Friday Front-Run ?

Today was the last day of the month. We suspected there might be some typical end-of-the-month 'window dressing' and we suggested there could be a lower low today. There was - between 12:30 - 12:45 ET. Then prices turned higher and did not look back. They 'almost' made a new all-time-high but held the Crop Top just as before. It is plausible the pros were 'front-running' the new inflows that would likely come in for the first-of-the-new month when the institutions get back on Tuesday.

Here is the ES 4-hr chart with the best tentative count at this time.

After the expanding triangle, it 'is' possible we had a first wave up and a w-x-y second wave down. Then, there is a quasi-bullish-engulfing candle for what might be a smaller-degree first wave within a third wave of v.

The MACD went flat on this timeframe and might take a turn upward, then a divergence or two. Also, a tentative parallel has been sketched in. A third wave of new money would likely break this parallel higher, so it is worth watching.

Have an excellent start to the evening and enjoy the long weekend if you are celebrating the holiday.

TraderJoe

Crop Top

Like a bad haircut - you know one of those 'crew' cuts where the hairs stick straight up - today's SPY cash contract has been bumping along the highs refusing as of today to make a new one. Here is the 4 Hr chart of the SPY ETF.

You can see the repeated pokes at the prior all-time high without success. There are at least four of them in this wave. The few things we 'know' are: 1) that price has broken the 0 - ii trend line. 2) There has been some support at the prior August 1 high which has been hit on the downside twice now, and 3) the MACD has curled down a bit.

What we have is a low-volume summer holiday market with the junior pilots in control. So, they can just sit there and whip prices around until the VIPs come back from weekend vacation and decide what's for the best. It sure feels like a fourth wave, anyway. Can it decline deeper? Oh yes it can. Must it? No, it doesn't have to. It's The Fourth Wave Conundrum and it happens at every degree of trend.

Have an excellent rest of the evening and start to tomorrow.

TraderJoe

I wah-wah-wah won-der ... (2)

In the ES 4-Hr futures, there are now about 105 candles from the low; close to the 120 recommended for The Eight-Fold-Path-Method for Counting an Impulse Wave. From the chart below, the Elliott Wave Oscillator has gone below the zero line and is now in the area where we look for fourth wave completion.

The lower parallel has been dropped once, and the third wave is now nicely above it to indicate its characteristic as a third wave. Just like the wave on August 6/7, we are now in the location where either a fourth wave holds & the fifth wave begins, or we run the risk of the pattern failing altogether. Yes, the Ⓔ wave can spike lower. This is common in triangles. But it does not have to. The minimum needed to fulfill the expanded triangle has been met. Price so far has retraced about 23.6%; it can go lower if it wants provided it does not get too out of proportion.

One concern for the price pattern is whether any of the drop in the overnight will show up in the cash market. That remains to be seen.

Have an excellent rest of the evening and start to a good day tomorrow,

TraderJoe

I wah-wah-wah won-der ...

With apologies to the song, I can't help but wonder if we aren't making a triangle at the highs in one of several forms. This one might be a 4-hour expanding triangle on the ES futures, as this morning we just clicked over the highs and then fell off.

ES Futures - 4 Hr - Expanding Triangle?

Such a pattern might be part of a larger ⓑ-3 wave to make a larger flat. Or, it might end an upward wave. We'll have to watch closely.

This might take a whole lotta time as these are four-hour bars. Patience and flexibility needed.

Have an excellent start to the morning and the week,

TraderJoe

Weird Day - And the Non-Corrective Count

For literally months, we have been saying that we were likely in an Intermediate Wave (3) higher in the ES futures. The awful price action suggested it could be the third wave of a contracting ending diagonal. That idea has not been totally invalidated yet, but as I posted before, the NQ futures, and NDX index did break the length requirement becoming longer than their respective wave (1)'s. So, is it possible that the ES futures could break the length requirement? It is. What if it does? Then, it suggests this might be the applicable count as shown on the weekly SPY cash index.

The first wave could be the expanding diagonal - which we also said could be the A wave - and would now simply become the 1 wave. Wave 2 would be a 50% retrace, which is deep enough to support an extended third wave, and it would be of the sharp form. Wave x3 is already longer than 1/A and wave 4 might become an expanded flat to alternate with the sharp second wave.

The EWO would currently agree with this count with wave ③ of 3 being on the peak of the EWO and wave ⑤ of 3 being on the divergence. The EWO is currently red and declining. It is because today was such a weird day and hung around near the high all day today, that this interpretation became a higher probability - along with the NQ having exceeded its length considerations.

So, let's see how it goes. Have a good start to the evening and the weekend,

TraderJoe

OKRDD

Today was an outside key reversal day down. It was the highest high of a very deep retrace, and took out the prior day's low, closing lower. In fact, today was a triple close key reversal, closing below the last three up closes. Tomorrow is the Jackson Hole speech by Chair Powell so we'll see if the high of the outside day down is respected for the next two trading sessions or not.

In the interim, I thought I'd take a brief look at the New York Composite Index ($NYA) which made a recent local higher high. That weekly chart is below.

The salient points are these: 1) price is still in a parallel, 2) the EWO is red and declining, and 3) the timing is amazing with Y = 2.618 x W in time. Of interest, Y = ~1.382 x W in price, also at this time.

It still a very dicey call to make, but some of the ratios are getting very interesting. The NQ and ES have not made new all-time highs. Here is a chart showing todays outside key reversal day, down.

Two things to note here, the closing price bias is still up until it isn't. And the daily slow stochastic has now fully embedded.

Have an excellent start to the evening,

TraderJoe

All Hail .. 3

Today in the SPY cash index largely went sideways on the smaller timeframe after one pop to a higher high. Below is a chart of the SPY cash 10-min, showing one very valid form of a potential running triangle.

SPY Cash - 10 min - Potential Triangle (alt diagonal)

As you can see the potential e wave retraced over 62%. So, it could be over. But e waves can also do some more time-wasting things. For example, they could form a double-zigzag lower. But they could form an ending triangle within the triangle as well. All of that remains to be seen, yet. Since, the potential triangle could be over, it might pop in the overnight.

There are only three things we can say. First, above b wave and the triangle is likely over with a thrust due next. Or, second, under the a wave, first - without having gone over the d wave first - then possibly there is a diagonal lower starting out with three-wave sequences. As of this time, there is no sign of the latter. Third, price has not yet been driven very far into the apex of the triangle yet so it may have further to go - but that is a judgement call.

So, keep a close eye on things and remember the saying, "trading is treacherous in triangles".

Have an excellent start to the evening,

TraderJoe

All Hail .. 2

Today was a Doji, including a higher daily high, and day two of embedding - with a third day where both the %K and %D of the Daily Slow Stochastic (DSS) over 80 is required to fully embed. That means tomorrow is the day most at risk of not embedding - and that certainly does not mean it can't embed.

Make of it what you will. The daily close bias is still up as price closed over the 18-day SMA. The daily swing line is still up. While price resistance might be the upper daily Bollinger Band, initial support might come in around the combination of the 18-day SMA and the 100-day SMA.

The wave count is stretched and strained. Yet, when price started down today, it fizzled pretty darn quickly. Intraday we were trying to count an expanded flat, up, after a diagonal down. And within the potential 'C' wave up the fourth wave just missed overlapping the first by cash close. If it should fail in the overnight, perhaps the Flat up wave counts as w-x-y. Or perhaps a larger diagonal is forming. We'll see.

Might be worth it to assess the overnight price action and see what - if any overlaps develop. Right now, the price movement was very 'grindy' both down & up.

Have an excellent start to the evening,

TraderJoe 

All Hail ..

Machines and Buy-Backs. Information from various sources reports that the low volume, nearly straight-up rise since the outside-day-up on 08 August is largely corporations buying back their stock before the window closes again. And, if you have followed my paraphrase of Ira Epstein's Guidelines for trading you have seen several things play out as noted on the daily ES chart, below.

ES Futures - Daily - Swing Line Up

Items that have played out according to Ira's Guidelines (provided here back in 2015 at this LINK).

• Jul 15th: Do Not Buy new here against the upper daily Bollinger Band
• Aug 5th - 8th: Do Not Sell new here against the lower daily Bollinger Band
• Aug 7th: High of Outside Day Down (ODD) should not be taken out or it's a trap for the bears
• Aug 8th: High of prior ODD taken out by outside day up; trap for bears sprung
• Aug 13th: Price closes above 18-day SMA setting the bias and the swing-line UP.
• Aug 15th: Daily Slow Stochastic (DSS) over-bought only.
• Aug 19th: Only first day of DSS embedding. Needs two more days.

Note, too, that every single day since the outside-day-up a higher-low day followed. From then 'till now, there was no lower low day to allow less risky entries into the trend. Thus, the machines have done their duty buying back the corporate stock. A question now might be, "what now from here?"

Well, I think the best answer is the one Ira typically provides. That is, "with an over-bought stochastic and price nearing the upper band, I'll just let someone else own it here. After all, price only tends to close outside of the bands only ~5% of the time. That is until or unless it embeds - which it has not done yet."

It is my hope that providing this near real-time summary - with comments made by this blog at the time - can help provide some appreciation for the power of his guidelines.

Now from an Elliott Wave perspective, it matters to the count whether it closes over the top or not. So, we watch closely and see what we can see.

One thing we can see - because we're not blind - is just how close in proximity a new all-time high might come in relative to the timing of a political convention. That's just a coincidence, right? It's not like the President might have called up the PPT (Plunge Protection Team) with a message like, "Hey, Japan's threat to raise interest rates might destabilize our markets. See what you can do about that." Nothing overtly political, right? If you're in a bridge-buying mood, I'm selling - bridges that is. 

Have an excellent start to the evening,

TraderJoe

What Do You Yen For ?

Over the last couple of weeks, there has been a lot of talk about how the U.S. stock market cratered 'because of' the blow-up of the Yen carry trade - not because of the inherent Elliott Wave count of the U.S. market. Almost all financial news media outlets carried the former story but not the latter (of course). But did / does the Japanese Yen have an Elliott Wave count? We purport to suggest that it does, too, as the monthly chart of the Yen, below shows.

Yen (6J) Futures - Monthly - Zigzag

Note, very simply from its failed ending diagonal high in 2011, the Yen has traced out a simple Elliott Wave 5-3-5 sequence, otherwise shown as Intermediate (A), (B), (C) - a zigzag. And this chart is instructive in a lot of ways. 

OK. Maybe you counted the five waves down to (A) from 2011 to 2015. OK. But then would you have had the extreme patience required to count out a six-year triangle before resuming a (C) wave decline. Really? Six-years?! You would have waited and waited and waited some more before saying, "the next down break must occur."? Um, with my familiarity with readers here, I don't think so. Traders tend to be an impatient lot as it is. And yet, Neely suggests a wave corrective to a motive wave usually takes more time than the motive wave. And here you see a clear example of that in force.

So, what's next? That's all you really care about, right? Well, we are showing the wave as either having finished or having one more much smaller down wave to go. Let's have a look at the weekly chart. Just before we do that notice that the down wave might end at mid-channel of a parallel, above, which is shown, and the EWO is currently green and rising.

Yen (6J) Futures - Weekly - Potential Contracting E-D Ver #1

The above weekly chart shows a less proportional - but still legal - way for the Intermediate (C) way to have ended as an ending diagonal. There is, indeed, a lower low for Minor 3. The issue is that Minor 3 only 'ticks below' the prior low such that 3 seems much shorter than 1.  But the following weekly chart also shows a way the diagonal count can continue for a bit.

Yen (6J) Futures - Weekly - Potential Contracting E-D Ver #2

Above you see the larger diagonal possibility which makes Minor 3 more similar in length to Minor 1. And although the measurement is not included for chart clarity, it shows that wave 4 is 62% of wave 2 which is a very proportional measure in a diagonal. Readers of this blog should independently confirm that measurement. This chart also shows the measurement of 0.0075370 above which the continuing diagonal would invalidate because wave 4 should not become longer than wave 2. Note, too, that the Elliott Wave Oscillator has turned back above the zero line - either the sign of a 4th wave, or the turn, up, for good.

Further it shows that wave 5 of a (C) wave diagonal can fail. This is because the diagonal would be an ending diagonal, and not a leading one.

So now, let's look at the daily chart.

Here we see three likely waves up with c/iii being almost 1.618 times longer than wave a/i. You also see a corrective looking down wave which is at the junction of a rising trend line from 0 - b/ii and from a declining overhead trend line. And you see price turning up from this lower trend line. Further, you will note that price has come down to the 18-day SMA in red, "the line in the sand".

From here, The Principle of Equivalence says we are in the same position as the equity market. If price rises and creates an impulse, we must accept its implications. And, yet, if price falls, we know to where it might fall and what it's limits might be. We also have a pretty clear idea of invalidation levels and overlaps that can be watched, especially above. Right, now a fourth wave is not overlapping.

In any event, the Yen carry trade is for the uber-wealthy that have access to the banking and trading resources to carry it off. It is difficult for smaller players to participate in (except as usual, in trying to ride the coattails of the big players).

Still, a couple of days ago no less than Jamie Daimon expressed a Yen that the wealthy be taxed more, echoing the concerns of Warren Buffett. You can read the story at this LINK. I personally concur for a lot of reasons.

First, is the example above. If the very wealthy can participate in a Yen carry trade like above 'just because of their size' and the smaller investor is at a huge disadvantage, then shouldn't increased taxes on the wealthy's profits be one manner of off-setting that purely positional advantage? Can't we level the playing field a bit? I mean they already have large algorithms, and news-reading computers, etc. How much more of an advantage do they need?

Second, by definition, wealthy people have their lower sections of Maslow's hierarchy (safety, security, food, shelter, etc.) taken care of by virtue of their money. In any society which seeks to progress, shouldn't these individuals be the ones who more help advance everyone's state in the society? No, I'm not saying to any extreme level. Just more so. Or at least proportionately so. We all know there are still corporations that pay zero taxes. That is, they give back nothing to the society they are allowed to operate in - except jobs & products, of course. But then, either all corporations pay no taxes should we allow that in the future, or they do so proportionately, and not just by legal legerdemain.

And what would the society do with such taxes - just hand it over to the poor & needy? Well, maybe some of it - but we know there can be some disincentives to behavior if that is taken too far. No, what about devoting much of it to infrastructure improvement, to improvements all can benefit from? Chief among these must be clean water and clean air to keep health care costs down.

For example, just imagine if a good use of A-I (whenever it fully comes on board) is not just to out-game the enemy in war (real or otherwise). But what if A-I could actually control your traffic lights in real time so that your car used even less gasoline or electricity, than sitting idly by at an intersection with no traffic coming from the cross-directions. This could help reduce the level of pollution and frustration for nearly everyone without implementing what looks like "handouts".

I hope Mr. Daimon and Mr. Buffett can get some further traction on this idea. Because, after all, they are some of wealthiest people, with a Yen to pay more taxes. Enough of the pun - they are literally begging that society increase their taxes. I say we just take them up on it. What say you?

Have an excellent rest of the weekend & start to the week.

TraderJoe

Good For the Goose & Gander

What applies to the downside, applies to the upside. Right now, we appear to have three-waves up in the SPY cash hourly chart, as below.

The RSI indicator is getting very over-bought. The futures are still up in the evening. The daily closing bias is up. The swing-line is up.

But the Elliott Wave count says we are making either a,b,c or i,ii,iii. It is very difficult to parse which the way things were left. So, The Principle of Equivalence applies again. The actual degree would be at minuet level (a), (b), (c), etc. but I did not put all the brackets in, so the chart is clearer. We'll clean that up on the weekend if needed.

At some point price should try to test the lower smaller channel boundary. From there it will either succeed to hold, or it will fail.

Price is currently above the 62% retrace, and it is nearing the 78% retrace. It is also approaching that prior 01 Aug high bar, which we noted as a daily fractal. There is nothing bearish on the chart yet as the trend has higher highs and higher lows over the 18-day SMA. But the daily slow stochastic is over-bought only (not embedded). And a question one could ask is whether today's cash movement might become part of an island reversal.

The next couple of days should answer quite a few questions. Have an excellent rest of the evening.

TraderJoe

Rationale for the Current Count - ES Daily

Below is the ES daily chart with the current Elliott Wave count. This post is an attempt to explain the current chart rationale as completely as I can. First notice, the prior gray up trend line. Absolutely nothing has changed to the left of that line. The upward count is still to wave Intermediate (3) in blue.

Now when you look at the right side of the chart, you see wave minuet (a), down, and you notice it is a larger wave than sub-minuette iv. It should be. The larger degree label means the wave is actually larger than iv on the left. That's what degrees mean. Now notice that minuet (a), down, is also larger than the prior minuet (iv) down on the left. That's ok. If a wave is larger than a prior wave in the same direction than that means the two waves are either of the same degree, or the newer longer wave is of one degree higher. Either can be the case.

Now, look at minute ⓘ, down. Do you see how this wave is of the same order as the whole of the minute ⓒ wave, up? So, the minute ⓘ down label is the best we can do at this time. It is not longer than the entire prior up wave, but it is on the same order. 

Because the current down wave is longer in price and time than any of the previous corrections on the way up, I said, "there is likely a turn of degree". And that is what this means. We are likely making a new wave down. 

Confirming this, we broke the up-wave trend line from wave (ii) to (iv) in less time than wave (v) took to form. This is Neely's confirmation Step 1. It passed this confirmation test step. Next, the wave has broken the low of the prior wave (iv) in less time than wave (v) took to form. This is Neely's confirmation Step 2. It passed this confirmation test step. Neely estimates when this happens that the odds increase to 90 - 95% that there is a true trend change. So. The above count goes with those odds.

Now, because of the position of the Elliott Wave Oscillator on the daily chart, it looks like only a first bump down has been made - hence a first wave down. Yes, that is a judgement call from working with the EWO over the years. So, be that as it may. Accept it or not.

The next piece of rationale is that the up wave has just about reached the 62% retrace level. So, this seems like a second wave location - even though that location may turn out to be higher, like 78%. If we are dealing with a diagonal down, here, diagonal retraces can be 62 - 81% per The Elliott Wave Principle by Frost & Prechter. And a down-trend line from the highs is very close by. You should draw that one yourself.

It is true, I simply cannot tell you if the diagonal forms whether it will be a contracting diagonal or an expanding one. How is that for Elliott Wave uncertainty, and Elliott Wave probability?? I can't tell you what I can't tell you, and I won't.

One thing I know I told you was on Tuesday August 13th. Quote.

Today saw more of the same "vol squeeze" referred to yesterday and brought ES daily prices up above both the 100 and 18-day SMAs. Temporarily, this flips the daily bias to up and puts a swing-line uptrend into play with the CPI report due out tomorrow morning. 

So, if you were one of those cowboys who took heavy short positions while price is above the 18-day SMA, then you are at fault. Not me. I told you both that there was a squeeze on, and that the bias was up. If you decided to do something different - that was entirely up to you. 

And during the day today, I said unless the day's low was taken out, they could still squeeze out a triangle (higher) or a diagonal (higher). Well, they did still squeeze it into the close. There may be a triangle there. Or more. It would help all to realize how similar triangles and diagonals can be because of their three-wave sub-components.

So, before I leave off for the night, let it not go unsaid. "Yes, there are only three waves down!" Could the entire correction be over? Well, it could be in the same manner that "anything is possible". But then this down correction would seem extremely short-in-time compared to the entire prior up wave. But it can happen. It's just that the odds are lower.

Have an excellent rest of the evening,

TraderJoe

Upward Overlap

Today saw more of the same "vol squeeze" referred to yesterday and brought ES daily prices up above both the 100 and 18-day SMAs. Temporarily, this flips the daily bias to up and puts a swing-line uptrend into play with the CPI report due out tomorrow morning. Further, upward price movement was sufficient to overlap the first downward wave on both the futures and the cash SPY.

ES Futures - 4 Hr Close Only - Overlap

So, The Principle of Equivalence tells us that i, ii, iii = a, b, c until it does not. Today's overlap greatly ups the odds that the (a), (b), (c) shown at the minuet level is the more correct downward count. That would mean that any further downward progress - say to the 200 day-SMA would be by diagonal only, and this count would suggest such a diagonal might be a contracting one - with the low being minute-((i)) (or circle-i or ⓘ). For the expanding diagonal count, one would have to suggest that (b) is a zigzag (ii) and not a Flat wave - which is what it looks and counts like. So, that count has diminished odds at the moment, but it just can't be completely ruled out.

As for the up wave, it is currently in a parallel and showing some increased acceleration near the upper parallel line. But I'd like to reserve the count on that wave until we see the reaction to the CPI report. There are currently a couple of ways to count it, and if it is a zigzag then often times the 'c' wave of the zigzag pierces the upper channel line. Right now, it is in a pretty strict parallel and that would be a bit unusual.

Have an excellent start to the evening,

TraderJoe

Vol Squeeze & Control

If you've been following the ES 4-hr futures, then you might have noticed prices being 'squeezed' into a narrowing wedge since Monday's low, as follows.

This is a typical "volatility squeeze" or Vol Squeeze for short. It coincides with the VIX or Volatility Index dropping from 66 to 19 in the same period of time. This also resulted in price retracing to the 100-day SMA. And?

And I think the thing to recognize here is just who is in control. You may have heard or read in some Elliott Wave literature somewhere a cute saying like, "Corrections are fascinating because sometimes they can seem to stall until the news catches up with it."

Well, let me be clear. You and I know our accounts are too small to move the markets. So, just who is the one doing the stalling here? We know it's not us. No, it is the big money players with massive algorithms at their control who spent the day whipping price around today - because they know what they're going to do with price, and we don't. 

Early in the afternoon I said, "Nothing impulsive here". And prices continued to stall and whip. Why? This is important: the big money players have some significant advantages over you. They know that if they tell the algos to make an exact double-bottom, then that is what they will do. After all, computers just do what they're told. They'll do it to within a tick or two - and they will frustrate the breakout players. If, like early in the day, they tell the algo to "make a triangle" then that is what they will do. And the 78+% retrace will frustrate the retracement players. Both of these will likely cause retail losses of some degree, and the big money can pocket that change, too. They want it all.

But the real advantage comes early in the next two mornings when the PPI and CPI reports come out on Tuesday and Wednesday. Then, the Smart Money knows they have news reading algorithms that can read the news and react to it faster than it can even be delivered to your internet workstation. Then, they can move fast without a lot of volume to contend with, and retail is at another huge disadvantage. So, it is clearly again to their advantage to stall or triangle before major news reports.

What does this have to do with Elliott Wave?  Well, a lot. I have written quite a bit about The Principle of Equivalence: how two counts can be virtually the same (like a,b,c = i,ii,iii) until they are proven different. Part of the reason behind this Principle is that Smart Money can do a lot of things with a news report. They can impulse, they can whip, they can wait for further clarification, etc.

In the current situation, where the up wave might be a non-overlapping fourth wave, if I know this & you know this, you can bet your bottom dollar that every good hedge-fund chartist, every bank Elliott Wave analyst, and every FOMC desk chartist knows it too.

You and I both know that someone got crisped when the yen carry-trade blew up. Millions and billions were lost. A lot of vested interests want as much of that money back as possible. So, they wait for PPI and CPI: these affect interest rates. And interest rates affect their profitability and margins on the carry trade. 

So, the questions are, "will the wedge break up, or will the wedge break down?", and "will there be follow through in the direction of the break after a back-test or not?" The people who have the book know what they're going to do in each case. It is gamed out for them in strategy meetings. It is you and I who don't know for sure.

Have an excellent rest of the evening,

TraderJoe

Some Fundies

Some brief time off from Elliott Wave today to have a look at the fundamentals involved in not only the Yen carry trade, but the state of the U.S. economy and the relationship of debt to GDP. So, I am just reposting this video - the first half of which is really excellent. 

I've been involved with markets and Elliott Wave for a very long time but there are things in this video I did not clearly understand (involving 8% plus each year). There is also some technical market talk in the first half of the video. Hint: when you get to the Steve Jobs portion, in the second half of the video, the economics & yen carry trade discussion is done.

Also note, while well done, I do not post this in any way to endorse either of the two firms involved even though I personally find their work credible. If you find it so, so you might like to do them a favor and like and/or subscribe.

Have an excellent rest of the weekend,

TraderJoe

ODU - And Cash

Turn-about is fair play. After yesterday's outside-day-down, the ES futures made an outside day up after the cash close today. The hourly cash close-only chart is interesting, as it has the requisite 120 candles on it, and the Elliott Wave Oscillator is now above the zero line.

Are we making a minute fourth wave near the prior lower degree fourth wave? It may not be complete yet, but this is either where things work out or they don't in terms of an impulse according to The Eight-Fold-Path Method.

Have an excellent start to the evening,

TraderJoe

Another ODD

Today in the ES futures started out with a marginal higher high. By the end of the day, it wound up making a lower low than the prior day, and a lower close. This is the definition of an outside-day-down (ODD). Here is the daily chart in the requested format.

The daily closing bias remains lower, the outside day candle is a continuation until/unless the high of the outside day is exceeded within the next two trading sessions. The swing line is lower. There is, already, a lower low candle for Thursday's session, and the daily slow stochastic remains in over-sold territory.

In terms of support and resistance, the 100-day SMA should contain prices on the upside. As far as support, there are two comments to make. First, the Bollinger Band/Moving Average support should come in around the combination of the lower Bollinger Band and the 200-day SMA. However, Elliott Wave support may not come in until the wave (ii), low or the ⓑ wave low at ~5,020, even if these are exceeded somewhat.

In one way or another wave minute-iv, circle-iv, can take more time if it wants to. But it is not required to. It 'could' be done, with lower probability. It could form a triangle, but it does not have to.

Have an excellent rest of the evening,

TraderJoe

Reminder: Full Retrace

The ES daily chart is below. This post is just a reminder that we clearly stated in the comments that if wave (v), below, was the extended wave in the sequence, denoted x(v), that these waves are almost always retraced 62% or more, and often they can be fully retraced or more. As you can see from the wave (iv) location, today the extended fifth wave was indeed fully retraced - and more.

In fact, price closed below the lower daily Bollinger Band after traveling down to strike the 200-day SMA. The next step in the process should be to monitor the down wave and see if it is retraced more than 50%. If it is (and it hasn't yet been in futures but is touching in cash SPY) then it might be a warning. Right now, things are acceptable, but they can change; that's what wave-counting-stops are for.

Have an excellent start to the evening,

TraderJoe

Lower Low in Early Trade

There is a gap down and a lower low in the ES futures in the early Sunday evening trade. This lower low fits the requirements of wave sub-minuette v, down, of wave minuet (i) down, of wave minute ((iii)), circle three, down, in the following chart.

ES Futures - Daily - Below Channel

This sub-wave is currently shorter than minute ⓘ, circle-((i)), down in both price and time.  So, we suspect that up movement from here is part of minuet (ii), up. Each of these will likely become part of a larger five-wave-down move at the minute degree to make up the Minor degree A wave down, as shown above.

Here are the recent five sub-waves on the hourly chart.

ES Futures - Hourly - Wave (i)

Have an excellent rest of the evening and start of a new week.

TraderJoe

Turned Away at The Line in the Sand

The ES futures daily chart in the requested format is below. Last night on some earnings, price briefly poked its head above the 18-day SMA. But, when the economic reports came out this morning, the resistance was too much, and price headed lower before taking out the up (green) fractal shown.

ES Futures - Daily - Bias Still Down

The bar formed was an outside day lower. After the cash close, the earnings of AMZN, APPL and INTC did not move price much higher (although it could still go higher tomorrow). We were able to get a clean "five-count" down this morning, started to get a retrace, and may get more of one tomorrow. Recall the Payroll Employment Report comes out in the morning so be on the watch for that one. 

The daily slow stochastic never made it out of over-sold territory. We still don't know if it will try to embed or not. Of note, today's down bar is the largest single down bar since the ⓑ wave low.

Two down (red) fractals have been formed at the low, and there are a couple of ways to see a potential head-and-shoulders topping pattern from here, but first price must break those fractals in a decisive manner at some point either tomorrow or early next week to continue a down trend. The swing line is still mixed as it has a higher high and a lower low.

As usual with an outside day down, price should not take out the high of the outside day within the next two trading sessions or it could constitute a trap for the bears, as Ira teaches.

Have an excellent start to the evening,

TraderJoe