being seen in the cash markets, yet.

    TJ

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    Replies
    1. Shouldn't such a pattern, assuming it is complete, be completely retraced?

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    2. Actually I don't think that is an expanding diagonal at all. It is just an impulse wave. Expanding diagonal should have wave 4 /2 overlap, not normally allowed for an impulse, right? This doesn't have that.

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    3. Dan .. no, a leading diagonal is 'never' fully retraced. I don't know where you are getting that from. 'Only" ending diagonals are fully retraced.

      Yes, there was definitely overlap. Here is the chart. Definitely not an impulse

      https://www.tradingview.com/x/bO5F5dX2/

      TJ

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  12. Tqqq triggered a long signal in my short term trading system right at 4:00 AM eastern time. This would jive well with a proposed D wave up for the S & P that might last for the day or into tomorrow.

    https://www.tradingview.com/x/QkEWuQr2/

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  13. Interesting "stat box" from SentimenTrader -

    https://i.postimg.cc/kGdNnLX9/statbox.png

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    Replies
    1. A tad deceiving since the S&P500 itself hit a new one month low on Friday, so the high over the past month is pretty close to the close one month ago.

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    2. Agree with Kevin, they're comparing multi-year with a 1 month.
      That said there are lots of non-confirmations around. DJU has not confirmed for one, though I can see a lot of impulse up and 3-wave down on DJU it is all overlapping - perhaps due to many degrees of trend. That said nothing about the economic data coming in suggests that any of these markets should be above their 2019/early 2020 highs to me. It all seems to be the result of loose monetary policy, stimulus checks, and mania driven by work at home types.

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  14. Question -

    https://i.postimg.cc/3JrJbt94/question.png

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    Replies
    1. Where I showed ((C)) down when the weekend closed, that was all there waves there were. The wave merely extended so that location was a smaller degree "1" of ((C)) with a three and a five, lower, after it - including the two and four at very small degree.

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  15. TQQQ triggered a reversal and is now on a short signal. It appears there is a 3rd or c wave coming up with a move down for the Nasdaq.

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  16. SPY (15min) - An hour in -

    https://i.postimg.cc/SsK5xHgB/hour-in.png

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    Replies
    1. Currently, we have retraced .618 of the gap area.

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  17. TQQQ right on the edge of triggering a long again at about 112.50. Time to pay for recent gains? with this vicious market action.

    https://www.tradingview.com/x/wOpEv8p5/

    Still a huge divergence which suggests to me a bigger move either way.

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    Replies
    1. Long trigger TQQQ at 112.30. Damn.

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    2. @Sd .. I asked you once nicely before. Please DO NOT post your trading signals here. This site is not intended for that purpose. Thanks again in advance.

      TJ

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  18. Not sure if anyone noted this but the DOW smacked into its 50 EMA and the S&P stopped at its 18SMA.

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  19. ES 15-min: back to the 18-day SMA.
    TJ

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  20. ES 15-min; just like this morning's 5-min sub-micro count had an extended first wave, so, too, does this micro count.

    https://invst.ly/v7bl8

    TJ

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