Reminder

On the ES daily chart here is just a reminder of the larger daily count we are working on. We are currently looking for the minute ((a)) wave down. We showed one way to possibly count it in the prior post (see this LINK). But that count is not finished yet and requires more downward movement in proper form.

Notice that the Elliott Wave Oscillator is a nick away from going below the zero line. Further, if the current downward wave overlaps the prior minute ((a)) wave, up, then it would likely invalidate any impulse count upward for that upward wave set.

Further, sometimes the minute ((a)) wave comes very close to the low of wave Minor 3. If that happens, we will reduce the degree of the current waves by one level. For now, let's see how this count goes.

Have a good start to the evening,

TraderJoe

Jay was in a bad mood today

The SPY cash 30-min chart is below. We were looking for a fifth wave down, v, for a couple of days now. After a slightly deeper than usual fourth wave, iv, the Fed Chairman's speech set off non-stop selling today. Boy, when they say risk-off they just don't stop. Prices ended on the lows.

Some other wave counters had bullish counts as their primary count. We did not - at least not until this wave is over. As far as I can tell the five sub-minuette waves lower, make up the first minuet wave, (i), lower. We are not yet to the minute degree let alone the minor degree. Keep in mind, this was a half-hour chart. There can (sooner or later) be a lot more to go.

On the ES daily chart, as you can see, prices got down to the combination of the 100-day SMA and the lower daily Bollinger Band, near where they settled. The daily slow stochastic ended up in over-sold territory.

At the moment, we have no problems with wave overlap - which is very nice not to have to deal with! We will see if the Smart Money took some profits at the lower band, possibly allowing for some retrace waves upward. 

Could prices just "break"? They could. But another thing that could happen is a gap down in the overnight on Sunday - when Asia can more fully react to the statement and the subsequent price action, and then a sharp U-turn in order to make a flat wave in the futures. Possible, not guaranteed.

Again, with the five-waves down it puts us on alert to watch for a retrace that does not go over the high. of 4,327.50 and there is just nothing to the downside that will surprise me from here.

Have a good start to your evening.

TraderJoe

Set Up to Impulse - IF it wants

The ES 2-hour chart is below. We have been looking for the possible end to a fourth wave. Today we are showing two Fibonacci retracement rulers. They are from top-to-bottom of the whole wave, and top-to-bottom of just wave iii, and they show 38% at very, very similar locations, practically on top of each other.

In addition to the measurements, wave ii and wave iv would exhibit alternation if wave iv ended in this area. Further, wave iv is much longer-in-time than wave ii - a characteristic we often look for in impulses and in expanding diagonals. Will the wave impulse? Only the Smart Money knows for sure what they will do with their funds depending on Chair Powell's remarks tomorrow.

But, if a new low is made in wave v, then the market can still turn around to make a second wave up at some point. E_T saying, "if you want to have third waves, you have to have the patience to have first and second waves complete themselves."

Have a good start to the evening.

TraderJoe

Still Sideways - Contact with Channel

U.S. equity prices as measured by the cash SPY (30 min chart) continued their sideways movement and ran into the right-hand-side of the descending Elliott parallel trend channel.

SPY Cash - 30 min - Channel Touch

Then prices backed off a tad into the close. Meanwhile, the Elliott Wave Oscillator got back to the zero line, as shown by the black circle.

On the ES hourly chart, we showed the possibility of this expanding triangle in the comments for the prior post. The time signatures still look correct for it. Here is the updated chart of this potential.

ES Futures - 1 Hr - Potential Expanding Triangle wave iv?

Price needs to clear the prior ((C)) wave before making a new lower low to validate the triangle shape. If it does, it potentially targets 4,175 - 4,200. Maybe this will happen in the overnight or on news tomorrow. If price can not clear the ((C)) wave, then it might possibly be counted as a failed double combination. Cash then might be counted as a contracting version of a triangle. The market is being cagey.

Have an excellent start to the evening,

TraderJoe

Pretty sideways

In the tentative downward count in the SPY cash (30 min) chart below, today was a very sideways affair. There was a lower low in cash. The downward portion of the wave still has a lot of room to move lower if it wishes. Then, the question is whether a fourth wave will hold it's usual wave structure or not.

The Elliott Wave Oscillator has begun moving towards the zero line but hasn't made a zero cross or close approach, yet. As of this writing price is still below the 18-day SMA, and the daily slow stochastic is approaching the over-sold zone.  The trend in the daily swing-line is still lower. The 100-day SMA and the lower daily Bollinger band are not too far below the market. Let's see how it goes. 

Have a good start to your evening,

TraderJoe

A Simple Chart, A Simple Channel

The cash SPY weekly chart is below. IF there is to be an Expanding Leading Diagonal (of the 3-3-3-3-3 variety) then wave Minor 5 'must' become longer than wave Minor 3. To that end a Fibonacci ruler is shown on the right to give typical expansion levels. Note the prior weekly up channel in magenta. Wave 2 found resistance at the 'mid-channel line (dashed)'. So far, wave 4 has found resistance at the lower channel line. Resistance was previously found at this location in the upswing at the end of May.

SPY Cash - 1 W - Potential Expanding Diagonal

We already know that potential wave Minor 4 is longer in price and longer in time than wave potential Minor 2. That fits with the characteristics of a potential expanding diagonal. We know that wave Minor 3 found support near the level of prior wave Intermediate (W) which was made during the upward wave. 

Will potential wave Minor 5 find support near the level of Intermediate wave (X) from October 2020 and the prior high in February 2020? If it does, we will label it Intermediate (1), down. But, if it does not and keeps on going to the 2020 low, then we will label the whole downward structure with Intermediate sized waves, and it will become (1), (2), (3), (4), (5) to Primary [C], down.

The tentative uncertainty in degree labeling comes from the fact that the downward wave structure is not yet larger in price than Intermediate (C) - down - of Primary [A], down. But, because it is larger in time, we can see the possible need to increase the degree of the waves.

Have an excellent start to the weekend.

TraderJoe

Lower Low Day

After a bit of back and forth in the after-hours last night, U.S. equity prices as measured by the ES e-mini S&P futures began falling off in the overnight and made a lower low today. The cash SPY and SPX gapped lower. The daily ES chart is below.

ES Futures - Daily - Loss of Embedded Status

In the process of making the lower low, the daily slow stochastic lost it's embedded status. That means it is more likely than not that price and the 18-day average will try to come together at a minimum. 

From an Elliott Wave perpective - at the moment - there appear to be only three waves down and they are currently labeled a/i, b/ii, or c/iii. This was shown on the hourly intraday chart in the comments of the prior post. Both labelings are to be considered equivalent until further price movement separates them out by length as right now there is rough equality between the two down legs.

Have a good start to the evening,

TraderJoe

Inside Day Up

Back-and-forth, whippy price movement. Today was an inside day up that appears to consolidate yesterday's drop. It was an inside day in the ES futures (chart below) that closed higher.

It feels like the market is waiting on news of some kind. With price over the 18-day SMA, the price bias remains higher. The daily slow stochastic is still embedded. Lower daily lows or higher daily highs are needed to provide more information. One suggested count was posted in the comments for the prior post.

Have an excellent start to the evening.

TraderJoe

Gap Down - Lower Low Day

Overnight the ES futures were lower. Eventually they made a 1.618 extension, then upwardly overlapped the first wave down, nullifying the fourth wave of a potential impulse count down. The chart of the ES 4-Hr futures is below. Price got down to the mid-line today.

Shown on the chart is the time taken by the fifth wave to form IF it has ended where shown (there IS a probability of a triangle here, so take it with a grain of salt). Thus, we show the time allotted if the down wave is to break the (ii)-to-(iv) trend line in less time.

Be very cautious in the currently whippy conditions. Have an excellent start to the evening.

TraderJoe

Good Looking Setup - Needs Activation

We are able (again) to count five waves to a high today. The cash gap we noted on the daily chart was filled. Then immediately the ES/SPX/SPY fell off in a decently rapid wave lower. Note the Elliott Wave Oscillator made a lower low. After the sell-off to ES 4,290 there was a 62% retrace.

In order to even begin to get confirmation - with such a deep 62% retrace - then there should be a 1.618 extension wave lower that should break the bottom of the base channel. Without it, any impulse down would be suspect. In the overnight, the prior high would need to be respected and not be exceeded. I would watch tonight's overnight carefully. 

Be cautious and make sure that - without lower price lows - the above pattern is not otherwise part of a triangle. We don't think so because price is running out of room to the upside. But it is possible.

Have an excellent start to the evening.

TraderJoe

Just Waiting ..

The ES four-hour chart of the potential minute ((c)) wave up to potential wave Minor 4 is shown below. The Elliott Wave Oscillator is still in good shape with waves (ii) and (iv) clearly visible at the zero line. And there is currently a divergence for wave (v) with the fifth wave expected to be shorter overall than the third (use OHLC charts for that measurement) because the third wave is shorter than the first.

ES Futures - 4 Hr - Close Only

Note that wave (iii) might be one wave peak to the right, which might also give wave (v) a bit of extra length as well. The notes on the chart explain what is being waited for. Have a good start to the evening.

TraderJoe

By Itself - Impossible to Predict

Below is the three-monthly candle chart of the stock of AAPL, shown for a specific purpose. Look the chart over and you'll note a few things. It just so happens that the three months aligns with the business quarter but that is not really intended to be relevant to the discussion. Also, have a look at the PPO (or Percent Price Oscillator) shown below the chart. It made a peak in 2008 and has been lower since, but that is just an observation.

AAPL - 3 Months - Log Channel

The major point of the chart is this. From an Elliott Wave perspective this chart's price movements from the equivalent of $0.11 in Oct 1997 to a high price near $183.00 were likely impossible to predict with specificity. I realize this stock price accounts for splits, etc. But the reason this chart was impossible to predict in advance was that it is so out of proportion (2.618? No. More! 4.326? No. More! 6.867? No. More!..etc.) that it does not fit usual Elliott Wave Criteria. Otherwise, you would have bought it at $0.11 and never let go of it - maybe there are a few out there in this position. If so, congratulations! But even if they did buy it for a low price, it is likely for fundamental rationale than for Elliott Wave reasons. Some might say, "Well I just like APPL. I like their products. I like their innovation. I like their AppleVerse, etc. etc." And I will grant you they are one of the most innovative powerhouses in the stock market. (And their innovation doesn't only apply to their products & services, it applies to their financial engineering as well, i.e. off-shoring of profits, stock-buy-backs, and the like.)

But they didn't buy or sell it because they "found a wave three at 1.618, or 2.618", etc. And, there certainly is nothing on the chart that looks like a side-ways fourth wave correction yet. And any Elliott analyst calling a top in AAPL would have been burned over & over again until the individual looked downright silly or maybe even mad.

Something similar happened with some of the meme stocks over the last couple of years. GameStop was a stock that was rocketed to non-proportional incredible new heights as the social media investors tried to burn the hedge-fund shorts by ganging up to force the stock price higher & higher. Some of those stocks have come back to earth. AAPL has not yet.

Well, you see, Ralph Nelson Elliott knew this much! 

Elliott knew there were innovative companies (like Edison's light company, and Ford's motor company) and these stocks could move way out of proportion to others - like a dodgy old railroad stock or some utility company's stock.

And that is - in part - what Elliott's theory is about. He reasoned that one must use an "average" of quite a few stock prices to smooth out the best common economic condition of all of the stocks. Thus, he tried to limit the impact that the spike highs and lows of individual stocks had on an average by including a wide variety of stocks. And, by including a lot of stocks he got a wider representation of the votes (or volume) assigned to the average.

Yes, Elliott thought that people expressed themselves (as if voting) and that those expressions were included in the price of each stock and the volume made in the transactions. And what Elliott was trying to directly judge was the human sentiment or expression of what we now call fear or greed in the trading and investing community. And so, he used a widely available average as his potential sentiment indicator. And this average would also be kept track of in the back of people's mind as they made their hourly, daily, weekly monthly or annual market judgements.

And that is just my point. Many casual or even professional wave analysts try to predict the market average by 1) looking at a few stocks, or 2) looking at a ratio of one type of stocks to another. I contend that the more of that they do, the more time they are wasting. They largely just show the past. They don't predict the form of the wave to come. Look at them all you like; to me they are a waste of time.

Elliott said the emotions had to be judged in aggregate; that's why he used an average. And I think Glenn Neely is right, too. You make or lose money based solely on the price of the risk asset being bought, sold or traded. Nothing else! And those observations have "profound" implications.

When will APPL turn and make a wave lower (maybe to contact the lower channel line)? It will do so when the "big" investors in APPL decide that the stock price is too rich at this level for the business's prospects, and they begin to sell it. It won't turn lower before that. They will know. They have the best information on the company's day-to-day operations. They will see conditions in the company as they make their investor visits to the worksites, talk directly to employees, watch the company's flow-of-funds and other measures that signal company health or a setback.

When will the DOW turn lower? It will do so only when the Smart Money realizes it is riskier to hold on to stocks than to move into cash, bonds, real estate or some other form of investment. Typically, for them to do that, they must have people they can sell on volume to. You know - Ma & Pa - who are usually unaware of what the Smart Money knows.

Make no mistake: the Smart Money also knows that for each billion dollars the U.S. Federal Reserve delivers back to the market in the form of mortgage-backed-securities or T-Bills, etc., they know HOW it will affect their large accounts - because they know how they are positioned in the market. And so, the Smart Money will buy or sell accordingly. Meanwhile, you & I can have little-to-none of this inside information. We can't see their accounts. We can't directly see their buying or selling. Only they and their brokers can.

Yet, the Federal Reserve has said they are selling. They said they are rolling off their balance sheet. Do you not believe them? Have a look at the weekly M2 Money supply figures. The money supply is decreasing. This is a first. When did it start decreasing? Well, the first week of January. When did the stock market start declining? Well, the first week of January. Interesting coincidence, isn't it? Or is it? So, did the FED stop selling? Did they? Try to keep that in mind. To me, the interest rate is a secondary factor - not the primary factor.

Oh, back to APPL about the only way I can count the first series of waves is as an expanding leading diagonal from 1981 to 2000. Try it. You'll find the measurements are right. If you do so, it makes a maximally sized first wave that can then have some degree proportion to the larger straight-up wave from 2003. (Here is a LINK to review that idea.)

What? An expanding diagonal led off a stock's price movements??!! Isn't it possible that an expanding diagonal downward might be responsible for leading off a slightly larger bear market than we have had so far in a stock average?

Yes! Let's all hope it doesn't resolve downward like APPL's stock resolved upward. But even though an average's price is maybe more predictable than a particular stock, we must all admit APPL's price rise was not predicted by anyone I know of. Certainly, no one said "for sure" in 1997 how high it's price might reach by 2022. At least I never heard it.

This is the second post this weekend, and if you have not read the first one yet, you may wish to.

Have an excellent rest of the weekend.

TraderJoe

Further Still into Target Area and Nearer to Trend Line

Here is the ES daily wave chart, updated for today's price action. Prices have closed further into the target area and nearer to the local down trend line.

ES Futures - Daily - Wave Chart

Today's higher high ruled out the alternates (only) of a prior top and barrier triangle. Our concern regarding the "micro" wave one shown yesterday proved to be bested by the degree labeling issues it would have created. Here is the SPY 15-min intraday chart.

SPY Cash - 15 min - Potential Diagonal

IFF (if and only if) we are making a diagonal with acceptable measurements, AND there is post-pattern behavior to confirm it, THEN, a down-trending Minor wave 5 might complete an expanding diagonal. The only concern with the above pattern is the expected retraces of 62% did not occur. So we do have one eyebrow raised.

Have an excellent start to the weekend.

TJ

Further into the target zone & confluence

Last night and today, stock futures as measured by the ES E-mini futures continued higher to the level of 4,260.50 and then began to fall off. During the day I showed this daily chart, below of what are likely the relevant (Fibonacci and other) confluence areas on the chart with the commentary below.

Good morning. Price is approaching the following Fibonacci confluence areas.

1. 62% retrace of prior wave (common for diagonal waves; can go further).
2. 1.618 extension of ((a)) wave.
3. Prior S&P cash gap.
4. Fibonacci days 34 + 4 (experiment).
5. (Non-Fibonacci) upper daily Bollinger Band 4,266 (today).

With price having just exceeded 4,253 during the day - chart was not the full day's move - the 62% retrace level on the prior wave was tagged and exceeded slightly. This is a typical level for wave four in an expanding diagonal. Having done that we started looking for a potential turn-around and counted a first five-waves-down, and we showed that. Now the question is this: "have we topped?" We suggested that if we haven't topped the down move has gone sufficiently low as to overlap prior upward waves, and this might mean we are making a contracting ending diagonal fifth wave. But, we also showed an alternate that we might have topped.

The alternate comes from this chart in the ES futures - which includes overnight waves not seen in cash.

ES Futures - 30 Min - Overnight Waves

The big, big question is whether that first wave up is enough to have started the wave sequence, and it never, ever shows up in cash although part of wave ii does. I am inclined to call it a truncation to the wave ii position, partially based on degree labeling, and that would make the wave sequence up just three-waves meaning, with the overlap, we could be in for an ending diagonal. Neely has documented a drawing of such a "tiny" lead-off wave in his book, Mastering Elliott Wave, but I have seen so few cases that I must keep an open mind, be flexible and count accordingly. Still, I have to ask, "why is that wave there, and why does a channel fit so nicely?"

One small issue with an ending diagonal is that it might take days to grind out yet, and that would mean this wave was not ending very near 34 trading days. Something to ponder.

Have a good start to the evening,

TraderJoe

Further into the target zone

Today's more benign CPI report provided the best reason for a fifth wave, and it got prices further into the target zone shown previously, and closer to ((c)) = 1.618 x ((a)), as in the ES daily wave chart, below.

ES Futures - Daily - Wave Chart of Potential Expanding Diagonal Lower

After the initial five-minute post-report bars (which occurred while the cash markets were closed) and saw ES futures prices rise virtually from 4,130 to 4,200, prices gave back about 20 points, then made a new high at 4,212, then gave back about 17 points and made another marginal new high.

While the post-opening waves can be watched for signs of either another flat, running triangle or even an ending diagonal, we maintain that from a wave-counting viewpoint, not much of interest happens until there is a clear five-waves-down of some significance and a retrace that does not go over the high.

If we are in the expanding diagonal pattern above (and it still must prove itself) then the fourth waves can be plain testy until they are not. We are happy to note in today's chart, above, that there is now clear overlap between wave Minor 4 and wave Minor 1. We also note there is one whale of a divergence going on between today's high and MACD on the ES 4-hr chart, and this often indicates a fifth wave in progress. Lastly, we'll note that the angle of incline of the minute ((c)) wave, above, is less than that of minute ((a)) wave.

On the above chart, the top trend line is tentative. It may need to be adjusted for the actual ending location of the Minor 4 wave when that become more apparent. 

Tomorrow morning is the companion PPI report, and it will be of interest, as well.

Have an excellent start to the evening.

TraderJoe

One Way to Count as Completed

There is one way to count the current uptrend as completed; as minute wave ((c)) of Minor wave 4. That is shown below on the ES daily chart.

ES Futures  - Daily - 'One Possible' Count Completion

In this count the entire up wave would have taken 34 trading days, and minute wave ((c)) would be inside of the 1.618 extension on minute wave ((a)), as shown.

One way to continue the count is to take the price action of the prior five days and make a larger running triangle out of it - with a more complex b wave, up. 

Note that although there is a doji candle at the high, the daily slow stochastic is still embedded. And a candle pattern is just that. It must be confirmed with a significant lower closing candle without having made a new higher high first to be activated.

Have a good start to the evening.

TraderJoe

Coincidence or Not ?

Here are two Fibonacci time studies on the ES daily futures. The first has occurred and there isn't a way to change it. These were "high-to-low" measurements. 

This second measurement has not fully occurred yet. The study is "low-to-high" measurements. It will be interesting to see if it is close, and, if so, how close.

Have an excellent rest of the weekend.

TraderJoe

Medium Range Picture

Don't lose sight of the ES 4-Hr chart. We were expecting contact with the EMA-34, and this morning's Payroll Employment Report provided that (+528 vs +250 expected).

The red alternate count below is for the wedge count. It could still come to pass.

Allowance should still be made for a 38 - 50% wave (iv) - only 23.6% so far. Allowance should also be made for the EWO to approach the zero line again (+10% - 40%). Possibilities for wave (iv) include:

1.  Expanded Flat
2.  Running triangle
3.  Expanding triangle

As usual, a larger wave (iv) would be ruled out if wave (i) is overlapped downward.

Have a good start to the day.

TraderJoe

Minimum Minor 4 Diagonal Target Obtained

We have showed on charts for a while now that - if the ES daily futures were to be making an expanding diagonal lower - this up wave would need to get past the minimum level of 4,168.25 (corrected). That level was marked on previous charts, and it is marked on the updated chart below. ES prices today got to 4,170 - meeting the minimum criterion.

ES Futures - Daily - Minimum wave 4 met

We now know that wave Minor 4 has both taken longer in time, and traveled farther in price than wave Minor 2. One can also see that the Elliott Wave Oscillator for wave Minor 4 is higher than that for Minor 2 - that is something I doubt anyone else told you could happen. 

Could Minor 4 be over today? Well, yes, it is possible as the wave would still meet the rules. Still, there are several ways the up wave could continue. Why? Because slightly higher prices might meet the upper descending diagonal trend line and provide a better look to the pattern. Here are the most likely options.

1. Price is still in a b wave of minuette wave (iv) as a larger flat. Wave (v) to come.
2. Minuette wave (iv) ended today in a triangle, and today is only wave i of (v).
3. Minuette wave (iv) is continuing in an expanding triangle; today was wave d.
4. Wave minuette (v) is making an expanding diagonal.

The four-block below shows some of these ideas in the order above on the cash hourly chart. 

SPX Cash - Hourly - Possible wave (iv)'s

Each of these local counts has it's own strengths and weaknesses. The one I like the least is the contracting triangle; its waves look the lesser developed. Well, this is all part of what I have termed The Fourth Wave Conundrum which happens at every degree of trend.

Of the four, it is likely that the second and fourth chart provide the wave in the wedge look that should have resulted from the extended first wave (i), and the shallow retrace following it.

Have a good start to the evening,

TraderJoe

Likely Wave (iv)

SPY 1-Hr: the fourth wave continued to develop today, and has at least hit the 23.6% retrace late in the day after making a near-equal high. Price is fighting a battle at the 100-day SMA on the ES futures.

SPY Cash - Hourly - Likely Into Wave (iv)

The near equal high permits a Flat wave to be constructed, and this would alternate well with the sharp second wave (ii). Locally, it would be great to see the Elliott Wave Oscillator tag the zero line - or a little above or a little below, and possibly for price to cross the EMA-34 which it has not done yet.

The daily slow stochastic remains embedded and since price is above the 18-day SMA the price bias is still said to be up.

Prices were quite whippy today in a session designed to chop accounts as much as possible. Note that as of the cash close, neither SPY nor ES made a lower low than it's opening price lows on an OHLC chart (even though that looks like the case on the close-only chart).  In addition to the Flat, some sort of triangle can not yet be ruled out until/unless there are lower lows - it just doesn't look like a contracting triangle on the futures chart at this point.

Have an excellent start to the evening,

TraderJoe

Inflows then Nothing

Overnight U.S. equity markets were lower as measured by the ES futures. When the cash market opened it gapped lower and traded lower for about an hour. Then the first-of-the-month inflows started coming into the market and the cash and futures made a new higher high. After that, the market traded sideways to lower. The hourly chart of the cash SPY is below.

After today's new high, you can observe the hourly closes just "skimming along" the EMA-13. Not even a 23.6% retrace has been made on wave (iii), yet. Because wave (iii) has not exceeded it's length criteria yet, we are either in wave iv of (iii), today, or starting on the larger wave (iv) which might be a Flat to alternate with the sharp wave (ii). The daily slow stochastic is still above the 80-level. Price settled just about dead-on the 100-day SMA. And locally, the hourly Elliott Wave Oscillator is red and declining.

Remember, this wave might form a wedge, so a contact of the lower parallel for a fourth wave might not be in the cards (but it could).

Have a good start to your evening,

TraderJoe