BFW

The simplest way to count the hourly SPY chart is with a truncation (*) wave up just short of the former all-time-high, followed by a Bullish Falling Wedge (BFW) lower, followed by a channel count upward in the following manner.

The upward (c) wave does not have to be done, yet. It might spill over into Monday/Tuesday to try to reach 62% or greater. But, at present, it is in excess of a 50% retrace on the downward wave which is acceptable. 

First waves down tend to be real stinkers, but the alternation in this one is a long and deep wave (ii) flat, alternating with a short and shallow wave (iv) zigzag.

If the up count since the low is going to bear-flag, it should end in this area or else it would have to form a double-zigzag or a Flat to take more time. Overall, I am still looking for five, clear minute-degree waves down to make the Minor A wave.

In any event, have a good start to the evening and the weekend.

TraderJoe

Outside Day Up

Just a chart today with the wave label degrees continued from yesterday. We don't know wave v is over yet and it could become longer than iii.

Wave v can still be whippy, so care, caution and flexibility still needed. The outside day up is valid unless the low is exceeded in the next two trading sessions.

Have an excellent start to the evening,

TraderJoe

Baked ?

For the last several posts I cited a likely downward mess - which we were treated to. I said there was a good possibility of making a diagonal. I think we did. As the chart below shows, there is a way to count a 5-3-5-3-5 expanding diagonal in the ES 4-Hr futures - done and complete.

This count would have the form (v) > (iii) > (i), and (iv) > (ii) with wave (iv) overlapping wave (i) and not traveling beyond the end of (ii). The main reasons for the count are the size of wave (v), and the precision by which wave (iv) was longer than (ii) but did not exceed it.

I have dropped the degree one degree for the time being and see the whole wave structure as a minute ⓘ wave. Alternatively, the whole structure is the Minor A wave, also done and complete - depending on which degree it turns out to be. The downward sequences are "5"'s and not "3"'s, and the upward minuet numbered structures, the parenthesis ( ) structures, are zigzags as they are required to be. Wave ii is a flat - which is acceptable in the impulse portion. The only element which raises question on the count is that (iii) is shorter in time than (i), while it is longer in price. But then, (v) is much longer in time again which seems a reasonable trade-off.

The trend lines are nearly perfect, and when I look at the whole structure on the daily chart, it just looks a little small to be the whole Minor A wave. I could be wrong about that. But no one knows what is coming tomorrow - not me, not you - so we'll see how the waves do.

There is nothing that forces the adoption of this count yet. There is still a way to consider a truncation high and wave (iii) at the bottom, but there isn't a great Fibonacci ratio in that count either. So, this fits best at the time, though I do reserve the option to see if it impulses by making a new divergent low first.

Have an excellent start to the evening,

TraderJoe

Big Picture Reminder

The ES 2-weekly chart is below with a reminder of what can be the big picture: we may be forming a 3-3-3-3-3 Contracting Ending Diagonal at Primary Degree.

ES Futures - 2 WK Close - Potential Contracting Diagonal at Primary Degree

Note that with 106 2-weekly candles on this chart, the Elliott Wave Oscillator diverges where it should. It is often the case that wave (4) will try to come down to undercut the rising trend line to set traders in the wrong direction before the turn for Intermediate (5), higher. In the process the EWO might come back down to the region of +10% to -40% of wave (3).

This count sets a specific invalidation in that price should not go over the current all time high before overlap with wave Intermediate (1) occurs. The overlap is expected in this case. Further, the lengths of the wave structure should be (5) < (3) < (1), (4) < (2) with (4) overlapping (1) without traveling below the low of wave (2).

Why? Because often a diagonal pattern signals that a market that has gone too far, too fast, and is near the end of a longer-term wave. And Primary ⑤ - if it forms properly - would be the end of a Cycle V wave.

Have an excellent rest of the weekend,

TraderJoe

Into the Real Mess - 7

In keeping with the theme of this wave being a real mess, I felt the best way to deal with it going into the weekend was to greatly oversimplify the count as the wave internals can be counted numerous ways.

ES Futures - Daily Close - 'Possible' Parallel

Bottom line: we are looking for the Minor A wave down, composed of five minute-degree waves. But, as this point - whether an impulse count or a diagonal count, there is insufficient retrace in the ES futures to allow us to place a fourth wave at this time. We do not 'know' the third minute wave is over, so it could go lower.

The ES price got down below the lower daily Bollinger Band and pierced the 100-day SMA in the overnight news regarding Israel's actions. Then, during the cash session today, price weaved around on both sides of that average, closing just slightly below it, and below the lower daily Bollinger Band for the sixth consecutive day.

We note that with 14-daily candles the RSI is not solidly in over-sold territory yet. "A" waves can be pretty atrocious so caution and flexibility are warranted until there are some clearer wave patterns and retraces.

Have an excellent rest of the evening and start of the weekend.

TraderJoe

Into the Real Mess - 6

Today marks the 5th consecutive day that the ES June futures have closed below the lower daily Bollinger Band as per the chart below. The close today was 5,049.00 compared to the lower band at 5,050.67 and this drops the odds to 1-to-3 percent that the next close will be below the band. In Ira's public videos he claims the most he has ever seen is seven-in-a-row.

However, of interest, the ordinary calculation of the daily slow stochastic has now attained embedded status on the downside.

Also of note, in any one of a couple of fashions, there are enough waves down to claim the Minor A wave has been made. And, yes, price could still attain the 100-day SMA and not ruin the count.

Another item is for certain. This decline since 01 April is already longer in price & time than the December 2023/January 2024 decline, and therefore it is of a higher degree. Remember we labeled that decline as minute ⓑ, and so labeling this decline as Minor A agrees that this degree label is larger than that one.

One also notes that the 18-day SMA is pointed downward and will likely act as resistance on the way up. With the embedded status, it is possible that Smart Money will continue to sell rallies until the embedded status is lost (and the %K red line of the daily slow stochastic crosses back up over the 21 level).

As we stated in the comments for the prior post, it is possible we completed the Minor A wave and are now into a messy B wave as a flat or combination. We'll see how tomorrow proceeds.

Have an excellent rest of the evening,

TraderJoe

Into the Real Mess - 5

We were expecting a messy wave downward. We're getting one. So far, in the ES futures, we may be getting a diagonal - as previously expressed. By far, the count that 1) is most proportional, 2) flows the best, and 3) does not involve degree violations is this expanding diagonal which a couple of us are counting. As well, this count follows the Elliott Wave Oscillator profile at the moment and can be clearly seen in the closing only chart below.

There are other ways to see the Minor A wave at today's low, but it does not quite look as proportional as this count. So, I'll hang on to that alternate for the time-being.

The above chart does provide a clean invalidation and it also suggests quite a wild snap-back from the current price lows. That is in agreement with today being the fourth consecutive close of price below the lower daily Bollinger Band, and the daily slow stochastic still in over-sold territory. And A waves can often be diagonals, particularly in corrections. So, we have to go with what looks best at present.

We'll keep you updated as best we can. The wave structures are very testy.

Have an excellent start to the evening,

TraderJoe

Into the Real Mess - 4

Just a word of caution for tomorrow. Today marked the third consecutive day of the ES futures closing below the lower daily Bollinger Band with the daily slow stochastic in over-sold territory as per the ES daily chart, below.

This means the odds of another close below the band is only about 2 - 5%. Some of the Smart Money is likely taking profits at the lower band. Yes, price could go down to fill the gap or hit the 100-day SMA. But, even as today showed (because of the profit-taking) whippy behavior could immediately follow. Price could certainly close back inside the band at any time.

From an Elliott-Wave perspective we are counting the Minor A wave down. We can see one way it could have completed, and another way for it to continue. See the comments from the prior post if you have the interest. So, we are patient until the length of price movement becomes more convincing.

Have an excellent start to the evening.

TraderJoe

Into the Real Mess - 3

A lot of people are expecting a wave three to "cut-loose" to the downside now (when some - not necessarily the same ones - were screaming for higher prices before). On the way up. I just urged caution, patience and flexibility, and on the way down - the same. Today ES futures prices DID complete the contracting diagonal from yesterday, and - so far - prices have not invalidated either lower or higher. So, let's give some credit where it was due. We saw whippy behavior, called it, and got it.

But what IF prices do cut loose tomorrow - say with an overnight gap and follow-through lower. This could happen. I am agnostic. But how would one count it? I can see two ways - which still makes this down wave part of the real mess.  Here is the first way: The Truncated Top.

In cash SPY, a contracting diagonal count does not work as well as it does in futures. This suggests the above option of a truncated top, followed by a minute-degree wave ⓘ, lower. Elliott himself, Prechter following him, and Neely following him all suggested major turns might see a truncation at the top. Then, following minute ⓘ, there would be a minuet (w), (x) and (y) wave up to the second minute wave, circle-ii, where minuet (y) is a failure wave. It is very important to pay attention to degree labels here, and not think every down wave is a "1" wave when it goes nowhere. 

The problem with the above scenario is that minuet (x) and minuet (i) - which are supposed to be smaller degree waves than minute ⓘ are actually longer in time than minute ⓘ is with the truncated top. This is not supposed to happen. This is why degree labels are important.

So, if this solution doesn't work, is there one that does? Well, first keep in mind we do have the valid contracting diagonal in the ES futures still on the table, which meets all guidelines in both price & time. And we simply do not know what the overnight and morning will bring yet. But here I think is the better alternate for cash.

As several of us discussed earlier, it is possible to get an expanding diagonal where wave minute-iii, circle-iii, is not completed yet. Notice the following attributes of this count:

1. The prior wave ends at the prior all-time high, where Minor C, and Intermediate (3) is shown. Then there are "three-wave" sequences downward as zigzags.
2. Following minute ⓘ, down, the minuet (a) wave diagonal, down, would be shorter in price & time than all of the minute ⓘ wave. Minuet (a) is supposed to be a smaller degree wave than minute ⓘ, and here it is in both price and time.
3. Next, notice the minuet (b) wave up. It is shorter than all of minute-ii, circle-ii in price and time. Fantastic, it follows degree definitions, too!
4. Then, notice sub-minuette i, down. It is shown looking slightly longer than (a), down, right? But that would violate degree label definitions, wouldn't it? YES! That's because the i portion of that wave actually ended at 512.00, and everything else after it in the correction is an expanded flat for sub-minuette ii! So, then degree definitions are not violated.
5. And so-on goes the minute-iii, circle-iii, wave until it maybe reaches the 1.618 Fibonacci extension - the level of which is shown on the chart.

Folks I simply can not do this every night, wave after wave, adjusting charts which do not consider wave degrees and Fibonacci ratios, so I simply will not. There are too many errors that others can make for me to suggest fixes. I have clearly outlined the problems with degree labeling that most ignore. (Refer to Neely interview if you haven't already at this LINK: Avoid the Top Five Mistakes Counting Elliott Waves.)

I am looking for people who put as much thought into a chart as went into the one above.  Notice "one thing" about the chart immediately above: it gives a clear & specific invalidation level to the count. If your charts do not do that because you don't consider Fibonacci levels or degree definitions then it could seriously hurt your trading also: because a bad wave-count can lead to a bad trade. And the second chart is just an alternate, too. It does not have to be the real deal. But it uses sound rationale and follows the rules, guidelines & degree definitions. So, if it busts it would likely not be because of something we did, but more likely because the Smart Money saw something we did not have access to.

Anyway, have an excellent rest of the evening,

TraderJoe

Into the Real Mess - 2

Due to overlaps, we have been suggesting that the wave down off the recent all-time high might be in the form of a diagonal in the ES futures. We showed one view of an expanding diagonal but the criticism of it (rightly so) is that the third wave would be shorter in time than the first - which runs afoul of a guideline for an expanding diagonal but not a rule. So, for the sake of following the rules and guidelines in the best spirit possible, a couple of us also suggested the contracting variety of diagonal, as below, on the ES 4-hour chart.

In this case - as the Fibonacci ruler on the left shows - wave (iii) would be less in price that wave (i). It is also less in time which follows the guideline for contracting diagonal. 

Now the question is whether there will be another whippy zigzag wave (iv) that is less in price than wave (ii). That means wave (iv) has 5,249 as a practical maximum before invalidating. Again, wave (iv) must be in the zigzag class of waves and may not be a flat for a diagonal to form properly. If wave (iv) remains valid in price, then the next question would be does it follow the contracting diagonal guideline for being shorter in time, too? If it does, then it is on to wave (v) which must be shorter in price than wave (iii) and might be shorter in time than wave (iii), too.

Again, the personality of the diagonal is that the bull forces are not convinced that the prior rally is done yet, and they are committing large amounts of capital but with the effect of not making higher highs. The swing-line trend is lower highs and lower lows, and the bias is lower as long as price remains below the 18-day SMA.

Again, the five minuet down waves (i) to (v) likely compose the minute ⓘ wave of the Minor A wave of the decline within Intermediate wave (4), if the waves finish properly.

Have an excellent rest of the weekend.

TraderJoe

Into the Real Mess

With the prior post (Get Ready for a Real Mess at this LINK) I have tried everything possible to prepare you for the current whippy market behavior. I have written before about The Fourth Wave Conundrum that this is the time when "everyone wants to know what the count is because they are likely getting whipped badly". I have also tried to teach readers about diagonal structure. So, let me preface that I do not know if the count below is correct. But I do know that the count provides a precise invalidation point. This is the chart of the ES 4-Hr futures.

The count would be of the 5-3-5-3-5 Diagonal. It is a speculative count. But the count was taken because wave (iii) is longer than wave (i) in price, and wave (iv) is longer in price and time than wave (ii). This means a wave (v) should become longer than wave (iii).

Notice than within wave (ii), wave 'a' is also an expanding diagonal. And now, in wave (iv), we may have a zigzag within a channel shown (dotted parallel). If that price pattern holds, then it is possible that the fifth wave will form properly.

But the second reason the count is taken is that it allows us to drop the previously listed "wave-counting-stop" from the prior all-time high to the new location shown. This is the only precise wave-counting-stop I see because wave (iv) is not allowed over the high of wave (ii).

The diagonal personality is that the bullish market participants are simply not convinced the game is up, and they are fighting back tooth-and-nail. Hence, the "battle at the 18-day SMA", the "line in the sand".

I cautioned against getting gung-ho on this wave. I'm sure some are listening, but not all. The whipping is brutal. But, if a minute ⓘ wave does form properly, then if a retrace holds below the high, perhaps five minute-degree waves will form to make the Minor A wave down. It could take a while, and some might not have the patience for it.

I encourage you to take this time to learn the wave principle in full detail, rather than go on YouTube and learn it incorrectly, or ask people to tell you what their counts are. You simply will not learn until you struggle yourself with counts on markets which I do not show. But, if you do, then - after a while - the light bulb might just come on.

Again, nothing says the above count will come to pass. But it's the best I can do in my struggle to understand the current market.

Have an excellent start to your evening,

TraderJoe

Battle at the 18-day SMA

In line with our theme for this wave of getting ready for a real mess, ES price action today was eclipsed by, well, The Eclipse. For those who could see totality, it was spectacular and looked like the "real deal". For those who couldn't, they will have to wonder for another twenty years to get the chance to satisfy their curiosity (2044). For those who watched price action, it was whippy, back-and-forth algo trade on both sides of the 18-day moving average, the "line in the sand", as the daily chart of the ES futures shows, below.

Another way to describe price action today, however, is that it was the second inside day following the double-close key reversal two days ago. By not closing above the high of that bar today, a continuation lower at least has even odds - a trap for the bears was not sprung today, but there is no guarantee.

Price still has not touched the lower daily band and over the last two days gave the impression of coiling and coiling and coiling. So, a breakout in either direction might last a bit. Until we see such, it is likely to be sloppy - even though downside counts remain possible.

Have a good start to the evening,

TraderJoe

Get Ready for a Real Mess

Based on the count in the DJIA cash (and near contract futures), the count to the Minor C wave and the Intermediate (3) wave is likely over. The minute second wave trend line, from the extended first wave, was broken and resulted in a shorter third wave, triangle fourth wave and even shorter follow-through fifth wave, as per the daily chart of the futures, below.

But as simple as the next down wave might seem, it could be a real mess - especially to trade. Remember, if we are making a Primary ⑤ contracting ending diagonal, then Intermediate (4) must turn out to be an Intermediate degree zigzag, lower. That means that Minor wave C would likely end lower than Minor wave A. And fourth waves of any type can be difficult at the very least. But the chart below expresses just some of the many complications that can occur in this wave. So, let's get into it.

Starting on the left, the Minor A wave down - which must occur in five waves - can either be a rather standard impulse in total - or it can be a leading diagonal in total, either contracting or expanding. But worse, being a Minor A wave, it could start with a minute ⓘ wave as a diagonal, and then convert to an impulse for the second, third, fourth and fifth waves of Minor A.  So far, in the ES, the pattern is very overlapping and might be a diagonal wave, possibly expanding, but this could still only be the minute ⓘ wave of Minor A. 

If that isn't messy enough for the Minor A wave, it could be the Minor B wave that really throws some twists and turns into the picture because a B wave can be "any three". To make the point more graphically we have shown many of the 'most common' variations of the B wave, above. For example, in the upper left pane, the B wave could be a zigzag or a multiple zigzag. Even if it is a simple zigzag, either of its motive waves - but not both - could be an impulse or diagonal. But there is no reason the zigzag couldn't double or triple, as well.

Next, in the upper right panel the Minor B wave could also be a Flat. This is the most difficult start-stop pattern as it will throw off numerous traps. Yet, further, the Flat family can include double-combination waves, and/or less-commonly triple combos.

Third, the lower left panel shows one variation of contracting triangle, the "running triangle". But the wave could also drive one crazy as either a regular or barrier triangle, as well. Each would be a contracting triangle, and the barrier version might also be confused with a Flat wave - as above.

Fourth, in the lower right panel we show the possibility for the expanding triangle, as well, though this is less common.

Fibonacci Fifth, one must keep in the mind the possibility that the Minor C wave could be an impulse or diagonal as well - to alternate with the form of the Minor A wave - and that either the last leg in such a diagonal might truncate slightly or that all of the Minor C wave truncates ever so slightly.

In sum, this wave could be a feast for the algos. So, if you are personally getting excited about huge, and large waves down, my recommendation is do not get overly worked up. As you saw on Friday, retraces can be very, very deep, and difficult to call. And the down waves can be halting start-stop affairs which test the patience in the first place.

Remember, in the contracting diagonal Primary ⑤ count, all that is required to happen is that the 4800 level, the high of Intermediate wave (1) needs to be overlapped in zigzag form. That is just not all that far, lower. And, yes, price can go considerably further down, but one needs to be aware of how compressed the pattern 'could' turn out to be.

Now, if you are looking for broad, swift and dynamic waves lower, then you are looking for the likelihood that this Intermediate wave (3) is actually Intermediate wave (B), up, and an Intermediate wave (C) down is to follow. That is possible as the alternate. I am taking the most conservative route here in a correction. But there is absolutely no sign of such a dynamic wave down based on the start of this wave down in the ES. One might argue that the Dow is falling faster. So be it. Still, the only sure way to call the difference will be if the Intermediate (4) wave invalidates at some point. We are nowhere close to that, yet.

Wave-counters should place a "wave-counting-stop" at the prior all time high as this would indicate problems with the diagonal count. We will lower this stop periodically while counting the Intermediate (4) wave, lower. And, when the Minor A wave is done, we may have to raise such a stop in order to allow for deeply retracing Minor B waves. They could easily go to 78 - 80% of Minor A.

It is my hope this post calms you down by showing you the complexities that can be faced. If you are calm by nature and treat trading more like just a fun business, you have more of the right attitude for success. For newer traders, this wave might provide really good opportunities to forego pressing the buy or sell button and learn the intricacies of counting waves instead - while the algos drive others crazy. Or turn to other assets to trade temporarily, if this fits your situation.

Have an excellent rest of the weekend,

TraderJoe

Double-Close Key Reversal and More

ES prices traded higher overnight, then - depending on the index (like the DJIA) - they either immediately reversed from the open, or in the case of SPY / ES, made one more new high before reversing. Based on ES futures, prices then traded down through the prior two day's closes and look to close lower as of the cash close. The reversal, closing below two prior daily closes is known as a "double-close key reversal". Sounds ominous. The ES daily chart is below.

The market (likely) was emptying out in front of the Payroll Report tomorrow where some additional volatility could occur.

The other item of note is that the "swing line" indicator signaled a down trend the way that Ira Epstein recommends this indicator be used. To do this, there must be a lower low below a lower high, but - in addition - there must be a close below the 18-day SMA. Assuming the futures market closes somewhere in this area that will likely happen as well.

If so, then the daily bias switches to "lower" for the first time in a very long time. I personally would like to see a tag of the lower daily Bollinger Band, and the undercut of the 5,167 level so as to trade below the low of the fourth wave triangle we counted out in real time. That would increase the confidence that the minute ⓒ wave of the Minor Y wave of the Intermediate wave (3) is completed.

Have an excellent start to the evening,

TraderJoe

ES Local Count

See ES 1 Hr chart below. Futures were much higher overnight on the "first-of-the-month money". But none of this shows up in the cash market.

With the MACD on a peak, and cash not open, it is wise to see what cash does before drawing a conclusion.

Have a good start to the day.

TraderJoe

Don't Argue - GOLD

Sometimes the market looks you in the face and says, "Don't Argue". Such it is with the Elliott Wave count in monthly GOLD futures, below.

From the Fibonacci ratio of (3) = 2.618 x (1), to the exact 50% retrace of wave (4) on wave (3); from the peak of the RSI on wave (3), to the lack of overlap between (4) and (1), to the current monthly divergence of the RSI on wave (5). The market says, "Don't argue". But in addition, we note there IS a kind of alternation in this count. Wave (2) is a "Running Flat" - in which case "running waves" argue for "Great Strength" to follow the wave. There was great strength following that wave (2); a 2.618 wave (3). And, to alternate, wave (4) was a "Regular Flat" - not as much alternation as one would like, but some. From the Fibonacci ruler on the left, price has now touched 1.382 x wave ③ which is a common target for either "B" waves or fifth waves.

Next, when we look at wave (5), we see it did make a higher high. And the "breakout" now has everyone extolling GOLD's virtues. Now? Not in 2016 - a Fibonacci eight years ago - when GOLD bottomed??!!

OK. So, let's do a real time experiment. IF we are in a wave (5), then the three most likely Fibonacci ratios for this wave are a, (5) = (1), b, (5) = 0.618 x [net (1)-to-(3)], and c, (5) = (3). So now let's draw a blank chart of GOLD and see what we get when we add a Fibonacci ruler.

First, the reader should verify that price is already past (5) = (1). Second, the chart above shows the relationship of 0.618 x net [(1)-to-(3)] comes in at 2,263. Meanwhile the price high last week was 2,257. Hmm. That is awfully close. OK. 

The problem for alert readers is this. Although there 'may be' an ending diagonal in formation, there is no proof of a turn yet.  So let's look at a weekly chart in Gold. And now the problem should become a bit more clear.

One could make the case that since wave 3 is at least 0.618 x 1, the diagonal may be ending. Granted. But also, we see that wave 4 was not a clear zigzag. It may have truncated being an omen of strength. OK. But neither does 3 exceed the length of 1, yet. So, keep in mind the measurement - which readers should perform - that, if 5 in the black count exceeds 2,325 then the fifth wave may not be forming a diagonal.

On a fundamental note, we note that GOLD's price has been rising in the face of FED's interest rate hikes. Is that the way it supposed to work? Paying no dividends, GOLD carries storage charges and costs of ownership. The higher interest rates are supposed to dissuade one from owning Gold. Any number of people are now saying that Gold will skyrocket when the FED begins to lower interest rates. Really? Doesn't that fly in the face of what just happened? Word has it that this rise in GOLD has been on the backs of (other) Central Banks themselves buying unprecedented amounts of Gold in order to fight off sanctions from the U.S. and other countries if things should begin to deteriorate. Charts do show that CB's have been heavy purchasers of Gold. Well, that's the story, anyway.

In any case, the patterns are intriguing but one should not argue with the measurements.

Have an excellent rest of the day, and the long weekend.

TraderJoe

Computer Geniuses

Today was a whippy day on the SPY/SPX/ES equity markets. SPY did wind up going over the prior high. ES did not yet. We showed ways it could. Market participants are expecting the PCE report out tomorrow with the markets closed. Below is a 1-minute chart of just part of today's movements on SPY.

Because there were some indications we were possibly in a fourth wave, FLAT wave structure could not be ruled out so - while I was fully prepared for an end of day sell-off - the chart above shows what the computer geniuses did in the last one minute of cash trading today.

One has to laugh. And the purpose is? Yes, there remains a way to count a top. And as the comments for the prior post show, there is also a way we might be in diagonal fifth wave. The structure is unclear so flexibility, patience, calmness, and a wry smile are the tools at hand.

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

TraderJoe

Strains Credulity

Yesterday's post said further up movement is possible, but it would strain the "right look" for a channel count. Today's upward movement progressed far enough to suggest a fifth wave in progress in a widening wedge rather than in a channel on the four-hour chart.

There's no overlap to call a diagonal. And there is no higher high, yet. There doesn't need to be, but there easily could be. There would not be a problem with a ⑤ = ① wave. The bottom line is that there is a new ②-to-④ trend line, and a downward trend would not start until/unless that trend line is broken in less time than the ⑤th wave takes to form. There needs to be a wave of both speed and power.

Remember, since there is no trading on Friday, tomorrow is the last trading day of the month. Word has it that some of today's up movement was due to quarterly rebalancing.

Have a good start to the evening,

TraderJoe

A Top is 'Possible'

A countable top is 'possible' based on the thrust of out a triangle. Further continuation upward is possible but strains the 'right look' of a channel wave upward - as we showed yesterday. Whether a top is here or not, caution, patience and flexibility are the by-words as most people know the market has not had a substantial correction yet.

SPX Cash Index - Hourly - Possible Thrust from Triangle

Below, the daily chart of ES futures closes is wedging and has broken the line of lows several times. This indicates waning momentum. However, an acceptable length for Intermediate (3) has been reached.

ES Futures - Daily Close - Narrowing Wedge

Further, the daily RSI has quadruple negative divergence. So, it bears watching that lower trend line again. Here's wishing you all the best because if the fourth wave Intermediate (4) starts downward, it is likely to be a very messy affair. There may well be late buyers at the 20-period SMA or at the 50 period SMA - these would like be people who do not know of or just want to ignore possible diagonal structure. (In other words, they might think the down wave is a second wave.)

In any event, comments for this blog are currently on moderation. Because of continued harassment, only valid EW comments will be published. There might be a delay in publication, or they might not be published, at all. I'll decide when to release moderation as I continue to decide whether to report the harassing individual.

Have an excellent start to the evening,

TraderJoe

Nothing Has Invalidated - 2

The ES 4-Hr futures tried all day to make the 38.2% retracement level of a third wave, as below. As of the cash close they had not yet as the Fibonacci ruler, below, shows.

Although nothing has invalidated, the count remains situational until there are waves long enough to make a difference. As far as I can tell, any price movement below ② or (e) would greatly slant the odds to the downside.

Have an excellent start to the evening,

TraderJoe

Nothing Has Invalidated

It is usually price length that will actually invalidate a count. Thus far, nothing has invalidated the price lengths, upward. The ES/SPX hourly triangle count we were working may have played out in this fashion. As you can see - even yet - the typical technical target for the triangle pattern still isn't achieved. That typical technical target for a contracting triangle is the widest width of the triangle added to the breakout point.  It comes into play around 5,300 or before.

Even though the above count may be playing out well, below is a very reasonable alternate which has a similar end objective in mind. It considers that the b wave structure, above, is actually a five-wave-sequence as below, re-labeled as iii.

That leaves wave iv as a slightly truncated flat, with an impulse following. It is very hard for me to tell the difference between these two counts, although the triangle is slightly preferred because the timing was exceptionally close to accommodate the FOMC meeting results.

But, from everything I can see since Thursday, nothing in this index/futures count has had a length invalidation yet.

Have an excellent rest of the weekend.

TraderJoe

Still on the Table - 2

Today we made c above a within Ⓓ. It could go further. Tomorrow is the FOMC result and Chair Powell's press conference.

The invalidation for wave Ⓔ is shown.

Have an excellent start to the evening,

TraderJoe

Still on the Table

In the ES (a little more likely than the NQ) the potential triangle we have showed for a few days now is still on the table. The ES 1-Hr chart is below in line fashion to make it a bit easier on those eyeballs.

The waves are getting "stupid silly". By Fibonacci ratio, Friday may have been c = a downward to a larger Ⓒ wave, with the diagonal we showed at the outset on the 11th as a leading diagonal and only a very minor truncation in the c wave. Today is possibly an a wave, up, and a b wave down.

Remember, if the triangle invalidates, then it is likely the inverse - some kind of 1-2 down. But, for now, there is no evidence of that.

Have an excellent rest of the evening,

TraderJoe

Weekend Video - ES, NQ & NDX

Here's a video exploring some simple, current Fibonacci ratios in the March contracts that just went off the board. Feel free to full-screen the video using the icon in the lower right for the best result.

If you have any questions or comments, please leave them below the video.

Have an excellent rest of the weekend.

TraderJoe

Not Easy

I have written often about what I called "The Fourth Wave Conundrum". That is the fact that there are approximately 13 different valid Elliott Wave patterns by which fourth & fifth waves can form starting with an initial three-waves-down. So, your odds of calling such a pattern by random chance are 1:13 or roughly 7 - 8%. Those are not great odds. Last night, the ES 2-Hr futures did not go over the prior high. That made life a little worse as it didn't rule out anything. And, this morning, price went down under what I previously referred to as the "Center Line" of a potential triangle. Here is the ES 2-Hr chart showing the center-line cross.

By crossing back under the center line, there is a potentially valid triangle forming - shown in green. If it does, so be it. It might be the last pattern before a fifth wave upward. But there are two things not to like about this triangle. First, the Ⓔ wave is forming nowhere near the apex of a triangle. Second, it currently looks somewhat impulsive.

Now, triangles can be elusive things and can get more complicated, so we must be calm and patient. But I also want to note that literally by the skin-of-its-teeth, the count can be the inverse of the triangle which is a diagonal down and a deep retrace shown as ①, ②. Personally, I'm not married to either count. A true knowledge of the odds simply won't let me be. 

The one thing that can be said, objectively, is that a contracting triangle invalidates below the Ⓐ wave.

Finally, it must be said that if prices go over the prior high again - which is certainly possible - then one cannot rule out an upwardly pointing diagonal - as the note in blue says - either. But we are not there, yet, at present. So, keep an open mind and let's see how this goes.

Have an excellent rest of the day,

TraderJoe

Still Waiting - 2

Below is the ES 1-Hr chart. We previously indicated that we were looking for a retrace wave that did not go over the top. We are still waiting.

We also said we might have made an hourly contracting diagonal downward. If that is so, the retrace could be quite deep. The CPI report is tomorrow.

Have a good start to the evening.

TraderJoe

With Roll

Here are the current measurements of the ES continuous contract, even including the level of the current contract roll over. Y = W to within 5 points.

The blue line at 5,600 at the top of the chart would be (3) = 0.786 x (1) where we think the proportions of the contracting diagonal would start to lose their 'right look'. Price is not close, yet. So far, so good.

Friday's daily candle on the roll-over contract was a "spinning top" candle. As with all potential candle formations, a substantial closing lower, in this case, candle would be needed as confirmation.

Sentiment levels have gotten even more bullish (contrary indicator) as the AAII Sentiment level crosses the 51% level.

Have an excellent start to the weekend,

TraderJoe

Another Horror-Story of a Contract Roll

Below is a daily side-by-side comparison of the roll-over ES futures contract versus the current month only. It's another horror-story of a contract roll-over with fully 60+ points premium in the new contract versus just the current month contract.

The red arrows show the opening price for the next day. Regardless of the Elliott-Wave count, this is a bonkers situation which really needs investigation as it is largely unexplained and getting worse as the months progress. The prior roll-over on this platform was in excess of 55+ points. A typical roll-over in prior years was 12 - 15 points.

Have a good start to the evening,

TraderJoe

Still Waiting

The ES hourly futures are shown below in the chart since the most recent high. The cash market says only three-waves-down. So, for now, that is the count. We are still waiting for a wave in which price retraces but does not go over the prior high. There is currently a 62% retrace, and a lower low bar after that.

ES Futures - Hourly - Retrace

The upward count 'can be' complete. But the downward count - if it is three waves - might only be a diagonal of some type. A further upward count might also be a diagonal, but it might also be possible to form a triangle here. So, we look for clues. A lower low today than yesterday would tend to rule out further upward movement.

FOMC Chair Powell is expected to speak before Congress at around 10 AM ET today and again tomorrow. Let's see how things go. 

Have an excellent start to the day.

TraderJoe

One Chart - Another Detail

On the ES hourly chart, we are clearly in a smaller degree channel, with five-waves countable or nearly just.

Price is starting to get some overlaps which will become difficult to count. Because price went virtually nowhere in the overnight, perhaps the real time market will make a triangle or a diagonal to end the wave. It doesn't have to. It could just 'fail' in a fifth-of-a-fifth which would not be a failure to make its overall wave count.

Still, since full-on reversals are more common on Tuesdays than on Mondays, we need to let this thing swing around a bit and see how it wants to finish. Looking at the channel, though, we'd have to suggest that if the EMA-13 crosses under the EMA-34 on this hourly time scale it may prove to be the end of the overall move, upward. At least that is what the wave count is saying at this time.

As always, caution, patience and flexibility are needed as price again strikes at or near the upper daily Bollinger Band.

Have an excellent rest of the day and evening,

TraderJoe

One Chart - Two Details

The overall count on the SPY is of a contracting ending diagonal Primary ⑤th wave. We are nowhere near completed. If the current up wave feels like a third wave, it's because it IS. It very well may Intermediate (3) of this count as the chart below shows. So, the wave number agrees with the 'feel' of the wave.

As I said, we are nowhere near complete. These waves can take a very long time - perhaps into the new election and beyond. But eventually it should come down. Yes, it is possible for wave (3) to be a double zigzag. Prechter has commented on such many years ago. It is also possible for wave (4) to contain an interior triangle like the Minor B wave section - when we get there. Here is the detail section on that Minor W-X-Y wave up to Intermediate (3).

The reason the chart is labeled this way is that there is overlap at X, pure and simple - cash & futures - and X is longer in price than ⓑ in March 2023. So, it should be of higher degree, and it is labeled that way. Price is now throwing over the upper wedge line, and everyone is getting exceptionally bullish (the CNN Fear & Greed Index is pegged in Extreme Greed). So, how does the current up wave count? Detail # 2 shows the count from minute ⓑ to minute ⓒ in the chart below.

This chart shows the most likely count from the minute ⓑ wave. Most people will get it wrong. I, myself, initially labeled the ⓑ wave differently at the outset, putting it back at the (w) wave location. The problem is that if you do this, then the first wave up of the third wave is too long for correct degree labeling as a lower degree sub-wave. If you look closely in this wave, now, all the degrees expand properly with lower degree waves actually being shorter in price and time as they should be. I know, I get it. No one cares much about the degree labeling. Trust me. It is helpful.

Note that (ii) - a smaller degree wave - is shorter in price and time than ⓑ. So is (iv). But then note in the next wave ② is smaller than the larger degree (iv), and so is the smaller degree ④.

Then note how getting the degrees right also helps put the gaps in the right location, especially the most recent gap which may eventually also be responsible for an island reversal pattern. Time will tell.

From my perspective, wave-counting is not an art - as some people suggest. It is a process of making measurements and matching those measurements with degree labels. Few people do it correctly. I often get it wrong, myself. But I am very, very aware that I can initially make mistakes in this manner, and I take every effort to correct them.

Have an excellent rest of the weekend.

TraderJoe

Brutally Whippy

Yesterday, we suggested there could be a new low this morning. There was in the futures at around 3 AM, as this first ES 30-min chart will show.

However, due to the markets take on the PCE report, that low did not appear in cash. So, we got part of it right, part of it wrong. Does the market give 'partial credit'? The cash market gapped up at the open, and then retraced fully 78%, or more, depending on where one measures the low from. There is not too much to be sure of, but after showing this next chart of the cash SPY 15-min time frame, we can discuss what does and what does not appear.

First, as stated, the new overnight low did not appear on this chart. Second, yesterday, we had counted three-waves-down on the closing only 15-min chart, so we have left that in place as the equivalent Ⓐ,Ⓑ,Ⓒ down. Then, after that, the one item we are sure of - by measuring - is that the 90% up level was reached in cash before a substantial overlapping retrace wave occurred. (This 90% level was not exactly reached in futures).

So, there are currently two zigzags upward, and they appear to be in a channel. But here is what we do not know.

1. We don't know upward movement has ended for this wave. A third zigzag upward could be made.
2. We don't know what effect, if any, the 'first-of-the-month' inflows will have on the market tomorrow.

We also know it is whippy. Brutally whippy. We have urged the utmost caution, patience and flexibility. Maybe we are making a larger more complex flat wave, and this is all or part of a "B" wave up. But B waves can still do some mind-bending, head-scratching things, so by-all-means, be careful in this environment.

Have an excellent rest of the evening,

TraderJoe

There Should at Least be a -5

Let's say that you are even a raging bull (which I'm not, I'm neutral) expecting a lot more upside. Then there are two ways that there still should be five-waves-down to start. The two most typical cases are below. The first suggests that maybe we are in a triangle consolidation on the ES daily chart.

ES Futures - Daily - Two of Three Ending Scenarios

IF we did not already have the running fourth wave that was previously proposed, and the fifth wave up of minute ⓒ, the triangle shown is a very typical way to nearly conclude a move. The reason for a running triangle would be to consolidate the almost 20 days of up movement in wave iii. This can take some time. However, triangles should consist of relatively clear zigzags that wind around wave iii. So far, the down movement doesn't come close. But the next zigzag should start with a five-wave (A) wave as shown in the left-hand panel.

IF neither of the above two scenarios play out - and let's be clear - the first one of the two scenarios is that completion has already occurred, then the next most likely scenario is the diagonal ending as seen in the right-hand pane.

Yet, this structure, too, must be composed of zigzags - which would also start with a five-wave (A) wave down in order to begin a wave ② within the diagonal, saying that wave ① is already completed. To that end, we showed this chart late in the comments section for the prior post, and it seems to suggest with a lower low there will be five-waves-down.

SPY Cash - 15 min Close Only - Current Count

Note that in the post-market price is already below the Ⓓ wave. Still, a wave five, v, on the above chart would need to be seen and to have some length to it. (Note that the wave degrees in the above chart for now are relative only and are just for illustrating the comparison).

In the hourly futures we suggested counting on, it is possible an expanding diagonal will be made, but we will look for other options, as well.

Have a good rest of the evening and keep an eye out tomorrow.

TraderJoe

Bait & Switch ?

Advertise A-I, deliver bombs? The recent A-I craze may have all but blinded retail traders into thinking this is a 'one stock' market made up of NVDA and no other. Clearly, we know that's not entirely true because AMZN is also near its all-time high. Yet a lot of articles read like that, and a lot of web-videos play like that. But are we missing anything? Of course. Also, beneath the surface, don't forget the fact that - sadly - the 'usual' way countries avoid or get out of recessions is to use the 'war play'. The chart below is of General Dynamics, one of the U.S. leading defense contractors, on a weekly basis.

While not as dopey gapping as NVDA is, the chart is also at its all-time-high as the country continues to sell arms in Ukraine, for sure, and likely in Israel as well (and many other places). Bombs don't have to be the only product. There can be "systems", drones, parts, consultants, etc., etc. And clearly, the U.S. and other countries are using arms to directly to defend ships in the Red Sea.

So, as the market is selling you NVDA, and AMZN and this is occurring even with divergences with HYG and the Dow Transports not having made a new higher high, just remember this key form of market 'stimulus' is insidiously occurring as well. I rarely look at the defense sector because I just assume with half-trillion dollar defense budgets this form of market pump is almost always occurring. Do you wonder why the solutions to these seeming intractable battles take so long? What incentive is there to solve the issues? Aren't there also some perverse incentives here 'not' to quickly solve such issues?

My apologies for being cynical. It really isn't me. It's the fact that war is often seen as a 'good thing' by markets rather than being seen as a bad thing for populations.

Have an excellent start to the week, and don't forget about those who are in dire circumstances because of this nonsense.

TraderJoe

Two Best Daily Counts

The side-by-side ES daily closing-only charts, below, show the two best ways to label the up move since October. The Principle of Equivalence says that we can consider both counts the same until they are not.

On the left is the minute a,b,c count from an X wave, and on the right is the minute i-to-v count from a B wave. In the minute i-to-v count, the first wave ((i)), circle-i, is the extended wave in the sequence. 

To me, it may be that the only thing that separates them is whether in the second count, the second wave, ((ii)), circle-ii, might just measure to be too small to actually even be a second wave. 

Yesterday, we said our ES 8-hr wave could be topping in a fifth wave (v). After an apparent exhaustion gap upward, prices did reverse a bit and closed just about unchanged to lower - depending on the market. This occurred as prices struck the upper daily Bollinger Band in only an over-bought condition, and not in an embedded condition. So, we'll try to take some additional clues from Monday.

Have an excellent rest of the weekend.

TraderJoe