Possible Triangle

It's not for certain that it will hold up in the overnight, but if the SPY (cash) 15-min triangle described below maintains its integrity, then it is possibly signaling, "the last wave-set dead ahead". We showed a smaller triangle in the comments earlier in the day but said there could be a larger one. The shown below is the larger one.

SPY Cash - 15 min - Potential Triangle

And if there should be five-waves-up; it might end the c wave of the (y) wave of the minute ((b)) wave up. Triangles are tricky, and this may not hold. So, let's see how it goes. If the triangle does not work out, then a downward double combination might work.

As always, patience and flexibility are key at this stage of the wave count.

Have a very good start to the evening,

TraderJoe

Watch Me Pull a Rabbit from My Hat!

Most of us typical people can be literally amazed by a good sleight of hand or more elaborate magic trick until we know how it is done. Then, we just say, "oh!". If you followed the comments in the prior post, you know that when we went to bed, AMZN had given guidance lower which dropped the ES futures -60 to -80 points, depending on where you are measuring from. The spike down in shown circled in the diagram on the right.

It is also shown overlapping a prior wave. But Presto-Chango! Open the cash market (diagram on the left at the arrow) and By-Jingo the offending little overlap magically disappears! Not even a point of the AMZN news appears in the cash market. Astonishing.

Is the result such that some Elliott wave analysts will count the diagram on the right as five-waves-up? It might be. 

How do such things happen? What is the secret behind the trick? Well, on Wall $treet, talk is the cheapest thing there is. Action is what really matters. And all you did was have one of the Corporate CEO's under-promise so he can over-deliver. It is one of the oldest tricks in the book. And it does get tiring. Meanwhile, the Smart Money AI (Artificial Intelligence) algo's just read who is short in the light overnight volume, and by how much, and then execute a program to inflict max pain. It happens all the time. It's a reason why I seldom, if ever, take overnight positions home with me, or trade through news reports.

From an Elliott Wave perspective cash-only wave counters might indeed view the diagram on the left as 'five-up'. Is it wrong? There is no definitive ruling, although it does not seem correct from a degree perspective as I have noted earlier. Those who also respect the futures prices might just say, "well, the parallel up trend is still in force until it isn't." Such a count can be (w)-(x)-(y) or it might have more legs yet. It is very difficult to say. The only counts that look like they have invalidated for the minute ((b)) wave are the Flat, and the triangle. It looks like if this wave is corrective, it would be a double zigzag (most likely) or a triple. As I said before, "B" waves are notoriously difficult. If this is still a "B" wave, then it is a case-in-point.

Have an excellent start to the evening and to the weekend.

TraderJoe

Still in Upward Channel

As per the ES 4-Hr chart, below, prices are still in the upward channel shown. AMZN earnings guidance put a spike down in prices in the after-hours. However, we were providing the suggestion of a downward acceleration channel much before the close of the cash session. See the comments in the prior post. As the initial downward parallel shows, prices did drop sharply below it in the after-hours.

If prices stay in the larger up channel, as we have written before several times, it would be possible to decrease the degree of the waves to a simple a-b-c. But that remains to be seen. The further prices drop below the uptrend channel shown the more the odds tilt in favor of a larger Flat for the minute ((b)) wave, or minute ((b)) wave completion at the prior day's high.

Have a good start to the evening.

TraderJoe

Reminder of Upward Overlap

Today's price action did almost everything but darn your socks. First the market gapped lower, then it filled the gap, then it made a higher high, then it reversed almost, but not quite, completely. The result was to leave a doji candle as the final print. The daily ES chart, below, is just a reminder that there is now upward overlap on what is likely the minuette (i) wave, down, of the minute ((a)) wave down.

The overlap, shown in orange, likely just confirms the minute ((b)) wave up was underway, and that a larger-in-time wave minuette (iv) is the less likely count. Today (you can review this LINK) we were able to count c = a or a (c) = (a). The degree is uncertain. Yesterday, we showed the possibilities for the several styles of "B" waves that could be made from here. You should review that post if you have not seen it yet.

Have a good start to your evening.

TraderJoe

Lordy Save The Wave Counters

The diagram on the left shows the potential zigzag that we might have so far to the minute ((b)) wave. This is counted as minuette (a),(b),(c) to the minute ((b)) wave. 

BUT, if you reduce the degree of those waves one degree, and you make them sub-minuette waves a,b,c then they can form either the sub-minuette (w) wave of a double zigzag (upper middle), or the sub-minuette (a) wave of a Flat wave (lower middle). 

By the same reasoning the patterns on the right of a triple zigzag (upper right) or triangle (lower right) can also easily be formed. 

As far as I can tell, there is - as yet - no determining factor. Wave counters simply must tough it out and do their best with the technical indicators in this situation.

Yes, if this wave is just before the minute ((c)) wave of the Minor 5 wave, then it very well might form a triangle, but it is absolutely not obligated to.

As such at this stage it is exceptionally difficult to provide estimates of how far the wave might travel unless the wave is done with the single triangle, as per the diagram on the left at this location.

Have an excellent start to the evening.

TraderJoe

'Legal' Reminder

Here is a reminder of the only 'legal' Elliott Wave count we have been tracking for months and months, according to the 'rules' of the Elliott Wave Principle, outlined by Frost & Prechter. It is the Expanding Diagonal in 3-3-3-3-3 form. 

We again publish this count even as other sites are pursuing known unallowed counts. Several sites are counting a contracting diagonal down to wave 3 in the diagram below even though this violates the rules for the contracting diagonal because the center wave is the longest. They do this and even acknowledge they are breaking the rules, but they say this must be some kind of exception. And one such site now has the unmitigated gaul to ask you for $199 to train you in how to count Elliott Waves when they have called the wave structure incorrectly now three times to try to sell their bullish interpretation to be used to attract you to their hedge fund. We will break no such rules. We continue to sell you nothing. We just continue to ask you to learn to count by the rules.

For our part, we said in the Aug 30 post - viewable at this LINK - that the minute ((a)) wave of the fifth wave often comes down to very near the terminal of wave 3. And look at where the five minuet waves (i)-thru-(v) have taken the minute ((a)) wave down to! Bullseye! We showed you the weekly sentiment reading moments before the market's current upturn and not for several months before. Further, we said we would expect the Minor 5 wave to take more time than the Minor 3 wave, and it still might.

 

The next consideration is the minute ((b)) wave, up. This wave has already traveled into the area of the prior wave (iv) and that is all it is required to do. But the up wave can get more aggressive. We have seen some 'B' waves of the fifth wave that attempt to test the upper declining trend line. It doesn't have to, but if it does, just don't be surprised. The question mark by the ((b)) wave indicates we simply do not know the extent of or the shape of the ((b)) wave in advance. From here, the ((b)) wave could be a zigzag, a flat, a multiple zigzag or a triangle. All are acceptable in this wave 5 zigzag down.

Keep in mind that diagonals are still low-probability patterns. They must prove themselves in every detail. It remains to be seen if this one does. This is the second post this weekend, and if you have not yet, you may wish to read that one also.

Have an excellent rest of the weekend.

TraderJoe

Ignoring Cash ... You Get Equality in Time

As most of you know, I follow the ES futures rigorously - while some Elliott analysts only study cash, and in fact some Elliott analysts (Neely, specifically) have stated at one time or another "not" to follow futures due to erroneous charting results resulting from time premium decay or other phenomenon. We have showed the SPY cash chart at this LINK from the comments of the prior post. But, if we ignore the cash market for a moment, you can see that consideration of the futures shows a Fibonacci relationship in time as follows on the ES 2-Hr chart, below, where the time of b = time of a.

ES Futures - 2 Hr - Equality in Time

Also considered in this manner, the downward wave b is an exact 50% Fibonacci retrace from the high labeled as the a wave. The b wave also counts very well as just a triple-zigzag correction in a channel as corrective waves often form.

Further, when considered in this fashion, there are no degree violations in this count because although wave ((3)), up, is slightly longer in time than wave ((1)) up, it is a wave of the same degree, and its sub-waves are all smaller than the totality of wave ((1)).

There is by no-means (even with these relationships) an all-encompassing reason to lock-in on this count. IF an a-b-c results, it could just be the start of a double zigzag larger minute ((b)) wave, up. It is also possible that the count could be a/i and b/ii. Why is the chart not labeled this way? Well, it is very, very difficult to count cash in an impulsive fashion at the moment. And as of yet there is no evidence of a 1.618 wave upward. If a 1.618 wave results, we will gladly consider the second form of labeling. But not until then.

Further, if only three waves up results, we must then consider a return-trip to the lows to form a possible Flat minute ((b)) wave, up.

In case it is not clear, the primary message of this post is to 1) stay flexible, 2) consider all the options, and 3) consider the current locations of the upper and lower daily Bollinger Bands, particularly when those bands are traveling sideways. I know how all-too-easy it is to get stunned by an intraday reversal. And I know how all-too-easy it is to go ga-ga over momentum in one direction or another. These two emotions are to be avoided at all costs. If you can't curtail these emotions, and some others, then financial markets might not be for you. This is one of the reasons why we posted a wave-counting-stop at 10:19 yesterday in the comments. It is usually a place where trend-line analysis and channel analysis indicate that something is changing. The analyst's job is to find out what. And it is the trader's first job to protect one's account capital, rather than to chase after profit at every moment.

Have an excellent start to the weekend.

TraderJoe

Lower High, Lower Low Day

As the difficult wave counting continued, today the ES futures made a lower daily high, and lower daily low. This is shown on the ES daily futures chart, below.

There is not too much to report on here, except that after prices made the lower high, they made a beeline to fight a battle at the 18-day SMA. What did we do today?

What we did today

1. We showed an initial chart indicating there could be a lot of compression going into the open.
2. We said prices could either pop or drop with that amount of compression. There was a pop.
3. After the top did not go over the high of the prior daily bar, we started counting downward.
4. We counted a descending expanding diagonal 5-3-5-3-5 wave (these are usually leading).
5. As prices kept dropping lower, we further counted down enough waves for an impulse.
6. See the impulse chart with the diagonal at this LINK. (Note degrees to illustrate point only).
7. Early in day we suggested that if an upward trend line was broken, it could mean a triangle.
8. That upward trend line was broken, and it appears likely that we are in a triangle of some sort.

One of the triangles, the larger triangle, would date back to the beginning of October. A smaller triangle would date back to only four-days ago and would be of smaller degree. It is difficult to say which is in play at this point. There are justifications for both.

Have a good start to your evening.

TraderJoe

Dumpster Fire

As measured in the ES hourly futures, the up wave has been a dumpster fire of a wave count (as I suggested it probably would be). It has numerous downward overlaps, and a failure to go above the prior high yet. It still could. The best two options are these.

ES Futures - Hourly - Diagonal Failure Potential

The first option, above, is the diagonal failure. The weakness of this count is that is doesn't yet appear in the cash market. It could. Perhaps such a wave is still part of the prior wave (iv), downward. It could also be a triple zigzag minute ((b)) wave, up.

The second count, above, is the "Don't rush me - I'm a diagonal count" and allows for a longer fourth wave. However, in this second count the fourth wave can not become longer in price length than the second wave or it will invalidate (shown). This wave - if it doesn't invalidate first - would then still have a chance to become either an ending diagonal or even a leading diagonal. Or it could be a triple zigzag contracting wave for the minute ((b)) wave.

First, let's see if new highs are made this morning, or if there is wave invalidation. MACD has returned to the zero line. Let's see if find support there and turns up (indicating a fourth wave) or if it keeps on falling.

Have a good start to the morning.

TraderJoe

Fibonacci Confluences

Here is the ES hourly chart showing the recent movement off of the low. While nothing is certain, here are the applicable Fibonacci measurements on this time scale.

ES Futures - 1 Hr - Measurements

The prior post showed the first five-waves-up as a potential leading diagonal, and possibly an (a) wave. This was likely validated by higher highs in both the ES and SPY cash.

The common extensions for the expanded flat are shown as typically 1.618 x a or 2.618 x a measured from the b wave. Price is at that second level now and has just passed the 50% retracement of the potential (a) wave. Being beyond the 50% level means that an up wave of 1.272 or 1.618 times the (a) wave could be supported. If one of those two wave lengths occur, price would exceed the prior b wave high.

The Fibonacci confluences with the downward retracements are shown. The key question whether price will actually resume upward from this location. The measurements only indicate the odds are in favor of this happening. They make no promises.

Have an excellent rest of the weekend.

TraderJoe

Reversal

We said this morning in the early morning comments that the so-called 'Smart-Money' could easily take profits against the lower daily Bollinger Band (see this LINK). They did. Further, we counted an initial five-waves-up and then were treated to a very substandard running correction. It felt like another machine-driven rally, but that is beside the point. Further up waves also produced very substandard corrections. No correction approached 50 - 62%.

At the end of the day, we arrived at this count.

SPY Cash - 5 min - Potential Diagonal

The count can be a 5-3-5-3-5 Diagonal, and it may be a leading diagonal. Perhaps tomorrow will provide a decent retrace. It should, but it does not have to - so be on guard.

These waves could be an (a) wave, up, or they can be a (i) wave up. As you probably know by now, we think we could be in the minute ((b)) wave, up. This wave up can unfold as literally "any three wave", correction including a triangle.

We'll try to take it wave-by-wave but bear in mind that even for the best wave counters 'B' waves can be very testy.

Have a good start to the evening.

TraderJoe

Maybe Overnight, or Wed/Thu

The market as measured by the ES futures has been playing an interesting game of chicken with the prior daily low shown in purple on the chart. The SPY cash does already have a lower low; the ES futures, as per the hourly chart, below, does not. Perhaps the minute ((a)) wave will finish with a lower low in the overnight.

Or, with the PPI and CPI reports over the next two days, perhaps it will finish on one of those days and begin a minute ((b)) wave up.

Have a good start to your evening.

TraderJoe

Still in the Declining Parallel - 2

As a follow-on to Tuesday's post (Oct 04), there are now about 150 candles on the SPY (cash) 2-Hr chart, as below.

SPY (Cash) - 2 Hr - Wave (iv) in Parallel

There is no upward overlap to worry about. And since wave blue (ii) was likely a Flat wave, then wave blue (iv) could either be a sharp - which it is already - or a triangle. The triangle's purpose would be to take up more time in relationship to wave blue (iii).

The Elliott Wave Oscillator got to a bit higher than the +40% which is most typical as seen in daily waves. IF a triangle forms, the ultimate reading in the EWO would be at wave e of the triangle, and that reading would likely be much lower. The EWO is currently back below the zero line.

Have a good start to the evening and the weekend.

TraderJoe

Reminder of Intraday Wave Counting Screen

Although I don't publish it every day, here is a reminder of the intraday wave-counting-screen. It is always the ES futures 30-min chart. And while I don't publish the chart every day, I generate it for my own wave-counting-purposes every day.

Reminder that it includes: 1) 18-period SMA, red line "the line in the sand", 2) 18-period Bollinger Bands with +/- 2STD (grey bands), 3) the 100-period SMA (green), 4) the daily pivot points - classic calculation (for reference only) shown as orange and violet bars, 5) the Bill Willams fractals (2 period) shown as green and red up & down arrows.

Plotted in the indicator pane is the standard 14,3 slow stochastic (30-min intraday). 

The chart is interpreted using the same rules/guidelines as in Ira Epstein's daily chart. Notice in last night's down move after five-six consecutive closes below the lower band, prices moved to the inside of the band.

Price bias is interpreted as positive if is above the intraday 18-per SMA, and negative below it (use in conjunction with the daily). The slow stochastic goes from embedded, over-bought, to over-sold and embedded using Ira's guidelines.

Those of you who have figured out Ira's "swing line" indicator can apply it as well. I do it in my head.

As of the open of trading this morning, it is clear there is a "battle going on" at the conjunction of the 18-period and 100-period SMA's, and it should be viewed that way.

Intraday, traders tend to get the most bearish when price is riding the lower band and makes several consecutive closes outside the band. Traders tend to get the most bullish when price is riding the upper band and makes several consecutive closes outside the band. This might be used as a contrary sentiment indication (again when used with the daily).

Ira advises never buying over an upper band or selling below a lower band on the daily and weekly charts. A similar filter can be used here when looking to identify the wave count. When consistently above the upper band or below the lower band, it might be a place where a significant wave terminal will occur. And inside bars might occur to consolidate or reverse the wave count and provide a better place where traders might enter/exit.

The Bill Williams fractals can be used as breakout/breakdown indicators.

Have an excellent start to the day.

TraderJoe

Still in the Declining Parallel

Using the SPY 2-Hr chart, there are now 137 candles on the chart, well within the 120 - 160 candle range of The Eight-Fold-Path Method for Counting an Impulse. Price is still inside of the parallel.

Today, the 38.2% retrace was hit. Price can travel a bit higher, but not too much higher for a (iv)th wave.

Have a good start to the evening,

TraderJoe

Bullish Sentiment Crashes

As many long-time followers of this blog know, many years ago - unsatisfied with readily available sentiment indicators - I developed my own and began to track it weekly. As the chart below, shows my proprietary Bullish Sentiment Index has now dropped to the lowest level since the pandemic low.

Although I follow this measure weekly, there is a lot of unimportant data as the market has been making new lows. Therefore, I have been reticent to publish anything about sentiment until it began showing characteristics more in tune with the nature of a bear market. It is now doing that. There are a few things to note.

1. It is Mom & Pop that have been correct on the drop. As measured by the AAII Index component of this overall sentiment ranking, they have been the most cautious sentiment group for many, many months now.
2. As of just the last three weeks, it is now the professionals and the newsletter writers that have been throwing in the towel.
3. The boat is becoming more loaded on one side. When situations like this occur, it often signifies that a turn is due. Not here, but due.

The CNN Fear & Greed Index is also buried in "Extreme Fear" at a level of 15! This, too, is a short-term warning sign.

Somewhat still indicating the trend lower can continue, the VIX is not yet at extreme high readings and the CBOE daily put-call ratio is not even close to residing in the Zone of Despair (above the 1.00 level) as compared to the Zone of Speculation (below the 0.50 level). The last reading was 0.77, and the 1.00 level was only hit once in the last several days.

Remember, one makes or loses money on price & price alone - not sentiment. Therefore, the purpose of this post is just to ask blog readers to be on guard to be especially flexible at these levels of sentiment. A nasty turn can come at nearly any time now. 

This is the second post this weekend. The first one may still be the more important. Have an excellent rest of the weekend.

TraderJoe