Closer Still

At today's high of 4,144 the ES futures got closer to the target level for Minor wave 4 in an Expanding Diagonal count. Here is the daily chart updated for the new prices, and to show some levels.

We will note that minute ((c)) = 1.618 x minute ((a)) does get prices to the target area. Further Fibonacci expansions are possible too, such as ((c)) = 2.00 x ((a)).

Remember, Monday is the first day of the new month with potential inflows from pension funds, 401k's, company bonus plans, dividend reinvestment schemes, etc.

As always, diagonals are lower probability patterns that must form correctly in every detail. Importantly, the Minor wave 2 high may not be crossed or that would be an invalidation of the pattern.

Have an excellent start to the evening and the weekend,

TraderJoe

Targets Remain the Same

Nothing has changed target-wise since Saturday's wave chart post. It seems to be only a matter of how we get there. Here is the ES daily wave-chart updated from Saturday.

As stated previously, wave Minor 4 is already longer in time than wave Minor 2 as would be expected in an expanding diagonal. It would also need to become larger in price points above the 4,168.25 minimum shown. Should price gap up tomorrow, as possibly suggested in the after-hours market, then the red count - from yesterday's post - might be the one operating and we could launch into red (iii) of minute ((c)) of 4. If the price structure reverses, then perhaps we are making the minute ((b)) wave in yesterday's black count. Both counts are still active, but if price extends beyond certain limits tomorrow it will greatly reduce the right look of the contracting diagonal count.

Keep in mind that diagonals are low probability patterns that must prove themselves in every detail. In that regard, to keep the pattern intact, then the invalidation level shown may not be exceeded.

Have a good start to the evening,

TraderJoe

Contracting Diagonal or into Minute ((c))

This post is being prepared shortly before the cash close of the equity market. The ES 4-hr chart may have made the contracting leading diagonal minute ((a)) wave, as per the black count in the chart below. We have suggested for some days that this structure was possible. While the proportions are not the greatest, the measurements do not break Elliott Wave rules.

ES Futures - 4 Hr - Contracting Diagonal ((a)) or into ((c))

Because the count of the internal up waves is not exactly clear as 5's or 3's we must assign the equal alternate labels in red that the minute ((a)) wave was completed prior - on June 27th's high - and we are now in the minute ((c)) wave up. Either is OK and both are easy to track. The minute ((a)) wave could go higher and remain within the rules. Note this higher high is likely on a divergence with the Elliott Wave Oscillator with about 167 candles on the chart. Also, this count found some resistance on the upper daily Bollinger Band which was a reason for suggesting it.

The U.S. Federal Reserve raised interest rates by 0.75% today as expected. The GDP report occurs before market open tomorrow.

Have a good start to the evening,

TraderJoe

Lower Low Day

The ES daily futures made a lower day. They came close to overlapping the prior a wave up at 3,909 but they didn't yet. Price now has a better overlap on the late June highs, however. We showed intraday counts in the comments for the prior post.

It's worth keeping an eye on the daily slow stochastic which wavered under 80 today. It could still get the embedded status back tomorrow BUT that is FED day (Federal Reserve rate decision and news conference). It is possible price could also get down to the 18-day SMA and find the neutral spot on the chart prior to the FED announcement.

Have an excellent start to the evening.

TraderJoe

Inside Day

The ES futures posted an inside day today in a whippy session. The daily ES chart is below. Another lower low candle (or more) would be more convincing for a wave (iv) of a diagonal even though there is clear overlap already.

Note the regular calculation of the daily slow stochastic was embedded as of the settle. There's lots of earnings this week, and the FED interest rate decision on Wednesday. I'm sure many a treading lightly until the dust settles a bit.

Have a good start to the evening.

TraderJoe

Daily Wave Chart - Eventual Targets

The daily wave chart for the ES Futures is shown below. Please note that wave Minor 4 already consumes more time than wave Minor 2 (the daily close of 3,965 is not shown as it is less than the threshold for another zigzag). Wave 4 in an expanding diagonal is supposed to consume more time & more price than Wave 2. So, everything makes sense at this point.

ES Futures - Daily - Wave Chart

Also shown on the chart are the minimum level of 4,168.25, the target level of the upper declining diagonal trend line, and the invalidation level for the wave. Wave Minor 4 may not exceed the high of wave Minor 2 for the pattern to remain valid.

Of interest are the Elliott Wave Oscillator (EWO, AO) divergences on the minute ((c)) waves compared to the minute ((a)) waves, and the lower overall level of the EWO for wave Minor 3 versus Minor 1. It is acceptable for the EWO on wave Minor 4 to exceed that of Minor 2. In fact, if that happens, it just expresses the expanding nature of the pattern (as long as invalidation does not occur).

Within wave Minor 4, we are not yet certain whether the minute ((a)) wave is complete already, or if it is trying to form a contracting leading diagonal to consume more time. Either is acceptable for this pattern, but the latter is preferred for reasons of the internal wave count. Forming a whippy contracting leading diagonal for the minute ((a)) wave might also reflect a whippy session on Wednesday when the Federal Reserve announces its interest rate decision. It may also reflect the position of the daily Bollinger Bands.

Have an excellent rest of the weekend.

TraderJoe

Today is about the limit for wave (iii) in Diagonal

As the chart below shows today is about the limit for wave (iii) in a diagonal count to the minute ((a)) wave. It is almost 90% of the first wave. It should not become longer. As of today there are three-waves, including the needed higher high for wave (iii). Further, within (iii), c = a. Cash and futures are in-synch on the wave. But a fourth wave should begin around now or we are looking at different structure.

SPY Cash - 2 Hr - Possible (iii) of Diagonal

The structure at the top (inside the green trend lines) is very wedgy and might be indicating an interim high for the pattern. If a fourth wave - minuette (iv) - should begin, it should be somewhat proportional to the pattern, at least overlapping the last a wave up, and possibly even undercutting the b wave up. It should also be a zigzag to follow the rules. Let's see how it goes.

Have an excellent start to the evening.

TraderJoe 

Beef, Chicken, Fish or Shrimp ?

Like a restaurant menu before you've had drinks, everything looks good.  Shall I have the beef, chicken, fish or shrimp? The same is The Fourth Wave Conundrum in the Minor wave 4. All we know is that if the larger move downward is a diagonal, as per yesterday's post, then, all of Minor wave 4 'must' be a zigzag. But how it forms that zigzag is up to the market. Here are some possibilities.

A lot depends on if the (a) wave up forms five clear waves, or only three clear waves, or if it forms a diagonal.

Then, it depends on if the (b) wave forms a zigzag, a Flat, or a triangle. The only thing we know for sure is that the low absolutely may not be exceeded for a zigzag to form properly.

Best of luck working this one out. Have a good start to the evening.

P.S. A test is included: let's see who gets it.

TraderJoe

Watch for an Extended ((c)) Wave !!

The weekly wave chart (Neely-style) is presented below. As you know the extremely choppy downward action has made me suggest diagonals. They are very confusing. This chart helped straighten me out. Then, I went back and counted every wave since the all-time-high. One place where I was confused got resolved. As a result one should at least be on guard for an extended minute ((c)) wave of blue 4. It might be 1.618 x ((a)) or more.

ES Futures - Weekly - Wave Chart

Now here is the count from the all-time high (ATH). Before you puke, note (v) = (i) with extreme alternation between ((ii)) and ((iv)). Wave (iii) is longer than (i); no overlap; no rules broken.

ES Futures - 4 Hr - Minute ((a)) wave down

In the minute ((b)) wave, the start of the pattern was the leading diagonal (a) wave which was also called out in real time.

ES Futures - 4 Hr - Minute ((b)) wave up

For the minute ((c)) wave of Minor 1, below, also note that wave (v) = (i).

ES Futures - 4 Hr - Minute ((c)) and Minor 1 Down

I had no questions about the Minor 2 up wave. I don't think many of us did. Just the top of it is shown here on the upper left.

ES Future - 12 Hr - Minor 3 Down

The alternation above is diagonal ((a)) - ((b)) - impulse ((c)). Minute ((c)) = 0.618 x minute ((a)). Minor 3 is longer in price & time than Minor 1. It is increasingly possible that Minor 4 will be longer in price and time than Minor 2. And, yes, within the descending contracting diagonal - also pointed out in the DJIA, wave (iv) is shorter in price than wave (ii). Shorter by ticks, but shorter.

It has been a bear of a count, so far, pun intended! Have a good start to your evening. Thanks to blog reader and excellent contributor BBRider for rekindling my interest in this count.

TraderJoe

Trend Line Noted

The U.S. equity market - as measured by the ES daily futures - ran up to the declining trend line of the acceleration channel we noted in the main count, not yesterday's alternate, and fell off. The larger down count is shown below. Today's high would be the high of minute ((ii)), circle-ii, below.

We note that if the whippy waves in May constituted a "running flat failure" then the market may be in a very weak position. This is another way to get Minor 2 to be almost equal in time length to Minor 1. If so, the upper declining trend line will likely hold on a closing basis. Note that minute ((ii)) at today's high is longer in time length than minute ((i)), and might be shorter than Minor 2 depending on which peak you pick for Minor 2. Thus, degree labeling may be preserved.

Lower lows than minute ((i)), circle-i, would likely indicate the onset of a minute ((iii)) wave, lower.

Again, breaking the trend line upward might indicate Minor 4, as per the Best Alternate shown yesterday.

Have a great start to the evening.

TraderJoe

Preparation of a Good Alternate

U.S. equity prices - using the daily chart of the ES futures - look weird and feel somewhat similar. When you look at the chart below, you might see why. Although nothing in the main count, lower, has invalidated yet, it seemed helpful to at least look for an alternate. Now when an alternate is developed, we don't just pick any labels we feel - like a large W-X-Y with internal (w)-(x)-(y) structure as some sites are showing. No, such a structure would be bizarre in Elliott Wave, because it is too complex and may not even follow the rules for wave construction.

Rather, we try to use measurements and objective criteria. You'll see how we have done that below. Again, the following chart is an alternate at this time because nothing in the larger three-of-three count lower has invalidated yet. But it could.

ES Futures - Daily - Possible Alternate

In this alternate, we base it on 1) the number of daily candles, now over 120 since the all-time-high, 2) the Elliott Wave Oscillator (EWO) and its divergences, and 3) the measurement of 3 = 1.618 x 1. Just for information, the number of daily candles is now 132 to be specific, and well in the range of 120 - 160 recommended for using The Eight-Fold-Path Method for Counting an Impulse.

To explain more thoroughly, we note that there is a location for wave 1, that provides a 1.618 measurement for wave 3. So, we can back this wave location up to the January low rather than the February low. What this does is serve to make wave Minor 2 more complicated in structure and longer in time than its corresponding wave Minor 1. Otherwise, if the February low is the low of wave 1, then wave 2 is shorter in time - an anomaly I have been looking sideways at since the decline began.

Now if we do that, we see that the lowest low for the Elliott Wave Oscillator is on wave (iii) of 3, as per The Eight Fold Method for Counting an Impulse. Then, wave (v) of 3 occurs on the divergence. As such it may explain the EWO heading towards the zero line for a wave 4.

This alternate suggests that wave Minor 4 could be a triangle OR a simpler zigzag, and one that breaks the current line of declining tops.

The key issue is that we don't know yet. No one does. Prices could gap down Sunday night & keep going Monday to better establish a larger third wave. But, what if they don't? The very reason that a good alternate is developed is to keep the trader unruffled and fully prepared in the face of a different market movement than currently expected.

But, again, not any alternate will do. One simply cannot just paste letters and numbers anywhere on a chart and expect success. As we have done above, it should be based on the significant measurements of price length, time and momentum that best agrees with the written Elliott Wave Rules and Guidelines (and perhaps with The Eight Fold Path Method if an impulse is to develop). 

And so, if the upper downtrend line is broken, then it will suggest that prices may better form a parallel trend channel. I don't know if others may have reached this conclusion or not. I don't follow the work of other wave analysts or services at this time. And this study was independently arrived at last night after blog reader and contributor marc asked, "and what happens if the down trend line does break?"

In this alternate, a larger wave 4 must still adhere to the rule of not allowing overlap with wave 1. If all of this should occur, then the alternate would take the place of the main count.

Have an excellent start to the weekend.

TraderJoe

No Changes at this time - 2

Equity prices, as measured by the SPY cash 30-min chart below, made another lower low. This time the lowest low of the prior wave (x) was exceeded lower at the open. Then, the mop up crew came in and tried to close the gap. By the cash close/futures settle they had not. But they still could. We posted a wave label of sub-minuette wave i at today's low. The up wave appear to be some or all of sub-minuette wave ii.

Right as things stand prices went back to the upper parallel trend line of he channel in what looks like three waves. The current retace level is 38.2% and give the number of cash bars in the down wave, it seems quite short in time, too. So, it could go further, or it could form a Flat wave, which could extend the correction in time.

About the only thing one can do is draw in this parallel on an ES 15-minute chart, and monitor the parallel for measurements, and Fibonacci ratios. Right now the two up waves are roughly equal.

ES Futures - 15 Minutes - Monitor Parallel

Also, monitor to see if the parallel is broken to the downside, and is back-tested. If a failure of the back-test occurs, then either a Flat wave is likely in progress to extend the time of the correction or wave iii is in progress.

Have a good start to the evening.

TraderJoe

No Changes at this time

Using the SPY 30-min cash chart, shown below, there are no changes to the count at this time. There are no untoward overlaps to have to explain and price still closed below the moving averages. The count shown is the one that best agrees with the Elliott Wave Oscillator, and the channel.

In the ES futures, it is possible the down wave is an expanding diagonal with a possible further down leg to go.

An alternate has been added in red if the current up wave makes a higher high before it makes a lower low. It backs up the count one peak to the left at the high, wave c of (y) of (ii). 

Wave micro ((4)) could become a triangle, but does not have to.

Have an excellent start to the evening.

TraderJoe

Low of prior 'b' wave exceeded lower

After an initially whippy day in which the overnight futures were down, the cash market spiked up at the open. Then they spiked down. This appeared to extend the micro wave ((2)) as we indicated could happen in last night's post. The market drifted sideways into the hearings on Capitol Hill, and then began dropping as shown in the SPY cash 30-minute chart, below.

In the low of the last half-hour, the lowest low of the prior b wave was exceeded lower, and a new blue channel lower has been drawn. It does appear that we are in the micro ((3)) wave of the minute ((iii)) wave lower until further notice. Bulls have to defeat both the new down trending parallel and the July high. 

Have an excellent start to the evening.

TraderJoe

Cash Up Wave Even Less Impulsive

In yesterday's post, we provided reasons why we did not think the waves made on the holiday shortened week were impulsive. That being the case, even we were surprised (a tad) when Friday's up day could not also result in follow-through on Monday. The market was lower at the open, and followed through lower near the end of the day with a lower low. A truncation top is possible on Friday's high.

SPY Cash - 30 Min - Possible Truncation Top

In the process of making the lower low later in the day, price overlapped the prior a wave up, making a further impulse count up very difficult. As a result, we assigned the first low as micro wave ((1)), down. There was definitely a three-wave sequence up following the first down wave, shown as a :3 which could be a tentative wave ((2)) location. Meanwhile, the afternoon down wave looks like a :5 but can also be interpreted as a :3. So, it is best to see if a Flat wave is forming or not. Watch to see if 3,883.25 is exceeded in the overnight or tomorrow.

Needless to say, the weakness might well represent starting a minute ((iii)) wave of a Minor 3 wave down, but better evidence (price-length vs time-speed) is needed.

Have a good start to the evening.

TraderJoe

Cash Up Wave Does Not Look Impulsive

In working on the minuet (w), (x), (y) count to the minute ((ii)) wave shown in the prior post, the current up wave in the cash does not seem to have impulsive characteristics, overall. (Others may be attempting to count it impulsively.) Here is the SPY 30-min cash chart.

SPY Cash - 30 min - Zigzag So Far

The reasons for the lack of impulsion at present are 1) the very shallow and truncated travel of the b wave seems very atypical of a second wave, 2) There is no wave that currently breaks above a base channel that would have been formed by i and ii if they were to replace a and b, 3) the RSI really didn't go to a high level of over-bought in the wave, and 4) there is only a c = a length relationship at this time.

Let's see how things go on Monday/Tuesday.

Comments have resumed as of today for Elliott-wave related posts.

TraderJoe

Holiday Waves

On the ES daily chart, below, remember, we cited a level of 4,034.50 for the potential invalidation of wave minute ((ii)) of Minor 3, lower. Over the holiday, the wave structure formed an apparent double-bottom at the location marked as minuet (x). This double-bottom was previously discussed.

 

The upward wave structure has progressed enough for us to decide that, as long as 4,034.50 is not exceeded higher, then this can all be part of minute ((ii)) of Minor 3, even though the prior high has not been exceeded higher. The upper daily Bollinger Band might be hit or not. In terms of time, remember that it is very unclear which peak wave Minor 2 ended on.

Remember, the Payroll Employment Report is tomorrow morning before the open, and it can lead to some whippy market conditions.

Have a good rest of the evening.

TraderJoe

Back to Neutral

ES futures ended their overnight rise about where we indicated in the prior post (see the ES 2-Hr chart). They then tried to make a lower overall low today, couldn't, and got down to within 90% of the prior daily low. But, when a new low was not to be had, they rallied back to neutral - the 18-day average of closes, or "the line in the sand" in what is technically an outside day up because although a new low was not made over two days ago, it was made versus just yesterday's low. This is still whippy market behavior and is not trending at this time.

ES Futures - Daily - Back to the 18-day SMA

The daily Bollinger Bands are beginning to curve in on price, and the daily slow stochastic is neutral to positive. A reminder that if the low of an outside day up is taken out within the next two trading sessions it would be termed a trap for the bulls.

Have an excellent start to the evening.

TraderJoe

Higher Low, Higher High, Higher Close

Yesterday, we said we could only count a 5-3-5 downward, and further analysis depended on a higher high or a lower low. The higher high is what occurred and was no surprise in the whippy volatility. The ES 2-Hr chart is below.

Friday's higher high likely makes Thursday's upturn wave a :5, and the higher low as a :3, and now possibly making another five higher. If that is the case and a 62% retrace is obtained, then it is possible that wave (i), down, might be a diagonal. There is insufficient structure to conclude that yet, so we are patient. The alternative at Thursday's low is alt (x).

Comments might resume next week. Have an excellent rest to the weekend and holiday if you are celebrating in the USA.

TraderJoe