Worth Noting - 2

Daily bias: lower - price remains under the 18-day SMA

As far as I can tell, preliminarily, today's lower low day after yesterday's inside day will set the daily swing line into a 'down' configuration. I will want to verify this later tonight, but I think so. Regardless, as an update of yesterday's chart - below - shows, the bearish cross of the 18-day SMA under the 50 SMA become a bit better defined today.

The day isn't over yet, but today's down wave hasn't taken out the prior low by just one tick on the ES futures, yet. That may change in the overnight hours. If it does, it makes a third wave down more highly likely. As the above chart clearly shows, we don't yet know whether the market will impulse lower or make a diagonal lower. It depends on the internal wave structure, particularly of a third wave - if it forms.

I did have a look at what degree of wave label might tentatively be assigned to the waves, so far, and it looks like the minute degree is the best fit at the moment - subject to further evaluation. The waves off the bottom in March 2020 started with minute labels so I'm thinking that may here apply here.

Have a good start to the evening.

TraderJoe

Worth Noting

Today was an inside day for the ES futures, as can be seen on the daily chart, below. The candle did leave another tail, and may just represent consolidation of the previous large candle downward. However, it was a lower low day for the NQ futures.

ES Futures - 1 D - SMA Alignment

It seems worth noting that the moving averages have aligned to the down side today with the 9-period below the 18-period, and both below the 50-period. That hasn't happened in quite a while.

That is all.

Have an excellent start to the evening.

TraderJoe

Continuation Candle Lower

Daily bias: lower

With price below the 18-day SMA, the daily bias continues lower. Since 10 September price has not been able to close above "the line in the sand". Today provided a continuation candle lower.

In the comments for the prior post, we provided some hints on how to count this movement so far. Still, some landmarks must be met. In particular, there is now a down (red) fractal shown at 4,300 on the chart. The level must be exceeded lower to really get the swing-line into a further trend of lower highs and lower lows.

Have an excellent start to the evening.

TraderJoe

Tentative Rejection at 18-day

Overnight, the ES futures were up fairly strongly. In fact, they had gotten up over the 18-day SMA. However, that level did not hold. In the overnight market, we could count five-waves-down. We tried to count five-waves-up today but could not do it. The result is a topping tail candle, as in the ES daily chart, below.

Because there is tentatively rejection at the 18-day SMA, this creates a tentative trend line from the high. We can only count three-waves-up to today's high. Yes, there can be more correction of today's overnight downward wave, but so far, it has not materialized. The market may be waiting on some news.

The NQ futures did a full-on outside reversal day, down, with a lower close. The ES did not have the full outside reversal, but did have the lower close.

Have a good start to the evening.

TraderJoe

Full Description

Every wave is currently in it's place according to degree labeling, and there are no errors or warnings from the MotiveWave software platform. There are a few more facts of interest below the chart.

Additional Items Not on the Chart

Within wave Intermediate (W): wave minute ((b)) of minor B is shorter in price and time than all of Minor A, the prior larger degree wave in the same direction. Thus, it can be a subwave. Minor B overlaps Minor A. Wave minute ((i)) of C is a leading diagonal and is still shorter in price an time than Minor A the prior larger degree wave in the same direction, therefore it qualifies as a subwave.

Within wave Intermediate (Y): wave minute ((i)) of minor C is shorter in price and time than all of Minor A the prior larger degree wave in the same direction, therefore, it qualifies as a subwave. Minor B as a triangle is definitely shorter in net price than Intermediate (X) the prior higher degree wave in the down direction and qualifies as a subwave. Measurements show that time-wise Minor B may be shorter or just the same as Intermediate (X) in time, but I'm not sure exactly of the requirement since Minor B is a triangle who's very purpose is to take up time and move price sideways.

This is the second post this weekend, and, if you have not seen the first, you may wish to view it now.

Have an excellent rest of the weekend.

TraderJoe

Battle for the Line in the Sand

Many times we have written about how the 18-day SMA is often termed "the line in the sand". Like yesterday, today tried to make the higher high needed for price to meet it from below, but it couldn't do it resulting in just an inside day with a wide-range in price. The daily chart is below.

ES Futures - 1 D - Near the 'Line in the Sand'

 

If price can get over the 18-day SMA on Sun-Tues it might constitute an impulse up depending on how it is formed.

But from last night's high to this morning's low, and this morning's low to this afternoon's high we could only count three waves down and three up (a -3-3, if you will). So today could be part of a Flat wave in a fourth wave position within an 'a' wave up, for example. See the comments for the prior blog post if interested in the internals waves, one of which was a nicely formed triangle that we called in real time.

Oh well. The weekend is here. No one seems too interested in wave counting or measuring waves. Ho hum. I wonder what that might be a sign of, eventually?

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

TraderJoe

Upward Overlap Day

We have been saying for several days that we could only count three-waves-down on the daily chart and that the market would have to 'prove' a fourth wave up and a fifth wave down. The market did not do that. Instead today there was upward overlap on the ((A)) wave in the daily chart below, proving that there was only three waves down.

ES Futures - 1 D - Three Waves Down

You can see that price today neared the 18-day SMA, the 'line-in-the-sand', but did not go over it yet. So the daily bias is still down and the daily slow stochastic is still in over-sold territory. Further, a trend line down from the top (shown in black) was pieced to the upside.

So, the three-waves down could still start a larger diagonal diagonal downward. If you remember our count downward on the SPY (at this LINK), each of the downward number waves was a three-wave sequence. And that got us to the ((A)) wave on the chart, above. So, yes, it is entirely possible to go lower starting with three-wave sequences. But, it is certainly possible to go over the high again, in a five-wave sequence although the probability of that seems a bit lower because this down wave was the longest down wave in price and time since mid-May. If the down wave in May was wave two of the contracting diagonal upward, then we have already started downward, and there is no going back.

No, rather more likely, but not for certain is the probability that we are first back-testing this two-day up trend line on SPY.

Only if the back-test makes a lower high, then fails by making a lower low do we go lower. Since that trend line has four touches on it, and a gap down through it, there may be some significance to it. If prices should crawl up above the trend line, then perhaps it is a sign of a larger triangle or flat at the low. But such a count is becoming increasingly difficult. So let's keep an eye on that potential back-test.

Have a good start to your evening.

TraderJoe

FED Day

So, the FED says tapering could start and if it does it might be expected to be over by the middle of next year. However, no inference is to be drawn, if it does start, that interest rate rises would start soon after. So the market thrashed around a bit; nothing serious.

We have written over the last several days that there are only three-waves down, so far. There might now be the makings of a fourth wave, but, the market must simply prove that to us. If prices bust the larger down channel, upward, by a significant amount, and if they upwardly overlap the a/i wave, then we must conclude there were only three waves down.

Three waves down could start a larger diagonal, so it does not mean the down trend is completely over if we get an upward wave with overlap. On-the-other-hand, the market could impulse lower by making a lower low. With about 146 candles on the ES 2-hr chart, there is the potential for a fourth wave signature on the Elliott Wave Oscillator. The question is only whether a fourth wave holds or not in this area. 

The warning sign is that on the ES 30-min chart it is possible to count a contracting diagonal upward, so that if today's FED high is exceeded, it might start a larger c wave up. I can see both sides of the coin at this point, so the market will have to make-the-call.

Have a good start to the evening.

TraderJoe

Inside Day

Looking at the daily ES chart, below, today's "inside day" most likely represents some kind of consolidation.

With the FED meeting results due tomorrow, the candle could represent either all of a fourth wave, up, or portions of a triangle wave still under construction.

For the triangle option, see the chart we posted in the comments for the previous day at this LINK. In any event, we could only count three-waves-up from yesterday's rise into this morning's high, shown as the ((A)), ((B)), ((C)), up.

Have an excellent start to the evening.

TraderJoe

Three Waves Down (So Far)

Like it or not, the best Elliott Wave evaluation of prices since the high is that there are only three-waves down, and the third wave is 1.618 x the first wave, looking like this on the ES 4-Hr chart.

ES Futures - 4 Hr - Three Waves So Far

Yes, today was very impulsive. Yes, lots of key levels were broken. Two of those key levels were the lengths of minute ((iv)) of the ES daily diagonal, and the length of minute ((ii)) of the same diagonal. Those levels were exceeded lower.

Still the 1.618 Fibonacci extension was not exceeded in the futures. Further, what started out as a potential 1:10 kick-off day at the mid-point of the session, fizzled a bit to only about a ratio of 1:5 advances-to-declines by the end of the day.

Therefore, until we know more, the Principle of Equivalence still applies. That means the labels of a/i, b/ii, and c/iii are exactly equivalent until they are proven not to be. Could the market add a fourth and a fifth wave down to complete an impulse? Yes, it certainly could. The middle of today's wave suggests it might. But, the point is it hasn't yet. The market will tell us very clearly when it has impulsed. So far, no impulse is seen.

So remain flexible, patient and calm. And have a good start to your evening.

TraderJoe

What's Missing?

Although this week did see a lot of downside price movement, there still seems to be something missing. What's missing? How about those "kick-off" levels in the advance-decline line. You know those days where the declines exceed advances by 1:8, or 1:9 or 1:10. Those. We haven't seen one yet. Now we both know that they could come next week on FED announcement day, particularly if a significant tapering is announced. But, the opposite could equally happen depending on the announcement and who agrees with what.

So what is the best alternate if the market stages one more large rally? As I have been saying for weeks, I think the Dow provides the clearest clue.

Dow (YM) Futures - 1 D - Slightly Larger Diagonal

It is entirely possible for the Dow to complete it's ending diagonal by indeed getting that minute ((v)) wave higher high and possible throw-over of the upper diagonal trend line as is often expected. In the above scenario, wave ((iv)) is still shorter in price and time than wave ((ii)), and wave minute ((iv)) would be shown by the Elliott Wave Oscillator traveling below the zero line again, and on a divergence.

Again, this is if the September high is not the top. Now, I need to show the same chart with a price measurement on it, so as not to confuse you.

Dow (YM) Futures - 1 D - Fibonacci Measurement

Here you can see the the Fibonacci ruler shows that if price goes below 33,436 in the Dow futures (YM), then wave ((iv)) would become larger than wave ((ii)) in price, and that is not allowed by the rules! So, IFF price goes below 33,436 before a wave ((v)) goes over the high, then that means the slightly larger diagonal invalidates and the early September high is "the" high.

Additional technical evidence comes from the daily Bollinger Bands. As we know price is down to the lower band, and this is the place where the so-called Smart Money often, not always, takes profits.

Is there any other way the Dow could head up moderately higher for FED day and keep the previous diagonal with the high in early September? Sure. We could get several up days from here as the "c" wave of a flat second wave as was discussed in the prior post.

This is the second post this weekend, so be sure to read the first one, too.

TraderJoe

Lower Low

Today made a lower low, and it is not the time to get too fancy. The chart turned negative again, and broke the local channel lower.

ES Futures - 1 D - Channel Breech

As the Fibonacci ruler shows, if the current down wave falls below 4,389.00 then it would be longer than the down wave marked with the brown line which is minute wave ((iv)) of the diagonal we drew. That would likely mean 'there is a turn of degree'. Already the current down wave is longer in time than that wave, and this might be another indicator of a degree turn. And clearly, there might be a setup for a head & shoulders top.

One interesting item, not shown, is that price is actually beginning to bend the daily Bollinger Band downward. We haven't seen that for a fair bit. Still, we want to keep our wits about us, and especially in recognition that today was quadruple-witching, we will note that it would be helpful to get price below the 1.618 external retracement shown on the ES 4-Hr chart below, to conclude that a larger flat wave is not occurring.

ES Futures - 4 Hr - External Retrace Levels

If the channel breaks significantly to the downside, and price starts printing full 4-Hr candles below the lower parallel trend line, then it is more likely that a third wave of some type is in progress.

Have a good start to the evening.

TraderJoe

Boxed In

When you look at the ES hourly chart, prices are currently boxed in, as shown. This type of price action could represent flat or combination waves in Elliott Wave terms. Nothing will be clear until the box is broken in one direction or the other. Within the box, the highest highs have not been exceeded yet.

The height of the box just exceeds a 38.2% retrace from the all-time-high. The hourly MACD is very, very neutral and stuck at the flat line, although rising a bit from the recent divergent low.

Looking at the overall down waves from the high, there is room for upward movement, but such does not have to occur.

ES Futures - 1 D - Neutral For Now

 

The count very much depends on if the hourly box breaks significantly to the upside or to the downside.

Have an excellent start to the evening.

TraderJoe

'Possible' Flat

Yesterday, we turned from negative to neutral. In the overnight, price contacted the lower daily Bollinger Band with a slightly higher low. After a pop and then some backing-&-filling after the open, price staged an impulse which may result in the ((C)) wave of a flat, higher. The updated SPY 30-min chart is below.

SPY Cash - 30 Minutes - Potential Flat

 

The alternate to the chart labels is that there is a truncation at wave ((B)) at the low. For further consideration of downward movement, price must exceed that ((B)) wave low, pure & simple. Can the current ((C)) wave up extend? It can - within limits - one of those being not going over the high or else it means the low was, in fact, a truncation.

Have an excellent start to the evening.

TraderJoe

Grindy & Neutral

The expanding diagonal we called yesterday did indeed turn out to be 'Leading' as there are lower waves after it. A line chart (just to show the form) is below.

With another failure and gap fill after the cash open today prices ground & ground & ground lower. It looks like three waves lower and so - at this point - being around the 1.382 mark as far as closes go, it might be the b-3 wave of a flat. 

I'm not sure, but I am again neutral (after being negative) until I see more. Neutral means I'm looking to the ES 30-minute intraday chart for clues. Certainly, lower lows would tilt the odds to the down side again.

Have an excellent start to the evening.

TraderJoe

SPY Completes Expanding Pattern

With about 90 candles on the SPY cash 30-minute chart, we called this afternoon for the end of the SPY's expanding pattern - which may be an expanding diagonal; which may be a leading expanding diagonal or which may be an ending expanding diagonal. As best we can tell, the pattern is of the 3-3-3-3-3 form as shown below.

SPY Cash - 30 min - Expanding Diagonal Completed

The pattern fits the form in every respect with wave ((5)) > ((3)) > ((1)) in both price and time, and wave ((4)) similarly greater than wave ((2)). Further, wave ((4)) overlaps wave ((1)) without going beyond the end of wave ((2)), and all the sequences can be counted as zigzags.

After the pattern completed (with a 'c' wave that made a contracting ending diagonal), then prices broke the 'c' wave contracting diagonal's upper trend line and made a 23.6% retrace, so far.

While the diagonal is likely completed, downward movement does not have to be. On the ES daily chart, price is below the 18-day SMA, so the bias is lower, and the swing-line indicator has the trend down with lower highs and lower lows. But, price is not down to the lower daily Bollinger Band, yet, although the daily slow stochastic is in over-sold territory.

The Fibonacci retrace ruler has been placed on the chart above. The larger wave pattern down to the low is really messy at this point. It CAN be 'any' of these three wave labels given the Principle of Equivalence a / i or c. The c wave label applies if the wave is an 'ending' diagonal rather than a 'leading' one. What matters most next are 1) if closes stay below the 18-day SMA, 2) if a retrace stays below the high, or 3) if today's cash or futures low is exceeded lower.

Until we know more, the current wave labels provide little guidance. As stated in the comments, when the market wants to, I have seen these pattern break lower much more quickly than expected, say, if the Smart Money wants to get price down to that daily lower Bollinger Band.

Have an excellent start to the evening.

TraderJoe

DOW Appears to Fail Diagonal

As noted in the comment section of yesterday's post, the DOW futures (and cash) appear to have failed the contracting ending diagonal fifth wave by trading below the low of minute ((iv)).

This appears to be a negative development. The only way I can see around it is to make minute wave ((iv)) larger in time as a larger zigzag. That is certainly possible, but only within certain limits. Wave ((iv)) could not become longer in price than wave ((ii)).

Here is the progress on the SPY's expanding diagonal downward.

Wave ((5)), z, is now longer in time and price then wave ((3)), y. There could be more to wave ((5)) in the overnight and into Monday.

Have an excellent start to the evening and the weekend.

TraderJoe

Someone's Out to Drive me Batty

Warning! The chart below does not resemble the ES futures. If you go over the comments for the prior post, you can see that today we again 'tried' to count five-up in the ES 5-minute futures. We could NOT do so. We could only count three-waves up today, and when they failed we turned around and tried to count five-waves down. The fifth of the five waves in the ES may be completing in the after-hours. 

In the SPY, here is the current 30-min wave labeling from the recent high. We had noted the possible exhaustion gap which is now filled. We will also note an open unfilled gap in wave ((3)), y. We will also note that wave ((4)), x came out pretty darn close to 78.6% and represents good proportions for a plausible diagonal pattern.

I did not ask for this pattern. It's what is being delivered. I would rather count an impulse. It's not there. So in the SPY, we need to see if a ((5))th wave that is longer in price (and, hopefully longer in time, too) gets made. For tonight, and until there is more information, that means that - using the Principle of Equivalence - the same exact down waves count as w,x,y,x,z - again until we know more. A 3-3-3-3-3 expanding diagonal must have as it's alternate the three zigzags of which it is composed - pure and simple.

I am getting tempted to discontinue all intraday counting until some people start practicing and trying with The Eight Fold Path Method. I'm not doing this for my health.

Have an excellent start to the evening.

TraderJoe

Momentum Helps Identify Waves

Unlike yesterday, today we were able to count five-waves-up after the cash open - just not as an impulse wave. Yesterday, we were not even able to count five-waves-up. Today's 'five-up' appears to be a contracting diagonal. Let's look at why. Here is the ES 5-min chart from the low.

ES Futures - 5 Min - Tentative Channel

Here you see that when you place a tentative 'parallel' around the most vertical waves, the waves that are otherwise most likely to become wave 1  & 2, instead of seeing that massive, vertical,  spiky, gappy wave that you'd like to see for wave 3, then all that happens is you see a very compressed structure that never leaps out of the upside of the channel. To traders, this compression is venom. All it does is trap traders in the market, or cause whipsaws, or causes traders just to exit positions because "nothing is happening".

Yet, this lack of an upward spike should perk up the wave-counter's ears.  It might indicate the structure known as the contracting diagonal - IF it can be counted properly. Here is how this wave was counted.

ES Futures - 5 Min - Diagonal 3-3-3-3-3

Notice, the slanted "roof-line", and the three-wave structures each getting progressively smaller in both price and time, but yet with the requisite three marginal 'higher highs'. Then, to prove it's diagonal character - as soon as wave ((5)), up, was completed - price broke down. It pierced both the lower diagonal trend line and the lower channel line which indicates a further real loss in momentum.

To meet degree labeling requirements, the first three waves up must be counted as a,b,c to ((1)). That is because the c wave up is longer in price and time than the a wave, so the two waves 'must' be of the same degree or that c wave is of one higher degree.

Make no mistake, the at least temporary loss of momentum isn't necessarily benign. As a larger A wave up, it could eventually lead to as much as a 1.618 wave higher IFF (if-and-only-if) wave ((5)) is exceeded higher, showing the wave as a leading diagonal.

BUT, if price breaks through the low, first, before busting the high of wave ((5)), then the diagonal could be an ending diagonal. And that is one of the reasons for patience with wave counting. Diagonals are structures which can be their own alternates, particularly when they are of the 3-3-3-3-3 form. There is not yet a known case of a true 5-3-5-3-5 diagonal as ever having been an ending diagonal, so those are always leading as of this writing.

The reasons for writing this review of a diagonal - even on this short term time scale might not be obvious to you. There are people who try to count waves who -

1.  Don't draw a tentative base channel around their waves
2.  Don't try to examine the momentum in their wave by doing so
3.  Don't actually measure their waves with a Fibonacci ruler
4.  Don't verify actual three-wave or five-wave sequences
5.  Don't place a specific moving average on their wave to look for form & balance

Yet some of these same people want to tell you have their wave count is better than one that has such specificity to it. Or, they want to tell you how 'their guy'  has such a much better wave count. Yet, some people don't worry about criteria like, "In a diagonal, is wave three allowed to cut off a line from zero to wave two?".

This is one of the few sites that ponders such questions. Have an excellent rest of the evening.

TraderJoe

Diagonal Likely Confirmed

There is a very good chance that today we confirmed the prior expanding ending diagonal that I called in the ES hourly futures. As a reminder here is that diagonal.

ES Futures - 1 Hr - Diagonal Defeated Lower in 'Less Time"

 

The expanding diagonal shown in perfect form, above, is an extremely rare event. One really must ask the question why is there an perfectly formed expanding diagonal at the high in the perfect position to end a much larger daily contracting diagonal??!!

Intraday today I tried counting the waves after the cash open. The waves formed a channel with only three waves up, and a potential 'c' wave inside of 1.618 x an 'a' wave. Then, the channel broke down and this was brought to the attention of the readers of this blog in the comments section (here is a chart LINK).

I turned negative on stocks in the comments section again last week. I said I couldn't count upward impulsively. I couldn't do it again today. Can I make an argument that there could be one last impulse up at some point? Yes, I can. That would suggest that this long flat wave - shown above - a really clear rounding top - is only a larger "b" wave in a slightly larger diagonal. That is because the Dow has not yet made that all-time high. But, I'm not holding my breadth. The Dow can fail. It may have failed already.

I will now also remind you of my weekly count and the three main points of rationale for it.

Again, the logic for this count is as follows:

1.  If the (X) wave were a 2nd wave, then a line drawn from 0 - (2) would break wave (3).
2.  The depth of the (X) wave is only about 25%. That is too shallow for a second wave.
3.  At this point in time, wave (Y) is shorter than (W), i.e. Fibonacci Ratio (Y) = (W).

Besides this when you look at the two-daily chart all one sees is "chop". One does not see big impulsive structures except very incidentally in the wave.

Let's see how things go. Again, today, I further tried to count impulsively upward. The market, not me, said, "nah, I'll break down a bit on you instead."

Have an excellent start to the evening.

TraderJoe

Time to Stay on One's Toes

Prices are not trading at the moment, so it's a good time to review where we are. Where we are is a very good time to remain on one's toes - with a lot of patience at the moment. Let's review the ES four-hour chart in what we think is or are the last wave(s) up.

ES Futures - 4 Hr - Looking for Last Waves

Looking at the chart, we see a higher high after the wave identified as micro-((3)), and that wave might form a divergence with the RSI. The peak of RSI typically identifies a wave three structure. And we see that looking at the wave 0 - ((2)) trend line, we can find a wave ((3)) that is entirely above the dashed trend line. It is shorter than wave ((1)) so that makes wave ((1)) the extended wave in the sequence. That being the case, we should expect wave ((5)) to be shorter than wave ((3)).

I have only shown you this chart to ask - in your wave-counting style - do you have the patience to wait for that larger trend line break shown in red? Also, you can clearly see by the purple dotted line where the prior support might be expected. A trend line break might meet with temporary support there and be followed by a back-test of the trend line. Why patience?

Let's look at the ES 30-min chart next.

Here we can see the overnight waves have formed a longer in time c/iii wave which does not yet have divergence on the RSI. Clearly, the chart is in the area of the prior supply zone on this time frame, but the RSI shows no divergence yet. So, we could just have three-waves-up to a lower high. Or the waves could extend to make five-waves-up and a higher high. At this point in the analysis waves a/i, b/ii, and c/iii are equivalent until they are not.

What about that overlap warning? Well, if prices overlap a/i, then it is what it is - it is just a warning as a fifth of a fifth of a fifth could also overlap and form a final diagonal at this much smaller degree. We simply don't know. There is no way to know. One could only guess. And we're not trying to guess - we're trying to count waves.

That's why I ask if one has the patience to wait for that larger four-hour trend line break. This is the action that will signify that downward price movement has some sufficient power behind it that might allow for continuing waves lower.

Where will "the news" come from that might accompany a drop? Remember, there are lots of large economies in the world that could have this news. It does not have to come from the U.S. FED. It could come from Europe, or China or South America for example.

But, for now, patience!

Have an excellent rest of the long weekend if you are celebrating the holiday in the U.S.

TraderJoe

A Tale of Two Scenarios

As most people know the ES daily futures made nearly a perfect Doji candle on Friday after the payroll employment report. Swift confirmation of that candle  might point the way lower. In the futures, there is a wave down and about a 71% upward retrace. We sketched it out on Friday in the comments (which you can view at this LINK). This posting tries to explain the cash market. If the overnight on Sunday/Monday confirms the Doji with a significantly lower low, then that would lend to this first scenario in the cash market.

SPY Cash - 30 min - Exhaustion Gap

In Scenario #1 a fourth wave ended at the end of the day on 30 Aug. And the question is whether the large gap up on 2 Sept is an exhaustion gap or not. If it was, then the up wave did end as the expanding ending diagonal (E-E-D, above) we sketched out in the futures. In that case, perhaps a downward wave in cash will form as a diagonal. Note that the ES top, so far, actually occurred on the morning of 3 Sept. Wave i down is a "three-wave" ((A)),((B)),((C)) lower, and wave ii could be a 'deep-retrace' wave.

Still, with the very same waves in cash we can sketch out a Scenario #2 in which all of these waves are part of the fourth wave triangle, with a top to come later this week. It looks like this.

We could have waves a,b,c,d of a triangle, and now in the e wave. And actually, the e wave has already crossed back under the center line of a triangle to validate the pattern.

This is one of the essences of what I have termed The Fourth Wave Conundrum. You can still make a lot of different patterns with three-wave sequences. And hopefully, this post shows why there is such a need for flexibility, patience and calm around market tops. Sometimes, unclear or three-wave sequences can be used in both cases.

So if there is this uncertainty in price, can time help us out at all? Well, looking at the expanding ending diagonal we sketched out in the ES futures, it took 67 hourly candles to build. So far, the market has spent only 8 hourly candles making a potential wave i down, and wave ii, up. So, although it does not look like it in the cash market, the ES futures have plenty of time to confirm that the up waves were an expanding ending diagonal by breaking the start of the diagonal in less time than the diagonal took to build. This is just one of the reasons why we always confirm time parameters with the futures, including as we do for degree labeling.

Just as a reminder, here is the diagram of the potential ending expanding diagonal in the ES 30-min chart just as we called it out. It would require confirmation by traveling below 4,512.50 in less time than the diagonal took to build.

ES Futures - 30 Minutes - Ending Expanding Diagonal

And, from this diagram, you can see how much more time left the futures have to confirm this potential ending pattern.

Have an excellent rest of the weekend.

TraderJoe

Waiting on the Dow? - 4

Today the ES futures made a new all-time high. Again, the Dow futures did not. Per the chart below, the completed count can still be waiting on the daily Dow.

Dow (YM) Futures - 1 Day - Potential Diagonal

The Elliott Wave Oscillator, the hesitant zigzags, the EMA-34 and the overlaps all point to a diagonal without guaranteeing it. A new high for minute ((v)), circle-v, is likely, but it is not required. 

On the shorter term ES 30-minute, with about 105 candles on it, and intraday SPY chart, we noted an expanding diagonal can be forming for the (5)th wave of ((5))th wave of the vth wave of the (c) wave of minute ((v)) as below.

ES Futures - 30 min - Expanding Diagonal ?

 

So, we'll see how the futures do on tomorrow's payroll employment report. We will note the up count can be completed today, though it would look better in time if it completed tomorrow. But, the up count can not currently be continued below 4,512. And we note the expanding diagonal's (4)th wave only held this level by a hair. What should be clear from these patterns is that it is exceptionally hard to count these waves legally as impulses. And just like I was the first to admit that I could not count this afternoon's waves down as anything other than a,b,c - with that same simplicity - I can not count the up waves as impulses (or a valid triangles for that matter). Therefore, I am now negative again on the market overall.

Have an excellent start to the evening.

TraderJoe

Waiting on the Dow? - 3

Today was pretty snarky for an inflow day. Overnight, prices as measured by the ES futures did rise.  They just didn't make a new all-time-high. The Dow futures rose again, and also did not make a new all-time high either. Why not? What was stopping them? So early in the day, it provided the idea that perhaps the futures are again in triangle mode. Maybe they are waiting on something like the Payroll Employment Report on Friday, or some other react-to-the-news way to cover their tracks and reverse.

So, in the ES 30-minute futures we showed this potential triangle idea, and the fractals and indicators associated with it. If it's not a triangle, then it could be a ((5))th wave truncation at the red star. But, right now the triangle fits it better (until there are more waves we can see). All we can say, is we've been saying higher highs are possible. They still are and they would not interfere with the overall wave count of Intermediate (W)-(X)-(Y) on the weekly chart. We didn't get the higher highs today - maybe later in the week. Maybe not.

At some point, the market is going to do the unexpected: set us up for one thing and do the opposite. Just when remains to be seen.

Have an excellent start to the evening.

TraderJoe