This morning provides a great example of why it makes little sense to count only the cash market in the SP500 versus the futures. The futures were lower overnight, and the Payroll Employment Report drove prices down even lower in the pre-market according to the 5-minute ES futures chart, below.
The Payroll Report showed lots of people getting jobs, and increased wages - higher than expected. The initial reaction was to dump from 4,720 to about 4,702. Then the market began reversing into the cash open from 4,702 to about 4,728. All-in-all this is about a 44-point excursion which is completely missing in the cash market.
Yet, these were real trades by real people and real money was won, lost, or temporarily trapped in the market as of this time. Does it make sense, as Neely and some others suggest, to 'only' count the cash market? We think while there is some benefit in doing so, since, granted, the volume is lower in the after-hours market, we think that this might apply more to the long term counts to eliminate the distractions from contract roll-overs, premium degradation, etc.
And we think it makes little sense to exclude this rich detail, including the truncation at the low, from the shorter-term wave-counting exercise - at least until the daily and weekly data are compacted into the larger degree wave count.
And regardless of today's news and the current count of five-down (including the futures), all this argues for is monitoring the high. The Primary ⑤ diagonal count, and the Intermediate (B) count both allow prices over the high again, so do not be surprised if the S&P joins the Dow and the NDX over the high. It is not required for a topping count, but both counts allow it.
Have an excellent start to the day.
TraderJoe
So trend in HTFs (high time frames) remains up. But we have 5 down in a LTF. The question now is to figure out what this means for the HTF trends, and when. Bright sunshine has given way to some clouds. My system sees some darker clouds forming too. But they don't tell me how close they are.
ReplyDeleteIf we are still in the x① count of C, then - since ③ < ①, then ⑤ must be less than ③. Again, this is only if we go over the prior futures high. Don't lose sight of the forest for the trees or catchy expressions. Just do the work - day after day after day after day after day ... Wax-on, wax-off, wax-on, wax-off, Daniel-San. TJ.
DeleteI think 5 on the 8hr would be limited to 4984ish on the continual contract.
ReplyDeleteSPY 5-min: So, cash went under its low, while futures have not, yet. That is likely a warning of some type. Watch the high of day now. The low of day in cash is gone.
ReplyDeletehttps://www.tradingview.com/x/FlT3vZL0/
TJ
Thinking of following due to the deep retraces.
ReplyDeletehttps://www.tradingview.com/x/XEsotUg3/
The EWO looks like it could be an expanding ending diagonal at the recent low. The 5 was short of being longer that 3 by a couple of points, maybe its like a truncated bottom.
DeleteBottom trend line seems to be holding so far.
DeleteSPY 5-min: time to watch a channel like this for the day to see if breaks down or up.
ReplyDeletehttps://www.tradingview.com/x/yCFSqVEV/
TJ
I'm thinking if ES heads back to it's low in a C wave down then perhaps the market is making a Flat, after the impulse to even out the SPY and the ES. If not, then there are other options. TJ.
DeleteSPY 5-min: there are five-waves down to near the mid-channel. This argues for putting a wave-counting-stop above the local high (the five down could start an impulse OR it could end a local Flat).
ReplyDeletehttps://www.tradingview.com/x/kEnCiZiq/
TJ
SPY has another new low. This argues for watching the top of the channel.
Deletehttps://www.tradingview.com/x/bz4HLMOq/
TJ
ES looks like a wave two retrace that took 1.618 the time of wave one and is doing its best trying to convince me that the bear market is back to stay.
ReplyDeleteMr. Market apparently fails ng to persuade. Bullish sentiment remains at historic levels, lol!
DeleteHello Tj,
ReplyDeleteYou stated "Payroll Report showed lots of people getting jobs, and increased wages - higher than expected". There is some nuance to the report worth mentioning. As you likely know, there are two different surveys involved in the jobs report, the Household survey and the Establishment survey, the latter of which is most frequently quoted by MSM outlets like the NYT, WSJ, WaPo. I always go directly to the BLS website and peruse the entire 40 plus pages of tables before coming to any conclusion about the report.
The Household data is quite weak actually, with the Employed category declining by 683K. This was offset by 676K leaving the civilian labor force (buyouts? Baby Boomer retirements?), so the unemployment rate didn't move.
Additionally, Full Time workers declined by roughly 1.5M, which was somewhat offset by a ~760K increase in Part Time workers, also not a great sign. Even within the Establishment survey, there were negative revisions totaling -71K and this has been a trend over the last year or so. This is a jobs report showing lots of cracks in the pavement, representative of a labor market in transition. My guess is there's a 50/50 shot at a negative topline print in the next 2 to 3 months. There is a lot of chart-based kindling strewn about, perhaps this is the match that finally lights it. I know this is a EW website, but sometimes there are fundamental weaknesses that set the stage for the technicals. Just my 2 cents, take it for what it's worth.
Regards,
Alex
My problem with any fundamental analysis is what good does it do.
DeleteSo you get a negative print, do I sell because economic weakness or buy because the fed cuts rates.
Say I'm lucky to be right on the analysis, but the wrong crowd places bigger bets, I am still wrong.
I was only suggesting that - as I wrote - "the initial reaction" was to what appeared on the surface to be better than expected results. Thanks for the facts, as it is clear to me from local data (store closings, etc.) that there is 'rot under the surface'. Good information and analysis never hurts. And to BBR's point: first the futures hated it, then the SPY loved it & then the SPY hated it. It's light volume and maybe - when the Smart Money gets back from the Sachelle's next week - they will have more to say about directionality. TJ.
DeleteA new post is started for the next day.
ReplyDeleteTJ