Battle for the 18-day

Basis the ES futures, prices sunk lower overnight (creating a large close-to-open gap in the cash market). Prices came within a point of hitting the 18-day SMA. Then prices spent most of the day battling around that very same average, only to undercut the 09:45 am low in the after-hours and land on that average about 30-minutes before the futures close. As of this writing they have now also slightly undercut the 23 May low Here is the current daily chart of the ES futures.

The black numbers show the current Elliott Wave count. The red numbers show the alternate if another fifth wave up does not kick in within a few days. ES prices have not had a 38% retrace in this wave yet. The Dow has more than that and is actually below its 100-day SMA.

We don't know that black wave (iv) is over yet. It could be by forming a complex correction, or it could drop lower, possibly in a diagonal. Either way Intermediate wave (3) still meets its upward length criterion at this time. We'll keep an eye on it.

Have an excellent rest of the evening.

TraderJoe

Time for time?

Here is the monthly closing-only chart of the ES E-mini futures. The trend lines are still pretty interesting but even more-so are some of the monthly Fibonacci time relationships.

We don't know that the third time relationship will hold. The evidence currently pointing toward it are 1) the trend lines, 2) the RSI divergence, 3) divergence with new-high new lows shown yesterday, 4) divergence with percent of stocks above their 50-day MA, 5) divergence with McClellan Oscillator, 6) divergence with the DOW, the transports, 7) continued divergence with HYG, and 8) a third wave, (3), which is currently shorter in price than wave (1).

Some evidence which points against the relationship not holding is the following: 1) NYSE adv-dec line recently made a higher high, 15 May, 2) Quantitative Tightening level drops off to the $40 billion level beginning June 1, and 3) the 4-hr chart can survive a further higher high, yet.

In the short run, prices continue to grind around in both directions still requiring caution, patience, and flexibility.

Have an excellent rest of the weekend/holiday.

TraderJoe

An Indicator to Watch

Over the next several days/weeks, this will be one indicator to watch - the net number of new highs on the NYSE. This is the number of 52-week new highs minus the number of 52-week lows on the whole of the NYSE.

There are already two divergences with the prior all-time price highs. It will be interesting to see if a new swing low under the April low is made in this indicator. 

The indicator alone is not a reason to think a new all-time price high can not be made. But what will be telling will be how this indicator acts if another new all-time high is made.

Have an excellent rest of the weekend / holiday.

TraderJoe

Mind Interferes

Once you have done your analysis try to take your mind out of the equation. As I have been saying all week, once you have 1) the right number of candles, 2) the EWO, 3) the EMA-34, 4) a good channel, and 5) an eye on alternation - let these tools do the work!

There are 143 candles on this 'wave of interest'. It happens to coincide with the 4-hr chart. Still, you pick the timeframe that provides the 120 - 160 candles for the wave of interest.

Since wave (ii) did not have its x wave go over the high, it is perfectly acceptable in a fourth wave for the b or x wave of wave (iv) to go over the high. If you don't think the EMA-34 is the right average, look where today, yesterday and prior wave iv stopped.

The EWO is already showing signs of a fourth wave signature near the zero line. Could wave (iv) come back to the prior fourth wave of one lower degree, iv? It could but isn't required to. It is just often the case - like price going back towards the 18-day SMA.

Relax. Try not to fight it. Have an excellent rest of the evening.

TraderJoe

TEFPM Applied to ZB

Here is the four-hour chart in US 30-Yr T-Bonds with The Eight-Fold-Path Method for Counting an Impulse applied so you can see that it does not just work in equities. There are about 100 - 105 candles in this chart.

Neely indicates an impulse should not exactly parallel. This one doesn't. The first wave, (i) only makes it to the mid-line of the channel. Wave (v) makes it to a channel extension from waves (ii) & (iv) placed on wave (iii) as Elliott indicates. The Elliott Wave Oscillator (AO or EWO) comes back to & below the zero line for waves (ii) & (iv) - as is often the case. Notice that wave (iv) is much longer in time than wave (ii). In this case wave (v) did not diverge on the EWO, and so it might just indicate only a larger minute wave ⓘ, up, at this point. However, the EMA-34 did travel through every significant numbered wave to show good form and balance in the count.

On the far right, the EWO has come back below the zero line, and, with five small-degree waves down, the correction of the up wave is likely in force. One must be clear - we simply don't know how the correction will form. It could be a zigzag, multiple-zigzag, flat, or combination. And that is where trading certainly gets tricky. Remember, the correction simply can take as much time as the up wave or more if it wants.

Have an excellent start to the evening,

TraderJoe

Anything You Want ..

With apologies to Arlo Guthrie, 'You Can Get Anything You Want at Alice's Restaurant'. There is an expression If you give ten of the same charts to ten different Elliott Analysts, the result will be ten totally Different Wave Counts. I want to tell you why that is. Here is a chart.

This chart was produced using NO METHOD at ALL of labeling the waves. And, with NO METHOD or ten different methods, it is only logically true that every such chart will be different. I have proved my case conclusively. The No Method involved was 1) why isn't there an R after the Q? 2) Why is there is a 1 after the Z? 3) Why is there a T after the 1? 

Using "No Method" or any method of your choosing, one can come up with any labeling scheme at all. I call such pictures cartoons. They might try to represent something real, but they are often just a glossy fake. 

Becoming Competent

I learned early in a different career that Mastering something requires going through stages - stages that most people don't wish to go through. Those stages are formally called 1) unconscious incompetent, 2) conscious incompetent, 3) beginning mastery, 4) intermediate mastery, 5) master / teacher.

Now, here's the deal. A lot of people have heard of Elliott Wave, but 1) they haven't taken the time to read and absorb the literature for themselves, 2) they watch a video or two or twenty on YouTube and think they know something, and they want to start making money using Elliott Wave. This is the stage called the unconscious incompetent. They don't know that they don't know.

Conscious Incompetent

When they start to read a little about Elliott Wave and the labels used, they may generate a chart like the one below.

They try, and the whole mess looks corrective to their eye. And they are sure they have two zigzags. OK. But notice, this is done without regard to any simple standard tools - 1) like trend lines, or 2) different levels of degree labels.  Degree labels? What the heck are they? Only when you read Elliott, and internalize the information for yourself, do you see what Elliott's idea of degree was - and what he intended by it. But the conscious incompetent at least knows they do not know all of Elliott Wave, and they start digging in deeply - to the reading and the work to be done to understand it.

Conscious Competent

At some point in the development, the person begins to put a few of the factors in wave analysis together in a sound way. They might add a few trend lines.

They begin to understand the various terms, the three classes of impulses, the various types of corrections, that the degrees are relative, and they begin to commit them to memory as they show them on their Elliott Wave charts. But even this is a limited tool set.

Beginning Mastery

At this next stage, the person begins to demonstrate their real knowledge of the topic.

They can locate triangles and understand and apply the various levels of degree labels. They know the difference between Primary, Intermediate, Minor, Minute - and all the rest. They take the time to do it correctly. They look at chart after chart; hour after hour, and they not only try to find the count, but they also follow-up to see if it worked as predicted. Further, they begin to apply a Fibonacci ruler in earnest, and look for the different relative lengths of the waves.

Is this boring, already? Are you tired and want to stop? That is what gets most who reach this stage. My head hurts. Is this really necessary to make money? No. None of it necessary to make money - maybe I'll do something else. See?! I made money without it. I'll stop now. I've read it all. I no longer need to find out or try out anything else.

Intermediate Mastery

Those who don't stop and push through add a few more tools - like looking for divergences - knowing that divergences don't always work the first, second or third time. They might add a relevant moving average to make sure their count shows good form and balance.

Their chart might begin to look like the one above - and they know why. All of a sudden - people at this stage are speaking a common language. Their charts begin to look the same! The ten different analyses are gone. But there is still something missing.

Mastery / Teaching

People at this level add an additional dimension to their work. They consider the variable of time. Further, they are able to explain what the wave principle is for AND what it is not for. They are able to explain WHY it works, WHEN it works, and when it does not. People at this level have one method, and, if they are using that method they arrive at ONE conclusion - not ten.

What is it going to be for you? Are you going to put in the time and the effort? Or are you going to generate the 11th chart, the cartoon?

It's up to you to decide. Have an excellent rest of the weekend.

TraderJoe

Slight Correction

As far back as January 19th, 2024, with a post entitled "Now You Know Why" at this LINK, I indicated that it was possible to count the up wave from October 2022 in two manners: either as W-X-Y or as A-B-C. The reason is that it was just possible to count the first A wave up as an expanding diagonal without breaking any 'rules'. So, because of the higher high that occurred in both cash and futures markets this week, I need to make a slight correction and revert to the A-B-C up count. The W-X-Y count was incorrect, but I had seen the possibility for either. Here is the revised chart for the ES Weekly.

As I said yesterday, it is necessary to understand that the current wave up since October 2023 is now a five-wave impulse wave. The Minor A wave is the expanded diagonal A wave, and the Minor B wave is the longest downward correction in the wave sequence in both price and time. The Minor C wave may not be over yet. But there is alternation in the corrective wave: Diagonal A, Impulse C.

This leaves the long-term count (the preferred count) unchanged in the following manner.

The current divergences are clear, as is the point where the RSI peaked - which clearly should be a third wave. Note that wave Intermediate (3) will not invalidate until it is longer than Intermediate (1). Price is not there yet. And, if that level is exceeded, it will clearly still be a wave (3) - just not one in a contracting diagonal.

Is there an alternate? There is. But it sees wave Cycle V as over already. Here is the alternate.

This is possible, but the first long term chart is slightly preferred precisely because we have not seen a longer-term diagonal to end the wave set, yet.

Have an excellent start to the evening,

TraderJoe

La Machina - Part 2

A key to understanding tomorrow's update will be to understand that most likely we are now making an impulse wave upward as shown below from October 2023.

The fourth wave, shown here as 4, is a long zigzag to alternate with the short flat for the wave shown as 2. These are likely only minute degree waves, and the wave symbols will be corrected tomorrow. I just wanted to make the point with numbered symbols, 1 - 5, today.

The wave is an impulse with an extended first wave x1; wave 3 is shorter than 1, and, therefore, wave 5 when complete should be shorter than wave 3. We may have yet to experience the fourth wave, iv, within wave 5, yet.

There was no proof this would happen, but it did. The lack of overlap was the telling factor.

Have a good start to the evening,

TraderJoe

La Machina

Today is a good example of just 'why' - regardless of the potential Elliott Wave count - one's strategy might best be suited by adhering to the trading guidelines supplied in the post at this LINK, as paraphrased from Ira Epstein's public videos, he being a broker with the Linn Group.

Look at the volume profile on the right hand side of the chart. Look at how low the number of trades is in each cell of the volume profile as price works its way up on the news of the CPI report & low retail sales.

This is nothing but pure 'machine trade' from the news-reading algorithms likely powered by the co-located servers that the Smart Money places as close as possible to the exchanges and pays big fees for the privilege of being first to the market.

It is hard for the retail to compete in that zone. That post-news bar is a five-minute candle. Was some of the retail on the way to work when that report came out? Were others using a news-service where the delay might be a minute before getting the report compared to the non-delayed premium services? 

Regardless, the effects of this machine trade are here with us to stay. Often, not always, such bars will be classified as '3rd' waves in EW theory, sometimes as 'C' waves. 

For the purposes of this blog, we note, though, that this price movement is happening over the 18-day SMA - which Ira classifies as 'positive bias' and with an embedded daily slow stochastic reading. Today is a good example of why.

Have an excellent rest of the day,

TraderJoe

Past Equal Time

Today 'might' have formed double 'spinning top' candles. The EW count has not changed. The up wave has taken more time than the down wave and thus measures less impulsively.

There's nothing guaranteed. There is nothing particularly bearish on the chart. Price has still closed above the 18-day SMA and therefore shows a positive bias. The bias remains positive until price closes below that same SMA. The daily slow stochastic (regular calculation) is embedded - a strong technical signal. The double spinning-tops is something to watch carefully. Confirmation of them to the downside would be needed as with any candle signal.

Have an excellent start to the evening.

TraderJoe

Equal Time

Previous posts said that the up wave was not yet longer "in time" than the down wave. It was stated more than once. Today may have constituted "equal" time per the chart below. There were 13 + partial day down, and now there are 13 + partial day up.

This is shown as 14 days down, and 14 days up on the above chart. The uptrend can continue for another day. Beyond that a new high is also possible. A new high can't be ruled out without downward overlap which hasn't happened yet. But keep in mind it is the very purpose of second waves to convince the majority that the previous up trend is resuming. The majority may become correct, but they haven't just yet.

That said, once again, while price is over the 18-day SMA, the daily bias is positive. The daily bias does not switch to negative until price is back below the 18-day SMA. If you plan on trading against the bias, which a seasoned broker like Ira Epstein does not recommend, then recognize that you will be fighting the algorithms, the Smart Money, and the 0 DTE's. It's just that simple.

And, as of today, the daily slow stochastic has not embedded, but, if it is to embed, it would be tomorrow as the third day.

Have an excellent start to the evening,

TraderJoe

Up Against It ?

Today isn't any ordinary day. Today is a day when the ES daily price has contacted the upper daily Bollinger Band with the daily slow stochastic in just an over-bought condition, as below. (The indicator is not yet embedded to the upside).

We don't know before-hand this will be the case, but this is often a location where the Smart Money takes some profits. There's nothing overt in the price structure, yet, other than price is also up into the 62 - 78% Fibonacci zone for a retracement, as well.

So, it's up to the Smart Money at this point. Do the big accounts begin to take some profits here or not? Only time will tell. It may help to look to some hourly candlesticks for clues. We shall see. 

Have an excellent start to the day.

TraderJoe

News Vacuum ??

Next week brings only a paltry number of economic reports (Consumer Credit, Mortgage Applications, Wholesale Inventories, Initial Claims, Michigan Sentiment & Treasury Budget). These are not the typical block-buster reports that move markets - like a FED meeting, CPI, or a Payroll Report.

Then, too, although earnings continue to dribble in, many of the larger reports save Disney, Coke, Oxy & a few others, have already come out. So, a question might be if the market will simply trade higher on a lack of news.

ES Futures - Daily - Higher High

The current wave count certainly allows for some further upward movement. There are still more down days in the count than up days, and they could equalize more or even switch to become more up days, within limits.

We note that the price bias is up. And that should be respected until it is no longer. We also note the upper daily Bollinger Band has been dropping below the prior all-time-high and may provide some resistance on the way up. Then, too, there is a pretty significant resistance/support band between about 5,160 and 5,260. The daily slow stochastic is not yet over-bought.

However, if price rises further, then items to watch out for - while the U.S. is in a news dead zone - would be 1) economic news out of China or the Eurozone, 2) foreign currency movements, 3) geopolitical developments that were unanticipated, and 4) news from our banking system which isn't part of a standard economic or company report, including bank failures, etc.

Then, too, news alone does not have to make market swings. Other internal factors - like traders managing "sell May" strategies, or people going on vacation, etc. can affect the market mechanics. So, it is still wise to be cautious and patient in such an environment until the wave structure becomes clearer,

Have an excellent rest of the weekend,

TraderJoe

HO - LL - HC

The whippings will continue until prices behave. Last night the ES futures made a higher open, only to decline this morning to make a lower low. This was followed by a price reversal into what is likely a higher close near the 18-day SMA. The ES daily chart is below.

As previously written, there are too many applicable patterns to make a call yet, although our count has not changed. See yesterday's post for just some the some of the possibilities. There are more - such as upward and downward diagonals, as well.

The one objective time measurement is that the up wave is still shorter in time than the entire down wave was in days. Often, second waves require as much or more time than their first waves. But, if this structure is still a fourth wave, that might not apply. So, caution and flexibility are really needed, especially with the Payroll Report tomorrow morning.

Have an excellent start to the evening,

TraderJoe

FOMC Results

Plain & simple, based on today's trading, those who were bullish the ES futures didn't do as well as hoped today. First, prices were slightly lower overnight. Then, they rallied into the FOMC press statement and conference - where, though rates were not changed, Chair Powell promised to back off on the amount of QT by $-35 bil. And then the press conference ended with prices heading back down to the area of the open.

Of interest, where did prices rise to? Why to the 18-day SMA namely. Then they staged what looks like a pretty clear reversal. Yet, from an Elliott wave perspective there are still many patterns that can form with the current price structure. We haven't changed our count as there is no reason to, but further whippy behavior is possible.

Remember, we still have the Payroll Employment report on Friday.

Patterns like a Flat, a double zigzag, a triangle or even a third wave, lower, could form from this location & structure. So, if you're going to play some of these waves, do so with the clear knowledge that reversals of direction can come at unexpected times until the market gets into a more clearly recognizable pattern.

Have an excellent start to the evening,

TraderJoe