No Urgency To Sell = NUTS!

ES futures just hit new all-time highs. SPY has not as of this writing. Yet, the put-to-call-ratio (see second chart below) is back down in 0.36 region as of last night. There is No Urgency To Sell, and this is otherwise termed complacency. Is it possible that the market is merely extending out this fifth wave of Minor B as an ending contracting diagonal (chart below)?.

The first step necessary, of course, is for SPY/SPX cash to register the new all-time-high. If it can do that, it might back off a bit in a wave iv, then pop up to make wave v to finish the minute ((c)) wave of Minor B.

Here is the put-call data with the latest reading at 0.36, the likes of which have not been seen in months.

Have an excellent rest of the day.

TraderJoe

Minor B ? - 2

The case for the Minor B wave at the high got a little stronger with the lower daily low today. Although today's initial internal waves were tortured and twisted (good pre-Halloween theme?) prices let loose at the end of the day and broke a revised base channel downward. This after further upward corrective waves refused to go over the 62% retracement in a failure, as below.

ES Futures - 30 min - Waves i & ii

Now we need to see if the prior wave (iv) is broken lower. If it does it would add to the evidence for this case. Within wave ii, the internal sideways triangle portion of the correction, may be correcting for the internal degree violations in time.

Have an excellent start to the evening.

TraderJoe

Minor B ?

IFF we are making a Minor B wave, up, after three-waves-down to a Minor A wave at the 1 Oct low, then this one fits the bill on the ES 4 Hr chart, below.

ES Futures - 4 Hr - Minor B

The relationship would be Minute ((c)) = 1.618 x Minute ((a)), with Minute ((a)) as the expanding leading diagonal. The clear alternate is shown below the price on the red line.

And, here is how the last wave up was counted out today on the ES 30-minute chart.

ES Futures - 30 min - Wave (v) Up

Today's up wave - after the initial drop - should it hold tonight, would be one of the first to hold below a 0.618 close on the retrace up. The low of wave iv has already been broken in the above chart, and wave iv is a triangle or a failed combination - difficult to discern.

Have a good start to the evening.

TraderJoe

No Change to Prior Waves Counted

Here is the weekly chart. There are no changes to prior waves counted. The new information is that stocks and futures (with the exception of the Russell 2000, yet) have made a new all-time high. Also, the NYSE advance-decline line made a new all time high. Along with several other FED-related factors this suggests that upward stocks movements may not be over.

From a technical viewpoint, using the weekly chart 1) there is no wave two signature on the Elliott Wave Oscillator. 2) Price could attempt to form a better channel. 3) There could be alternation in the wave (X)'s. 4) Wave (Y) was not as long as wave (W), but a brief turn lower occurred at exactly the right time, and 5) IF wave A is in 'three-waves-down', one simply had to wait until price got to 90% of the high to suggest that maybe wave (X2) will be a Flat or Expanded Flat. It did.

I could be wrong.

On Saturday morning, an update of the 4-hr chart was added to this post. The chart shows that this up wave whether minute ((iii)) or minute ((c)) is best paired with the leading expanding diagonal off of the low.

The rationale is that the pairing results in a near 1.618 relationship at this time. Now, "most often" leading diagonals are "a" waves. And, if so, one might expect the tentative up channel to break and not support a fourth wave down. But that remains to be seen.

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

TraderJoe

Up Wave Without A Substantial Pull-back x((1)) ?

This is the best hourly count I see. There is nothing yet to imply that the up wave is over. It would be quite a short wave ((5)) if the wave ended here. But, it bears watching. Price has not gone over the all-time high yet on this index, but it could.

What we can see is that the 0 - ((2)) trend line has been broken to the downside, and that is likely the wave ((4)). The location of ((3)) is not precise. There is one way to count in which ((3)) is at the 0.618 extension of wave ((1)). There is also a way to count wave ((4)) as a triangle - which was shown in the cash market in the comments.

The hourly EWO did drop below the zero line meeting the requirement of +10% to -40% of the largest prior peak. There is also a smaller probability that wave ((4)) is further to the right on the chart as a flat. Again, this depends on any overlaps. But at this point the up move exceeded a 1.382 of the prior high and low.

Have a good start to the evening.

TraderJoe

Internals

The $NYA has made a new high. The advance/decline line has made a new high. The Dow (YM) futures need to be watched to see if they exceed their truncation high. The ES futures have exceeded the 90% level of their decline. Internally, there is now more than a 1.272 wave up off the low with a higher high on the EWO.

The situation suggests drawing this tentative channel and looking to see if the channel holds or not. As I said previously, it is possible to go over the high. The $NYA has done that - as was commented yesterday.

The symbol (c)/(iii) > means this wave is continuing until a clear reversal is seen. And a wave (iii) is as likely as a (c) wave; but a 1.618 wave has not been attained yet.

Have a good start to the day.

TJ

Smart Money Target Hit

In previous posts we noted that the upper daily Bollinger Band might be a target for the Smart Money: those with position sizes large enough to move prices. This morning that target was hit and then some.

Today being Tuesday, prices might 'turn around' some. The question is how much and what it means for a wave count.

Have a good start to the day.

TraderJoe

Count Not Useful at the Moment

Today, we said the Smart Money might target the upper Bollinger Band at 4,472.50 and price got to 4,468 not quite making it. Why? Maybe it will on Monday/Tuesday. Maybe not. If not, there is a potential failure lurking, as we showed in the comments for today on the ES 8-Hr chart, below.

Price has not yet crossed up over the 27 Sep high. It could. That would be a common expectation. Price could also continue up to the 78.6% Fibonacci ratio or beyond. Could it make a new high? It could. 

The wave count is relatively useless at this point. A lot depends on that issue we we having with the first wave down. Is it a "five" or a "three"? If it's a 'five' we might just have had a large flat following it. Or, if it's a "five" the wave structure to the low might be ((a)), ((b)), ((c)) to Minor 1, with a second wave, Minor 2 for the month of October. Or the a-b-c could be part of a triangle, somewhere.

If it's a "three", then the wave structure to the low might count as w-x-y.

Another confusing item: the SPX/SPY and NQ futures made lower lows the first day of October. The ES did not. So, this might support some sort of "b" or "x" wave at the early October low. But, again, it does not add to the clarity. 

Too, neither is the situation with degree labeling able to answer many questions. But, because the late September wave down is shorter in price and time than the early September wave down, it can count as a sub-wave - like a "b" wave or an "x" wave.

Dubiously, the situation requires flexibility and willingness to use technical indications such as the Bollinger Bands until we see if a new high is made first or a new low. Right now, the Bollinger Bands do not exactly look like they are in a position to support new all-time-highs right away. But, stranger things have happened.

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

TraderJoe

Trend Line Broken

Today the down trend line was broken (and, hence, the upper parallel trend line). The upper daily Bollinger Band might be a 'Smart Money' target, but it does not have to be.

The count is temporarily in a state of limbo until we see how far the up wave pushes. At this point one can speculate until blue-in-the-face about triangle, and where they start, etc. We will avoid that for now while admitting a triangle is possible - but so it a Flat wave.

The one thing we will note, is that if this is the whole correction, it is just less than 23.6% from the Oct-Nov 2020 low. And it is only 14.6% from the March 2020 low. More downside - which has not been ruled out yet - could make those numbers more proportional. Such shallow corrections are almost unheard of.

Have a  good start to the evening.

TraderJoe

Back to the Line In the Sand

Yesterday, we suggested that maybe a second wave wasn't done yet to the upside. Today tended to bare that out.

After making a 90% retrace needed for the 'b' wave of a Flat wave, price then headed higher to the combination of the 100-day SMA, and the 18-day SMA. Keep on a watch out to see if the 18-SMA crosses under the 100-day.

Have an excellent start to the evening.

TraderJoe

Still in Channel - 2

Today posted some lower lows versus yesterday. We could count a new wave i down as an expanding diagonal which still fits degree labeling because it is shorter in both time and price than all of (a) - the prior higher degree wave in the same direction (down).

ES Futures - 8 Hr - Still in A Channel

Therefore, wave i counts as a valid subwave. It now seems largely a question of whether wave sub-minuette ii finished today or wants to make one more series of highs above today's interim highs. It certainly can do that if it wants, but just not exceed the (b) wave high.

This is also just a reminder than wave minuet (c) can either be an impulse or a diagonal. Why? Because it is in the (c) wave position, and therefore may be either if minuet (a) was an impulse.

The market may be perceived to be moving like molasses to the the down side. I did not order such. It is just what seems to be happening - for now. Regardless, wave iii of (c) should be a fairly dynamic affair if this is counted properly.

Have an excellent start to the evening, and thanks for reading.

TraderJoe

Still in Channel

The basic outlook for the ES futures remains unchanged from the schematic shown in the post from October 2, at this LINK.

Price remains in a channel lower. So far, there are lower lows and lower highs. The degrees of the waves, both in terms of price lengths and timing, have still been working out well.

Have an excellent start to the evening.

TraderJoe

Real Third Waves Turn to the Left

If you have not read the prior post through to the end, you may not fully understand where this one is coming from. It's about the fact that in bull markets real third waves "turn to the left", not to the right. They usually show a pattern of increasing acceleration and momentum, not decreasing amounts of same. With that - and yesterday's example in Soybeans - we show this potential count in $TNX, the US 10-year Treasury yield, as we stated in yesterday's comment section.

$TNX - Weekly - Real Third Waves 'Turn to the Left'

First, I need to say at the outset that I do not know a contracting diagonal will form. Only, the chart shows one actual and one potential wave three "turning to the left". And, IF Treasury yields are to rise due to inflation or stagflation, this would be the likely path forward from the low. It is possible Intermediate wave (3) breaks the high, then prices could back off again in Intermediate (4) - in a wave shorter than Intermediate (2) - followed by a higher high for Intermediate (5), shorter than Intermediate (3).

As of the moment, the weekly Elliott Wave Oscillator (EWO) shows the high on a potential Intermediate (1) wave. It is likely - because of the potential diagonal shape - than the EWO would diverge on the Intermediate (3) wave, and then too into the fifth wave. Time will tell.

The alternate to the above count has to be that - if inflation suddenly and miraculously vanishes - then it is possible that wave Intermediate (1) is not exceeded higher, and only a large triangle is forming, with a lower low to be expected. Either way it is a relatively straight-forward exercise to propose outcomes for either path. At the moment, we'll go with where the fundamentals of price shocks, supply constraints, and low worker-availability are pointing.

Lastly - on this topic - we will note that in bear markets real third waves turn down and to the right. You might look to earlier instances on the $TNX chart to see cases where that has happened.

With regard to the stock market, we suggested looking for a whippy day due to the confusing employment report. And that's what happened. All day prices whipped back-and-forth in a range including 62% from Thursday's low, and settled on the 18-day SMA which was also pointed out at the time. Here is the daily chart.

With price having settled on/near the 18-day SMA, then prices need to trade below to be bearish, in which case follow-through to break the 100-SMA would also be needed. It is primarily the role of third waves to provide the power to do so. If these key price levels are not broken lower, then it is likely not a third wave being discussed.

On this chart we have also shown the key trend line down from the high. For the bulls to resume control then they would need to pop above this trend line, then back-test the line and see it hold. So next week should be key understanding the larger picture in equities.

Have an excellent start to the weekend.

TraderJoe

E-T Missed a Diagonal! Duh!

People have often criticized certain aspects of my wave counts, saying that I find too many triangles and or diagonals, and that they are just not that common. Well, here's one that got away! I did not find this diagonal wave in real time early as it was being constructed. I only found it today when today's upward waves did not make sense. What prices did today was break key trend lines, only to re-accelerate higher temporarily. So, somehow that seemed like an a-b-c wave up but the wave lengths just were not making sense.

So now let's look at the diagonal and the rather precise Fibonacci measurements inside the wave. I'm so happy in hind-sight that this happened on a multi-hour time scale so that people don't brush it aside saying, "those only happen on smaller time-frames, like five-minutes..". The chart begs to differ.

ES Futures - 1 Hr - Expanding Diagonal

 

Now I have been counting waves for years, and not even I was exposed to the five-times (really, if you look at and count the lower wicks) that the market slammed into the 4,270 level - each one a fraction higher. "What the heck kind of multiple bottom is this?" I had, indeed, previously measured that the b-3 wave was a 90% wave to the already-formed a-3 wave, allowing for a flat or combination construction, but this one made me focus on the wave now labeled ((3)) which failed to go over the prior high. "It's a failure", I proposed. I keyed in on it. I locked in on the failure, incorrectly, in this instance. No this kind of wave makes one think the analyst is the failure. But I digress.

Instead, look at the Fibonacci ratios: wave ((3)) is an almost precise 2.618 extension on wave ((1)). And as I have written many, many times on this blog that you just don't get 2.618 waves all that often. They are not typical wave three extensions. No, they are usually found inside of triangles and diagonals. They are typically made on the news, and cause people to say, "hey, what the heck just happened?!"

Then, there is the bizarrely long wave ((4)), which almost makes it to wave ((2)), but not quite. And I mean bizarre. Even in retrospect it almost caused me to discard the structure as a diagonal. But I could only count three-waves-down, and couldn't call it an impulse, when Mitch did his Save the Republic from the Democrats thing, and foiled what initially had promise for a fourth wave of an impulse, lower - from ((3)) to ((4)) - and the market took off. Why was the noon switch around occurring in the candles? Was this going to be an a-b-c or an impulse, or what? And, then as the day progressed today, the price lengths got too out of control to maintain an impulse.

But, look what happened overall. From a Fibonacci perspective, wave ((5)) turned out to be an exact 1.618 x wave ((3)). Stunning.

Then, one of our alert readers (TimH) asked, "Can Y be 1.382 x W?".  "What the bloody-heck?" I smurgled to myself, "I'm trying to count these confounded waves! And I can't find it! I can't find it. Leave me alone!" 

"Wahl, ah, yea, I guess so - just don't go too far, because the usual is for equality.", I actually and politely replied. 

And then all the ratios fell into place, and the count cleared up. So what is the moral of the story?

In case it is not yet clear, wave counting in real time with an aim to predict real turns, takes time and effort. The biggest efforts are 1) in knowing what the pattern rules are, and 2) in measuring the patterns. Now many people do not wish to go through this effort for themselves. That's OK, but they just won't experience the internal workings of wave theory. 

TimH was measuring! And at the end of the day, that's what made me feel best. He will likely wind up getting it, if he already hasn't gotten it. And that's wonderful.

Others may rely on a wave analyst to do it for them, but without cross-checking, how do they have enough confidence to act on a correct count? Further,  because of the time and effort involved - which I prefer be directed at education rather than me counting waves for you, when someone asks me, "uh, yo, whatz yer long term & short term count in Crude Oil, or Cotton?", well I may come up empty-handed. Why? Because of the rather sizeable effort involved to get it as right as possible. This is the potential benefit of a large EW service IF you can find enough competent analysts. They could have the resources to specialize.

Did I mention there is a third biggest effort to expend? You have to be almost instantly willing in your mind to cycle through the five major categories of Elliott Waves (Impulse, Diagonal, Zigzag, Flat and Triangle), and ask, "which of these are you, you dog-goned wave?!" And, you have to be mentally flexible and resilient enough to be temporarily incorrect for minutes, or hours, or sometimes even days, as things progress. But not just once - over and over again on every wave count, until the proficiency begins to set in. My hope for you is that it does.

By the way, you don't think someone from the markets called up Mitch McConnell, and said,"Hey Mr. Senator; we're looking at a failure here on the markets, and if you don't pitch in, then everyone's 401K is instant pudding!" You don't think old Mitch did it of his own accord do you? Things don't work that way - not precisely for the noon hour when there otherwise should have been a fourth internal wave down for the potential impulse.

Well, anyway, is there another quick lesson besides the diagonal I can provide? Sure, here's a quick one. Real third waves turn to the left, not to the  right. Keep in mind the chart below is fully a 2-Day chart.

Soybean Futures - 2 Day - Real Third Waves

How  real? Well. Let's go from the 2-Day chart to the weekly chart.

Soybean Futures - Weekly - Duh!

Now compare this to what our stock market has done since the Oct/Nov correction in 2020. You decide. Yes, I know that Soybeans are a commodity versus ownership, and that there is a certain urgency when China places it's order. But, the principle of a third wave is the same. I think that is why Neely developed his 0 - 2 trend line criteria. I'm not certain. By, the way, the turn to the left shown is only the ((iii)) wave in the 1 wave up. See if you can find where the 3 wave, itself, takes another turn to the left.

Have fun, and have a good evening. (Oh, and by-the-way, if you want to see how that internal count progressed today, step-by-step, it's in the comments for the prior post. It shows you the final count on the wave ((5)), up. Better late than never, I guess).

TraderJoe

Repeat Exercise

I did this 'social mood' exercise once before. I thought it was time to repeat it, as I noted a number of these items in my comments.

ES Futures - Daily - Good News Near a Top

Educational, informative or not, the space shots represent the utmost in largess by the 1% while the vast majority struggle back on the planet.  Same with the IPO's: "all this money - got to do something with it." Let's not fail to mention the FED officials with their hand in the cookie-jar, the glorification of gambling apps by CNBC, Bloomberg and other news programs, and Senator McConnell's single-handed saving of the Republic today.

As to the short term, we could still be in a (b) wave of some type - either triangle or complex correction -  but time needs to be monitored closely.

P.S. As I was writing this post, the ES futures went over the high, eliminating a triangle (b) wave, but still allowing a complex correction to take more time & price. So, after the re-open I added this chart.

ES Futures - 4 Hr - Possible Combination (b)

In order to remain consistent with degree labeling then subwave (b) should take less time than minute ((ii)), the prior larger degree wave in the same direction. So far, OK.

Have a good start to the evening.

TraderJoe

Caution was the word

The SPY count remains on track per the schematic provided over the weekend. Here is the count with the price bars shown on the SPY 2-Hr chart just for clarity.

Today during the comments we said it was possible for the (b) wave up to have a failure wave. It still is. A lot depends on prices and developments in the overnight hours. It is still possible via an extra-ordinarily tortured fourth wave to get a higher high than the prior 'a' wave shown. But it simply does not have to happen. Otherwise, a large gap down tomorrow could signal the onset of wave (c) of minute ((iii)). The NQ's wave minute ((iii)) is longer in price than it's minute ((i)) wave, so it would be very interesting to see how the wave ((iii)) in the ES/SPY turns out.

Have an excellent start to the evening.

TraderJoe

Just One Caution

Those following the market today know that the NQ futures made a new daily low today. Meanwhile, the ES futures and Dow (YM) futures did not. Yet, as the chart below, shows the ES got to within 90% of the low.

Yes, there is a way this can still be a fourth wave in an impulse down.  If so, look for early follow-through. The trick or trap would be that the three-waves-up, shown only as ((A))-((B))-((C)), wound up being only three waves of a larger flat (b) wave. Otherwise, the (b) wave is at the prior high.

The Dow in the case of a larger correction, upward, would be a simple ((W))-((X))-((Y)).

Have a good start to the evening.

TraderJoe

At the Moment

The chart below (ES 2-Hr) shows the best I can do at the moment, using the actual price extremes and swings involved - hiding the actual prices on the chart - and going by both the clear measurements & the overall look of the waves. 

ES Futures - 2 Hr - Schematic

We'll take it step-by-step in a Fibonacci eight items starting with the information on the left-hand-side.

1. The first retrace is labeled (b) because it is very short. As shown by the Fibonacci ruler it is only 0.382, in price compared to the corresponding (a) wave, and it is clearly also way shorter than (a) down in time, too.
2. From the (b) wave down, the next wave down is longer in price than the (a) wave, and is likely a corresponding  (c) wave companion to that (a) wave. Since the wave is longer in price than (a) then the two waves should be of the same degree. There is no clear fourth or fifth wave after it, so the chart suggests there are only 'three waves down' and a diagonal may be starting from the high, and so the first low is labeled as minute ((i)), down.
   
3. Next, the Fibonacci ruler on the right shows the second wave is a more typical wave ((ii)) with its measurements between 62 - 78% of wave ((i)). This is typical of diagonals.
4. Further, the Fibonacci ruler in the middle shows that the (c) wave of ((ii)) is within 1.618 x (a) of wave ((ii)), and this is acceptable for a (c) wave. Below wave ((ii)) is a red marker showing how long wave ((ii)) took in time. And it is still much less than the time of minute ((i)), overall. This again suggests a diagonal is in progress, as in impulse waves more often the second waves takes more time than the first.
   
5. Then there is a pretty clear non-overlapping five-wave-sequence down to the low on 30 Sep/01 Oct, and this wave breaks the low. This suggests the wave is a motive-impulsive wave and is probably an (a) wave. Also, this (a) wave is shorter in price & time than its prior minute ((i)) wave - the previous larger degree wave in the same direction - and so it does qualify as a subwave.
   
6. Oct 01 was probably some or all of a (b) wave up. Now (b) waves can be pretty intractable at times, so is it done? Why go through all this effort? Well, the next steps provide some payoff.
7. From the prior information we can see from the red Fibonacci ruler labeled 1, that 4435.75 would be an absolute maximum for the (b) wave. Why? Because beyond that level, it would become larger in price than wave ((ii)), up, and this would be a price degree violation. And even though it didn't cross the high of wave (ii)), it provides a key invalidation level for a diagonal count.
8. Lastly, looking at red time marker below wave ((ii)), and moving it over the start of the minuet (b) wave provides a time maximum beyond which the (b) wave should not extend. Why? Again, after the date shown, then the claimed smaller degree (b) wave would become larger than the claimed larger degree wave ((ii)) in time, and this would be a time degree violation, and so it provides another key measure of invalidation of a diagonal.

For those used to thinking of Elliott Wave in the most simplistic terms, this might be a lot to digest all at once. That's OK. This is Saturday and the markets are not open, so there is some time to take it in and let it roll around a bit. Overall, I'm trying to show you Elliott Wave so that you might be able to duplicate the results, not Elliott Wave Because I Said So as so many of the on-line services and even market professionals would like you to have it. They want you to be reliant on them. I'd rather that you could learn to be reliant on yourself.

 

And while nothing guarantees this wave count will pan out, the way to show how, when & why the wave count could invalidate should be clear. Thanks for listening.

 

Have an excellent rest of the weekend.

TraderJoe

Worth Noting - 3

 Chart only today for this lower low day. See the annotations. The Smart Money knows what they doing.

ES Futures - Daily - Lower Low Day

Only partial waves may have been made today. Have an excellent start to the evening and the weekend.

TraderJoe