Woo a Potential Triangle, Don't Marry It

Below is the daily chart of the ES futures. The potential triangle we have been trying to count can be seen between the blue converging lines in the middle-right of the chart.

If a lower low is made in the YM futures, then it is possible to count five waves in both the ES and the YM futures. But, as noted previously, there simply are no guarantees. The structure could break up as well as lower. IF it breaks up, then it is likely the second wave, ii, of the structure.

At the end of the day, prices were left nearer the highs than lows. But a wave ((E)) in a triangle was not invalidated yet. If there is to be a fifth wave down, the wave should likely impulse, but we can also see no reason why it could not diagonal. One issue might be timing, as below.

Tomorrow is the last trading day of the month, the quarter and the year. It is possible that it will be a sloppy or a down day to accommodate "window dressing" prior to the potential standard inflows we have written about that accompany a new month, new quarter or new year as money from company bonuses, pension plans, 401k's, dividend roll-over schemes, etc., enters the market. 

So, an impulse down might we well-timed to set up the market for a rise in the new year. It does not have to happen that way, but it could. If so, look for a significant gap in the overnight.

I should also note, that the daily slow stochastic un-embedded for only one day. Therefore, it has indeed re-embedded, even using the standard calculation.

Have an excellent start to the evening,

TraderJoe

Apple Pit ?

While we are doing our level best to count waves downward, the potential four-hour triangle in the ES futures is still just barely alive at the end of the session. If the triangle breaks down further, it could become a barrier triangle. If it breaks down even further than that, it might morph into a contracting diagonal.

We are 'expecting' downward waves. They are occurring. We continue to do our best to count waves in accordance with the rules. Today, before a wave surprised on the downside a bit, we warned twice that there are ways the waves could just crumble. It's a bear market and today some waves did fall apart. One of those charts that is falling apart more is that of AAPL as shown below in the weekly chart.

In the last couple of days AAPL has broken the prior weekly low.  Just be aware of it. It has a lot of influence on a lot of stock averages. 

Have an excellent start to the evening.

TraderJoe

One of the 'possibilities'

Overnight the ES futures were roughly 25 - 30 points higher. Before the cash open, they started downward. But the highest that the cash new high reached was less than one full point! Some very weird things are going on in the lighter holiday volume. We're used to that. Below on the ES 4-hr chart is one of a couple of good possibilities. As we've said, it is possible to see wave v at the low.

Yet it is also possible to see a running triangle at this point as well, and then wave v form later. Only a couple more wave termination points need to form properly. And they might happen in the after-hours. The purpose of the running triangle would be to even up the net difference with the second wave in the structure. But because the triangle has a lower ((B)) wave it would still be a bearish formation and not necessarily halt the total decline.

There are other ways for a longer in time fourth wave to form (larger flat?) but so far there no signs of those formations and there is already downward overlap.

Conversely, if the potential triangle is invalidated upwards, then it is more likely wave wave v ended where shown at the low, and this would also end wave (i), down, and price would then more likely be in wave (ii), up.

Have a good start to the evening.

TraderJoe

Simplify, Simplify

Here is the weekly chart of the ES futures, with the count simplified just to show the major idea. So, for better chart clarity forgive the use of a to represent minute ((a)) or circle-a. The other symbols are correct, and a symbol key is shown in the lower left.

So, is the 5th Extension Diagonal (also known as the 3-3-3-3-3 Expanding Diagonal) a good way to form a Head & Shoulders pattern? That is the question. If we are in Minor wave x5, then it is already longer in time than wave Minor 3, and now it needs to become longer in price, with the minimum shown. So far, volume has been increasing with lower price.

Merry Christmas & Happy Holidays to all,

TraderJoe

Still on Track - 2

We were expecting upside movement today in form of the continuation of a fourth wave, higher. The ES 2-Hr chart, below, shows the current count. It's good as far as it goes.

With price at the 38% retrace of wave iii, it is an excellent place for wave iv to have ended. We got some indication of that in the prior post by seeing a potential ending expanding diagonal which was fully retraced in less time than the wave took to form (see LINK here).

So, we would expect a fifth wave, v, to begin in earnest tomorrow - perhaps on the unemployment claims data. Time will tell.

Any down movement today - even off the high - was still slow and halting. Someone is keeping a consistent bid under the market: for what reason is unclear. The pre-holiday trading is now a bit lighter.

There is really no reason to look at alternates other than for the exercise because there is no upward overlap and price is not over the 50% retrace level. If we do get a surprise move upward, I could see how the low on the 19th might be wave an alternate i, and a further up move might be wave ii. It just depends on if that extra wave is present at the high or not. But let's see how it goes first.

Today was a higher high day. and does move the swing-line indicator higher on the daily chart - at least temporarily.

Have a good start to the evening.

TraderJoe

Still on Track

ES futures prices were lower overnight and made a lower daily low keeping the swing-indicator headed downward without indicating a trend, lower. Prices remained below the 18-day SMA and the daily bias remained negative. However, after two consecutive days outside of the lower daily Bollinger Band, prices did creep back inside the band resetting the number of consecutive closes. Remember, price tends to close outside of the band only about 5% of the time. The daily chart is below.

ES Futures - Daily - Back Inside the Band

The daily slow stochastic is still in over-sold territory and has not yet embedded. The Bollinger Bands continued to widen to the downside.

From an hourly perspective, there is no proof of anything yet - although there may very well be a 1.618 wave downward, as below, with 120+ hourly candles on the chart.

ES Futures - Hourly - A 1.618 Wave

As is typical, the primary question now is whether an adequate fourth wave, up, forms, and then whether a fifth wave lower forms after that. Already the Elliott Wave Oscillator is back above the zero line in some very compressed action today. Recall, the exact location of wave iii depends on how many one-two's you see on the 14th. It is not as clean as one would like.

Keep in mind it would take a daily higher high candle to even temporarily turn the swing line up enough to say there is a point from which a trend lower could develop. So far, that has not yet happened.

Have a good start to the evening.

TraderJoe

So far on track

For the time being price movement is largely as expected. I'm trying not to over-complicate things and that's why the wave-counting-stop is shown in the ES Futures Daily Chart, below. The minute ((b)) wave up was a bear to count.

ES Futures - Close Only - Currently Lower

Now, the overlap warning on the downside was hit two days ago. The EWO is falling off, and price has pierced a parallel to the down side. It's hard to give the upside much credence until or unless the wave-counting-stop is hit or exceeded (use OHLC for that).

There could still be surprises in both directions although downside surprises would be much less shocking at this point.

Have an excellent start to the evening.

TraderJoe

Battle at the Lower Band

Overnight, ES futures prices were marginally higher but failed at the 100-day SMA shown as the green crosses in the daily chart, below. In follow-through selling to yesterday's down move, prices continued falling overnight and then began tracking on the lower daily Bollinger Band. New lows were made after the cash open and then prices began to get very compressed and began oscillating, trying to rally into the close but giving much of that back.

ES Futures - Daily - Battle at the lower band

The bands are just beginning to be pushed outward by price. The daily slow stochastic is in over-sold territory, the bias is down as prices closed below the 18-day SMA, and the first target of the lower band was hit. The ES spent much of the second half of the day fighting a battle at that lower band.

From a wave-counting perspective, we can see today as possibly ending a small degree third wave, with possibly a small degree fourth wave up to follow. 

A good question will be whether the slow stochastic converts to embedded status on the down side at some point in the future. It has not started that process yet.

Have an excellent start to the evening and the weekend.

TraderJoe

Signs

Some better signs are beginning to appear that the minute ((b) wave, circle-b, on the ES daily chart below may indeed be over. Today, we had a lower low below prior lows and below the parallel which was modified slightly to account for last week's lows.

ES Futures - Daily - Below Modified Parallel

The MACD indicator also confirmed its divergence with a lower low. Even though that is the case, price is not too far away from the lower daily Bollinger Band, so it might be bumpy for a bit. It would be helpful to see a countable impulse or diagonal wave to establish the trend downward.

Have a very good start to your evening.

TraderJoe

FED Scores 1/2 a point!

Chairman Powell and the FOMC lifted interest rates 0.50% and got prices back down to the 18-day SMA temporarily. Then prices bounced back part-way. The daily chart of the ES futures is below.

The daily Bollinger Bands are still going sideways. The daily slow stochastic has lost its over-sold reading and is now neutral, as well. The daily bias is modestly positive. And the swing-line is mixed with a lower low and a higher high.

Today's bar made a downward overlap on a prior up bar from four-days-ago.

From a wave counting perspective, the minute ((b)) wave still has options but today we only counted three-waves-down from yesterday's high (so far). It's possible  a top is in place, but downward acceleration would be needed for that.

So patience, calm and flexibility are still needed until waves are long enough in either direction to make more sense of them.

Have a good start to your evening.

TraderJoe

NBC = Nothing But Chaos

Famed trader Bill Williams titled his book, "Trading Chaos". Today was a good reason why. Although we were counting waves upward, the local count invalidated over a prior high. Here is an intraday snapshot of the ES daily chart taken about 1 PM ET.

Sometimes the chaos the market makes is somewhat predictable - sometimes it is much less so. This morning was one of the latter cases and a good reason I urged patience and caution in front of large news reports coming out this week.

Some of the reasons for the market chaos may be due to the increased speed of information flow in modern times. We know that our current situation is vastly different than that in which Nathan Rothschild made a fortune in British bonds after receiving messages from the Waterloo battlefield by carrier pigeon.

Here, all traders new the CPI report was coming at 8:30 am ET, and they quickly received the results of the report in a similar manner. But, what added to the chaos were some commodities brokers who informed their clients only an hour before the report that full margins would be enforced. Then, after the report came out, they relaxed back to day-trading margins. Seriously?!! They knew the report would be released at a certain day and time. They couldn't tell us the night before that they would have this policy?

What is going on here? No, this chaos is being generated by the market-makers themselves. Obviously, they will say it is "to protect them and their clients". Really? OK. So what about if I were (and I wasn't) in my car on the way to work when they issued the email saying they were implementing the full margin requirement? How does that protect the client that is driving to work, or busy at a meeting at work if the person did have to meet the new margin requirements? 

If you look into it, you will note that the futures spiked about 35 points in the five-minutes ahead of the report. Was that driven by the new margin requirements? Did it start the upward spike in itself. This is sheer craziness.

Maybe it's one reason to continue to be very, very cautious ahead of all major reports. Maybe another is whether the Smart Money just wanted a really swell shorting-opportunity ahead of the FED meeting. They certainly got one, whether it sticks or not. But perhaps another reason is that as Bill Williams indicates maybe the market just makes and breaks fractals on various time frames as people respond to the chaos in various waves. "And - between any two fractals - is always, always an Elliott Wave of some degree." Our task is to try to figure them out.

In terms of the wave count, a local second wave up was invalidated. But a minute ((b)) wave up in the ES futures has not yet been. The day isn't over. The lower parallel trend line was not broken and back-tested with a resulting failure of the back-test. And I indicated there would be nothing to the down side until or unless that occurred. It didn't.

Have an excellent rest of the day.

TraderJoe

The Wave Formations are Awful

Volume is light and seemingly declining in the futures for the time being. Here is the ES futures 2-Hr chart. It is the best I can do. Can the up wave fail? It can. But it can go higher, as well.

ES Futures - 2 Hr - Correction Upward?

 

There is lots of news out over Tuesday, Wednesday and Thursday including the CPI Report, the FOMC decision and the ECB Policy Decision just to name a few. Be careful, flexible and patient.

Have a good start to the evening and the week,

TraderJoe

Higher High Day - 2

The ES daily chart made a higher high and a lower close. Today was PPI (Producer Price Index) Day, and the futures were higher before the open, then tanked on the PPI report, then rallied to almost 80%, then fell off again into the close on much higher volume. The daily chart is below.

My understanding of the swing-line indicator is that this allowed the line to continue higher for yet another day - as shown.  A low below Wednesday's low is needed to change to a down-trending rather than a neutral reading for this chart element.

The daily slow stochastic is still in over-sold territory. The Bollinger Bands are still traveling sideways, the swing-line remains trend-less, and price settled under the 18-day SMA, so the daily bias is down again. Today made the fourth consecutive day that prices closed below the lower parallel trend line.

The bumpy and whippy conditions continue. The CPI report is currently scheduled for Tuesday of next week before the market opens.

Have an excellent start to the evening and the weekend.

TraderJoe

Higher High Day

Today the algorithms spent most of the day doin'-the-deed after making a higher high before and after the cash open. So far, ES prices have backed up towards the prior price channel in a higher high day. But this does mark three daily closes below the lower parallel. The daily chart of the ES futures is below.

ES Futures - Daily - Higher High Day

My understanding of Ira's swing-line indicator is that this has the effect of moving the swing-line up at least temporarily (as shown) but there is "no trend" established because there was a higher high followed by a lower low (yesterday's low) and because prices closed below the 18-day SMA in any case. A new lower low day - lower than yesterday's low - would be needed to begin a trend towards lower prices, provided the day does not turn out as an outside day up.

As things stands there was still no new upward overlap of concern on the intraday charts.

The daily slow stochastic remains in over-sold position, and the daily Bollinger Bands are narrowing which indicates at least some consolidation. Tomorrow morning is the PPI report before the market opens. Bumpy conditions can persist.

Have an excellent start to your evening.

TraderJoe 

Second Close Below Parallel

Today was a fairly narrow range day and might represent some of all of wave iv from yesterday's intraday chart - see LINK here. As of this time there was no upward overlap on wave i of the potential impulse. The daily ES futures did make a new daily low early in the morning, but then they formed a doji by the close of the cash market and price is still fighting at the 100-day SMA. The daily chart is below. Today was the second close below the parallel, and the close is still below the 18-day SMA so the daily bias is still down.

Tomorrow could be another whippy day. It might start lower on comments from the ECB (Christine LeGarde, see Economic Calendar) or the weekly jobless claims and - based on the wave count - it might then whip around higher, perhaps after testing the lower daily Bollinger Band. We don't know for sure; we just surmise from 1) the wave count, 2) the news, and 3) the market's position relative to the band.

The daily slow stochastic is in over-sold territory, so the market might have a bit more down-side but would not like attract the new positions of the so-called Smart Money. Rather, the first hit of the lower band, in conjunction with the 100-day SMA, is where the Smart Money may merely take some profits and wait to see what occurs next. The Bollinger Bands are beginning to narrow in a bit, so some consolidation might follow.

We note that the 18-day SMA ("the line in the sand") is still above the 100-day SMA, and it has not crossed lower yet. If it were to do so, it might provide more confirmation of a market turn lower.

Have an excellent start to your evening.

TraderJoe

Plausible - Extended 1st Wave?

Is the diagonal already complete, and now morphing into an impulse? Here is the ES 30-minute chart with this wave counting idea shown. The symbol x i means the first wave would be the extended wave, the longest wave in the sequence in price.

ES Futures - 30 min - Completed Diagonal Morphing to Impulse?

When looked at using the futures, the third wave of the diagonal ((3)) does not look as awkward as it does in cash with this count. The fifth wave of the already completed diagonal ((5)) would have stopped short of the lower expanding diagonal line - just as the literature reports several do. Although I am showing a close-only chart so that form may be studied, the idea has been checked on OHLC charts and it works there, too.

The very substandard second wave retrace (less than 38%) would fit with a second wave only if the first wave is the extended wave in the sequence. So far, wave iii is shorter than wave i.

We would now be in the fourth wave iv in the overnight session. If the diagonal is now morphing into a true impulse, then overlap should be avoided as indicated. Otherwise, a larger diagonal is likely being formed. But if a true impulse results, it has some benefits a larger diagonal does not.

Have a good rest of the evening,

TraderJoe

Plausible Minute ((b)) - Circle b

Friday's hanging-man candle in the futures did get confirmation lower today. U.S. equities as measured by the SPY cash ETF opened with a gap lower, and followed-through. First, a reminder of the weekly count.

Prices fell off of the upper dashed expanding diagonal trend line in an interesting sign. Now on to the plausible daily count.

The count of a (c) = (a) zigzag with an expanding ending diagonal for the the fifth wave, v, of (c) would expect to see prices drop below the start of the diagonal at the 390 level in less time than the diagonal took to form. The Fibonacci ruler shows the (c) = (a) level.

As of yet, price has not dropped below the dashed lower uptrend parallel. It needs to do that, and back-test that line and then fail the back-test with a lower low candle. Again, I am not in love with any particular up count at the moment. This one has some strengths to it in that it would follow degree labeling considerations. If you also called it (y) = (w) I would see no reason to argue.

I would also just add that as of the cash close, the ES futures daily slow stochastic was no longer embedded. This needs to be watched for the next day.

Have a good start to the evening.

TraderJoe

LTMD - Let The Market Decide

Daily ES prices continued to close above the 18-day SMA. Therefore, according to what Ira teaches in his public videos, the price bias remains up. The daily slow stochastic is still embedded. Therefore, the so-called Smart Money may still try for the upper daily Bollinger Band. They didn't do it today. They might have but it didn't happen. So, let's go down to the Intraday Wave-Counting-Screen, which mirrors on the 30-minute timeframe the same guidance as for the daily chart.

Here you can see the spike down in the futures which accompanied the Payroll report. Following this wave which was only about 1.27 x as long as the first wave down, there was not a fourth and a fifth wave down. The payroll candle took out the two previous down (grey triangle) fractals.

When prices turned and hacked & hacked higher, they initially created an upward wave which is followed by a down (red) fractal. However, price ended over the 18-period SMA, and so even the intraday chart ended with a positive price bias. The intraday slow stochastic is over-bought and not embedded at this time.

In the futures - besides the top being its own up (green) fractal - there are two other up (green) fractals that have not yet been broken.

We have tentatively labeled the down move as an ((A))-((B))-((C)) down. That's all there is. A fourth wave higher that did not overlap did not form, as neither did a fifth wave lower.

At this point, if one were to draw Ira's swing-line on the intraday chart, it would be indecisive because there is a lower low and a higher high at the end of the day. Because of this indecision, one of the best strategies is to Let The Market Decide at the moment which way it wants to go.

Yes, we can make arguments that we may have started a diagonal downward, as in ((A))-((B))-((C)) of a wave i, downward, and that the afternoon high is a wave ii, upward. But the upward wave may be completed, or it may not be. The jury is still out.

And, just like we can make an argument for a downward diagonal, we can make a good case for a triangle pattern, too, that might lead to higher highs.

So, watching those fractals for a bit might be an excellent strategy. If the first down (red) fractal back is broken it is only of minor significance because until the morning low is broken, a FLAT wave could also occur - still making new highs eventually.

Fractals are the location where the markets make decisions. You can try to out-guess them if you want. That is up to you. But remember where the daily bias is pointed. And if you chose to fight it, then at least recognize clearly you are fighting that bias, and it is you that decided to.

Otherwise, although today is known as a "hanging man" candle day, there is no confirmation of that candle until a new daily low is made. Isn't it interesting how that fractal at ((C)) and the confirmation of the hanging man would likely be at the same place??!!

Also, keep in mind that if a diagonal downward takes place, it could have two forms: either a contracting diagonal or an expanding one. And, typically, if the third wave lower is in the contracting form, then it would be shorter in time, while if the third wave lower is in the expanding form it would be longer in time - another excruciating drip-drip-drop.

But, further, looking at daily seasonals, since Tuesday is often (not always) a turn-around day, then if there is a triangle into Monday, the prices could pop on Tuesday to then make a better full-reversal bar. Nothing like that exists on the daily chart yet.

So, be cautious, be careful, be patient, keep your wits about you. The volatility is difficult to deal with, and the wave count is only of secondary usefulness right now to outline some of the shorter-term risks. Hopefully, some clarity will be provided soon.

And remember, Ira does not recommend outright short positions until below the 18-day SMA. This is in order to get the wind at your back if at all possible.

Have a good start to your evening and your weekend.

TraderJoe

Driving Miss Crazy - 8

It remains an extremely difficult up count. Here is the chart of the ES 8-hr futures. Price would still be within (c) = (a).

ES Futures - 8 Hr - Zigzag?

 

The alternation would be diagonal (a), impulse (c). The (c) wave would have a very long-in-time wave iv to alternate with the short, sharp wave ii.

Again, nothing says the up wave is over until/unless the lower parallel trend line is both broken and then back-tested with a new low after a failure.

Have a good start to your evening.

TraderJoe

Driving Miss Crazy - 7

FED Spaketh, Dollar Dropeth, Stocks Riseth: based on our intraday comments and count, we were expecting an up day today. We were expecting a potential ((C)) wave, up. We did get more than that. A new local high occurred on the daily chart. And, to be honest, we were not expecting that.

The daily slow stochastic which had lost it's embedded reading yesterday regained it today. Here's what I want to know: even though I was watching it, what allows the FED Chair to pick a Brookings Institute meeting to clarify FED policy to such a degree, and, yet, as the result of FOMC meetings absolutely none of the clarifications occur in those press conferences? In the press conferences, he confuses, he obfuscates. Here he clarifies and in express detail says what he is looking for. Really. Why today? In case you don't get my drift, it feels over & over again like the fix is in. How would it be known that the this FED speech gets as much attention as an FOMC announcement (in terms of access for the public)?

Something really stinks. Do I care what the new announcement precisely is in detail? Very little. Do I care that the FED itself is creating an unbelievable amount of market volatility all by itself? I do. I really do. Some serious money could be caught the wrong way in such a move. Somebody could get royally hurt. As the chart shows, today's move isn't even the largest up move - although to listen to the financial media, you'd think that the Equity Gods had visited Wall Street in person today.

No, as I have said repeatedly, there is nothing doing to the downside until or unless that lower parallel trend line is broken, then back-tested, and then the back-test fails. That just hasn't happened yet.

And I really hope - with all the FED members caught insider trading, against the FED rules, and with the "off calendar" monetary missives - that FED Chair Powell is sleeping well at night. I, for one, have lost all respect for this organization. And for him, in particular. I listen to what they do - because I have to. I listen to what they do because, as a retail trader, they will essentially vaporize my account if they don't. I don't listen because of their wisdom, their finesse, or their skill. They are engaged in market manipulation, and worse, and I simply do not condone that.

Have a good start to your evening,

TraderJoe

Driving Miss Crazy - 6

The price structure could very well be "short-a, long-c; long-a, short-c" for (w)-(x)-(y) overall in the SPY hourly chart. The close-only chart is shown below to concentrate on form and timing. Let's see if any confirmation occurs. 

SPY Cash - Hourly Close - Loss of Momentum

I still want to see price trade below the lower channel boundary, back-test it, and fail with a lower low. The items in favor of confirmation are that the highest high is not on or above the upper channel boundary which is a sign of momentum loss, the lower Elliott Wave Oscillator, and the possible truncation high.

Have an excellent rest of the day.

TraderJoe

Driving Miss Crazy - 5

This SPY 30-min chart looks at this last wave sequence upward to see if will count as a clean "five". There does appear to be alternation in cash. And cash does not overlap, yet.

The sequence appears to start with an expanding diagonal in cash, so wave ((5)), up, should be an impulse.

Have a good start to the day and to the week.

TraderJoe

Driving Miss Crazy - 4

I'm personally not in love with any count. As I suggested in several posts & comments, a minute ((b)) wave count could be messy and full of trips & traps - especially in the light holiday volume. Here is one version on the ES 8-hr chart, which at least provides an upside target from typical technical analysis.

You could also see it as (w)-(x)-(y)-(x)-(z) and I would not say it was incorrect. However, as before, there is no downside count likely to be started until or unless the lower parallel trend line is broken, then back-tested and having the back-test fail.

Have a good rest of the holiday weekend.

TJ

Driving Miss Crazy - 3

U.S. equity prices as measured by the SPY cash (30min) index in the chart below, gapped down, broke the dashed interim trend line previously shown, then back tested that trend line and fell off a bit again. To begin to make a third wave down, the back-test would need to fail, and the down (red) fractal shown on the chart would need to be broken lower.

SPY Cash - 30 min - Expanding Pattern Currently

Today's gap (red circle) was not filled as of this time. It's hard to make more of the price movement than what it is, so far.

Have a good start to your evening and your holiday week.

TraderJoe

Driving Miss Crazy - 2

In a whippy session that we said could happen because the VIX is in the 20's (i.e. 23.8 towards the day's close) rather than in the 10's, price action created a Gap-Fill Two-For. Price as measured by the SPY cash index made a gap up, then traded down to fill today's gap, and in the process filled a gap down from yesterday. These are the two black circles shown on the chart. The gap that remains (see chart below) is from the 15th close to the 16th open (red circle).

SPY Cash - 30 min - Smaller Degree Potential Expanding Diagonal

We also suggested that analysts WAIT until the dotted up trend line shown was broken, back-tested with a subsequent back-test failure before deciding on the fate of further waves. This turned out to be sound judgement as the dotted trend line was not broken to the downside.

So, it should be clear that one downward count would be of an expanding diagonal downward off of the high. A wave v would be needed to the downside before potential wave iv invalidated to the upside. This is just the cash equivalent of the futures chart we showed yesterday. It's a little cleaner and the gaps are more prominent this way. But wait, do we really have to deal with another diagonal? Seriously? It's actually worse than that. Intraday yet another diagonal happened and we counted it in real time. Here is the final chart of that potential diagonal on the SPY 2-min chart.

Spy Cash - 2 Min - Even Smaller Degree Expanding Diagonal Upward

This is why we suggested to wait until that dotted uptrend line is broken and back-tested with a subsequent back-test failure. The trading bots are especially good at walking a trend line. Look at how little room there is between wave ((ii)) and wave ((iv)) - degree labels are just relative for illustration, here. Yes, they skin any premature trader alive if the trader acted on the suspicion that the trend line would break without seeing the actuality of it. Then they grind and grind, finally to explode to the upside in a fifth wave. 

First, notice how many overlaps there are. It's insane. Next notice the three-wave look to the sequences.  Look at the triangle that might indicate last wave ahead but does not - because it is a running triangle. Running triangles in an uptrending wave are bullish, not bearish. Fourth, notice the price extension in the fifth wave. So, even though the fifth wave is the extended wave in the sequence overall, it also put on a further extension to make the point! And Fibonacci fifth, notice price is trading back inside of the expanding pattern. If it is truly a 3-3-3-3-3 pattern then one conclusion that can be reached is that it is an ending diagonal. Time will tell.

Can we ever count an impulse? We did! Look at that wave from b to c within wave ((v)), up! It's a cleanly counted impulse. We hope to count more of them as time goes on. Right now, the diagonals are serving their purpose to keep everyone confused, and to not let you in on what the count might be. Certainly, if the market makers are going to engineer a big decline for the larger daily potential expanding diagonal downward, then they don't want you or I on board.

Back to the 30-min chart. Some technical analysts will see the price squeezed between the declining upper diagonal line and the up sloping dotted trend line and say the market is coiling. That's likely a valid assessment, and the question is which way will the coil break? Luckily, we don't have to deal with that if one just realizes there isn't a valid downward count until or unless the dotted trend line breaks to the down side is back-tested, and the back-test fails.

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

TraderJoe

Driving Miss Crazy

With all apologies to the movie title, the market gapped down this morning, potentially activating the bull trap from the daily chart - with the lower daily low after the outside reversal day up - and then had no follow-though lower in the cash session. Prices then traded in an approximate 50 point range after that from 3913 to 3963. The slowness and choppiness of this hourly decline suggested the following intraday count on the hourly chart of the ES futures, below.

ES Futures - Hourly - Expanding Pattern Again

We don't know for sure, but the Elliott Wave Oscillator again suggests an expanding diagonal lower. The wave labels on this chart are just for relative reference they do not yet reflect the degree of the decline. But the EWO is on a low which suggests a wave 3, and the 62% zigzag for wave 2 is compatible with a diagonal. There appears to be an impulse  ((a)) wave, up, which started out as an expanding diagonal itself, and then converted to an impulse wave. And by the end of the day, the low held so either there is a ((b)) wave down, or just the beginning of a ((b)) wave down. Either the ((b)) wave or the ((c)) wave, up of a wave 4 could take more time so that all of wave 4 takes more time than all of wave 2. Then, a rocky fifth wave down might occur. It should also consist of a zigzag if an when it were to occur.

Like any expanding diagonal wave 4 is not allowed above the high of wave 2 or it would invalidate. If the upward wave does invalidate, alternate count is shown in red below the chart. There would just be two zigzags down, so far, labeled as w-x-y.

The time  signature of the wave is almost certain to frustrate. It's whippy and trading entries and exits have to be carefully considered. And in this environment - just like buying or selling is a strategy - just standing aside until a recognizable wave occurs can work well, too. For example, it is very difficult to tell if that ((b)) wave is done yet or not.

From the daily chart, one item of note is that downward price movement ended after price contacted the 100-day SMA again. But, there was still a lower close on the day.

Have an excellent start to the evening.

TraderJoe

ES Inside Day

While the NQ (NASDAQ 100) futures and the RTY (Russell 2000) futures made lower low days, the YM (Dow) futures and the ES (S&P500) futures did not. We'll have to wait and see if that will happen in the overnight or tomorrow.

Have a good start to your evening,

TraderJoe

Outside Reversal Day Up (ORDU)

Overnight stock index futures - as measured by the ES futures - made a higher high. Then, during the cash trading session today, we counted a potential expanding diagonal downward. The three zigzags had the right lengths and the right overlaps. You can review the count for the diagonal in the comments for the prior post. The diagonal and subsequent waves were long enough to make a lower low than yesterday's low as can be seen in the ES daily chart below.

ES Futures - Daily - ORDU

Prices, then headed higher in what is likely a Flat wave to the 62% retrace of the downward wave. Then, they fell off slightly late in the session, again, still closing higher than yesterday's close. So, we have a higher high, a lower low, and higher close: an outside reversal day up. The close is still in the lower third of the candle, however, and thus, the candle may still be classified as a doji, perhaps a spinning top type. As with all candle patterns, a significant close confirming the pattern is needed - in this case, lower.

If the low of an outside day up is exceeded lower within the next two trading sessions, the candle may be classified as a trap for the bulls. That remains to be seen. We will still want to see the lower trend line of the up trending parallel be taken out lower for better confirmation (parallel shown in prior posts).

Have an excellent start to the evening.

TraderJoe

SPY reached 62%

After the SPY cash price retraced 62% and hit a price of 400.18, prices on the day began to ease as per the daily chart, below. 

SPY Cash - Daily - 62% Retrace

This can be the end of the minute ((b)) wave, up, but better confirmation would be prices trading below the lower magenta parallel uptrend line.

In the DOW - as far as we can tell - we were able count a potential ending diagonal in real time, and the charts are in the comments section of the prior post.

Have a good start to the evening.

TraderJoe

Par = 100

After the Dollar's dump this week, and the breaking of a potential smaller triangle, I decided to look again at the longer-term three-month chart of the US Dollar Index (via the futures). The Dollar may have given off important longer-range clues this week.

US Dollar Index Futures - 3 Month - Potential Triangle

Where the Dollar decided to turn lower this week was at the top of the upwardly sloping magenta parallel shown on the right. This is one clue. And it made me wonder, "Is the Treasury just basically allowing the Dollar to range as long as it doesn't stray too far from the 100 marker?" Such action might describe a very long-term triangle because the internal counts are very challenging from the standpoint of counting impulse waves, upward. They don't work well at all since the (X) wave. That is a second clue.

A third clue is that (from the quotes on this site) the Primary ((C)) wave up would be 'just about as long in price' as the Primary ((A)) wave, up, and it is definitely longer in time, meaning the two waves might likely be of the same degree. A fourth clue is the apparent three-wave sequences in the Primary ((A)) and the Primary ((B)) waves. 

A Fibonacci fifth clue might be the rather flat Elliott Wave Oscillator on the long-term chart. 

So, is this just about Treasury policy to - let's call it - keep the Dollar relatively stable? To keep it oscillating around the 100 level? 

I can't swear to it, but it may illustrate how institutional groupthink works or implements policy. Clearly, this potential triangle has an invalidation point above the Primary ((A)) wave. But it also suggests that a break, back-test and subsequent failure of the recent up-parallel might lead to a nasty spill - whether the inflation scare gets worse or not.

This is the second post this weekend. If you have not read the first one yet, you may wish to read it also.

Have an excellent rest of the weekend.

TraderJoe

A Couple of "What-Ifs for the Dow"

An upward minute ((b)) wave has not yet formally invalidated in the Dow Jones Industrials Average but something seems quite squirrelly about it. I'll suggest what's so odd after the first alternate is presented. As an objective Elliott analyst, I can only say that this count (hold your nose) follows the rules, but it sure does not look proportional. For the Dow, if the first count, Alternate A, is the case, then we are making the Cycle V wave up - at least in the Dow - and the "optimistic scenario" of a Primary ((B)) wave up, and Primary ((C)) wave down goes out the window shortly. Here is that alternate on the Weekly chart of the Dow. (The idea for this alternate was shown way back on Jan 21, 2022, at this LINK : see the red line in the bottom half of the price chart).

YM Futures - Weekly - Cycle V?

As this chart suggests, the Dow would have a "running second wave" for Primary ((2)), Circle-2, and the current downward wave sequence would be a Primary ((4))th wave with the Intermediate (C) wave being a failed expanding ending diagonal. Plausible, but then look at how dissimilar waves ((2)) and ((4)) are in time. Too, the Elliott Wave Oscillator would be quite deep although it would be less deep at the end of the (4)th wave. A benefit of this count is that Primary ((4)) would be longer in time than Primary ((3)). Neely suggests such is often the case. Primary ((4)) does not yet overlap Primary ((1)).

In the short term, this count is optimistic because it implies a new high - and quite a substantial one could be made in short order. In the long term, of course, this count is very pessimistic because a five-wave Cycle wave down would immediately follow with devastating consequences.

A less drastic alternate for the Dow follows on what is the Daily chart of the Dow. The support for this count is more Fibonacci based.

YM Futures - Daily - Minor 4 ?

Here is the squirrely factor. IF we are in a minute ((b)) wave for the Dow, then why is the Elliott Wave Oscillator at a new local high? One would think the EWO of a "B" wave would diverge. Rather if you look at the Fibonacci ratios in this Alternate, you can see they are dead on. Wave Minor 3 would be exactly a 1.618 x wave Minor 1, and it's exactly 2.618 times as long in time! That's really quite spectacular. This would mean the current up wave would be Minor 4. As such it has a new invalidation level above Minor 2.

Yes, it is pretty dicey stuff, and it really interjects a lot of uncertainty into the local counts. Perhaps the Dow is doing a little bit on its own, and it may not affect the ES count to a large degree. This is yet another reason to remain flexible patient and calm in the back-and-forth daily swish-swash that is the field day of the algorithms right now.

To make matter a bit more fun (or a bit worse), look at the current up pattern. Yes, many of us have counted the structure as a triple zigzag. We do not know the up wave is concluded. But, as the ES 4-Hr chart below asks, is it just a triple zigzag or is it an expanding diagonal (v > iii > i; iv > ii)?

ES Futures - 4 Hr Close Only - Triple Zigzag or Diagonal

Yes, you can say it, "good grief!" this is not a level of complication that one typically sees counting waves. But let's face it. A lot of this has to do with the outright interest-rate market manipulations of the FED, the way the market is being machine-traded by the "Smart Money" algorithms, and probably the increased popularity of Elliott Wave counting itself. As I had conjectured in 2018, the era of counting of easy impulse waves may be over. The current market is 'chop-city'.

Have a good start to the evening and the weekend.

TraderJoe

Very Difficult for Retail to Compete

Here is a one-minute chart of the ES futures around the release of the CPI report. What you will note is that the ES futures prices moved 110+ points in literally one minute.

ES Futures - 1 Minute - And 110+ Points on CPI

Yes, we know the big institutions have the news-reading algorithms that read the news and respond to it to move prices. What you see here is an excellent example of why it sometimes makes sense to avoid new reports. Before a human could likely even receive the data, make a decision and respond to it with a mouse-click or two, prices had moved 110 points or more!

While this is clearly the very epitome of impulsivity it also seems to clearly show one disadvantage of the retail trader. Further, after the report, there simply is no retrace of 23%, or 38% - just a complete machine grind that the retail trader is also at somewhat of a disadvantage to deal with.  OK, so the ES moves +110 points, and without a significant retrace we're supposed to buy-in and take the risk that prices won't exceed the low? Right (facetiously).

What you have here is machines making waves and making it extremely difficult for traders to participate. This is again made possible because these "Smart Money" machines, can see the order books, and they know the depth of the market at every instant.

What does this have to do with the wave count? All we can say is that the DOW is dangerously close to invalidating its minute ((b)) wave count. The other three major indices are not. If the Dow doesn't invalidate it's possible the wave count for all the indices is a larger triple zigzag upward. Time will tell.

Have a good start to the evening,

TraderJoe

Let's Concentrate on Form

Here is the ES 4-Hr chart in close-only line form. For the moment, let's concentrate on some elements of the chart form. First, as of the cash close, there is a new three-touch trend line (dotted) up from the minute ((a)) wave low. There is also a potential new (temporary) declining parallel down from the recent minute ((b)) wave high.

The wave labels of a/i and b/ii should be currently read as being identically equivalent until some length in the waves (and a possible fourth & fifth wave) can separate the counts. 

Today, we counted a likely leading diagonal down. It may have converted to an impulse by the end of the session. Tomorrow could back-and-fill, or it could just as easily gap lower into a third wave of either a c wave or of a wave iii. Time will tell.

Again, there is no reason price could not go directly down and break the low of the minute ((a)) wave in order to form part of the minute ((c)) wave down.

If price begins to back-and-fill the upper declining parallel would likely need to be respected or an impulse lower would be questionable.

Have a good start to the evening,

TraderJoe

DOW goes it alone

Of the four major stock index futures, the DOW futures alone made a new daily high today. This is really curious as it resets the count on the DOW.

U.S. Futures Contracts - Daily - DOW new high

At the moment there is a high degree of uncertainty as to what the correct wave count is. Could it still be the minute ((b)) wave, up? Yes. But even the Dow can not travel much higher, or it will invalidate that count, as well.

The current wave structure is choppy, whippy and seems uncountable. In some of the index futures it may be a triangle beginning to form (election triangle?). Or, it may be a downward diagonal forming, except for the Dow.

There is not much use in micro-counting at the moment as even some of the internal waves make absolutely no sense. One up wave today never even had a 23% retrace until the closing half-hour. Yet, the wave retraced more than 78% of a prior wave. Can't recall when I have ever seen that.  It's one facet of the wave structure that makes me ponder if we are not in a triangle. The triangle idea is suspect, too, right now, because the Dow made a new high. But, then again, all counts are suspect at the moment.

Have a good start to the evening.

TraderJoe

Looking for an alternate?

We don't know if you are, but if you are looking for an alternate count for the minute ((b)) wave, other than the failed triple zigzag up, then we ask you to reconsider the previous post on the potential ((b)) wave at this LINK. And consider the ES daily chart, below.

We can not at this time suggest a wave pattern like this will happen. Therefore, it is just an alternate to keep in one's back pocket. But there are benefits to the pattern at this location. One benefit is that it will help to take more time relative to the minute ((a)) wave, down. A second benefit is that it could signal the "last wave set down, dead ahead". Third, we noted over the weekend how many other markets are in triangles or triangle-like patterns.

Right now, we have no reason to suspect we are not in the minute ((c)) wave down. But, prices need to drop pretty quickly in the next day or two for that to seem most likely. Perhaps the election will have something to do with that. Perhaps not. One reason we can't go with this pattern right yet is the prior upward wave counts best as the failed triple zigzag. Triangles do not typically form in this fashion for their (a) wave up.

For this reason options must be fully open at this time, with a drop below Thursday's low being of key interest.

Have an excellent start to the evening.

TraderJoe

Will They Hold ?

We don't like to disagree with what we see. It is entirely possible that the US Dollar Index (futures) are in a running triangle, as shown in the daily chart below. In fact, one form of a valid triangle has already formed because the minute ((e)) wave, circle-e, has already crossed back below Minor wave 3.

US Dollar Index Futures - Daily - Potential Triangle

There is some evidence for the triangle in the fact that the MACD is dead neutral at the zero line, and there were two humps up in the MACD previously, which could have been third wave locations. Further, the potential triangle has the right look, and the daily EMA-34 goes through each lettered wave expressing good form and balance. 

A running triangle is usually bullish and means there could be another significant spurt higher. But triangles are funny birds, and very tricky. The triangle could form more waves, expand once in a fake-out and do other things like stall out sideways to frustrate even those who might recognize it. As we have discussed earlier, the potential triangle could fail lower in which case the three-wave sequences might become part of a diagonal, lower, instead. But, if it does not fail, the best confirmation will be to exceed the high of the minute ((d)), circle-d, wave first.

And how about the three-day VIX? Triangle?

VIX Cash - 3 Day - Potential Triangle

Will a triangle in this market indicator hold? It has similar characteristics to the Dollar's potential triangle.

And, finally, a potential nested i, ii, ((1)), ((2)), down in the hourly ES futures. Will it hold?

As a reminder, in no case is micro-((2)) allowed above the high of subminuette wave ii. The market was extremely whippy as the result of the Payroll Employment report. But, so far, there are no degree violations I can see. Yet lower hourly lows are needed to better establish a daily down trend. So, we remain flexible, cautious and patient to see if some of these patterns resolve as expected or not.

Have an excellent rest of the weekend.

TraderJoe