'B' is for Belief, Bubble (and Babble, too)

The thing about B waves of expanded flats or running triangles is that they try to get you to believe they are built on something substantial, when they might not be. They might be part of a bubble too. And, as long-time reader and contributor BBRider commented on the prior post, this one is also built on some FED babble. A mumbling, stumbling Jerome Powell, Chairman of the FOMC, said on Friday the FED might be in a position to lower interest rates. OK. With that in mind, we just keep on counting, using parallels and finding clear five-wave sequences where we can find them as on the ES 4-hr chart below.

ES Futures - 4 Hr - Channel Upward

The above count is cognizant of both time and price degree considerations. It also recognizes the following counting items.

• The (c) wave down could be counted as 'five' as a diagonal, pointed out in prior comments.
• The a waves of both upward sequences in (w) & (y) are very, very similar in size and shape.
• The minuet (x) wave, down, can be seen to take less time than the minute ⓐ wave, the prior higher degree wave in the same direction.
• We also said a lower low was needed to call the down sequence from Aug 15th as a five-wave sequence. That lower low did not happen, and there was, instead, a near exact double-bottom leaving only three-waves down.

In terms of price lengths, we know the SPY and the DJI have exceeded their prior highs. So, likely all indexes must be counted in upward sequences, even if the ES has not made a new high yet. It likely will with the momentum from this wave. So, we are watching the typical ⓑ wave external retracement levels to see what information they provide.

Still, things could get very, very whippy near a new all-time high.

Have an excellent rest of the weekend,

TraderJoe

Down But Not Out

Overnight the ES futures went down to tag the 18-day moving average of closes, also known as 'the line in the sand'. Prices have since started to bounce from there as in the daily chart, below. The 18-day SMA is the place where prices often retreat to in order to figure out what to do next. This again might be the case with the FED minutes today, and Jackson Hole on Friday.

Looking at the chart we note several things: 1) there has been a more forceful overlap on L #1. This again is not fatal, but it does rule out some impulsive upward counts. 2) While this morning's lower low has the trend line currently pointing down, it has a prior higher high and now the lower low which is not typically counted as a trend. And it is currently above the 18-day SMA - so even if it was a trend - it is still neutralized by the daily bias still being upward. 3) the daily slow stochastic is currently below the 79% level. That is a warning that price and the 18-day SMA could come together. Well, they already have, they occurred almost simultaneously. 4) The only day that the embedded status can be regained is the next day, if it remains lost through the close. 5) Although not followed by many, we will note there is an upward cross of the 100-day over the 200-day SMA. This has some weak bullish significance to moving average followers.

The overlap of L #2 would provide more information from a wave-counting-perspective but that has not happened yet. So, keep an eye on things.

Have an excellent start to the day.

TraderJoe

Wobbly but Not Topped Yet

The ES daily swing line has wobbled a bit but has not set a clear new downtrend yet. Prices on Friday overlapped the prior high but not by enough to draw any firm conclusions yet. The daily chart is below. Prices retreated from the area of the upper daily Bollinger Band as expected, especially given the daily slow stochastic is over-bought only (for two days). The third day needs to be watched closely to see if gains the embedded status or not.

ES Futures - Daily - Into Minor B

Meanwhile, two other overlap levels are shown which are of interest in ruling-in or ruling-out counts. In particular, we note that if L#2 is exceeded it would probably be below the 18-day SMA and might set a trend.

In terms of an EW count, we still see the Minor A wave at the July high, and the new August highs confirm that the early August drop was only a three-wave sequence (probably ending in the diagonal we counted).

Again, we have no proof positive upward movement is over. It is possible for a Minor B wave to form in numerous ways including: an expanded flat, running triangle, or even more complex Flat-x-Zigzag, Flat-x-Triangle. Those patterns are in the book for a reason.

Have an excellent start to the weekend,

TraderJoe

Hourly Trend Line Becomes Hourly Channel

Today is Friday. Higher highs are possible, although the morning is starting out 'wobbly' - possibly like a triangle or diagonal, there is insufficient evidence for a turn yet. The lower three-touch trend line we cited earlier has held. It has become an hourly channel.

Since 123.6 has been hit and slightly exceeded, then 138.2 may be possible, but not required. Maybe the Minor B wave will be an expanded flat (at least initially) that would add length to the downside. If not, it might become a running triangle with the first :3 waves down as the more violent start of the triangle. Time will tell. The hourly MACD has turned lower again, but could be rehabilitated again, too. Dicey times.

Have an excellent start to the day.

TraderJoe

Hourly Trend Line - In the Making

In the SPY cash hourly index, as confusing as some things might be, there are four or five indisputable facts as shown in the chart below.

The most undisputed item would be the measurement. The up wave made 90%+ of the prior down move. So, if the prior down move is only a :3, then the up move can be the "B" wave of a Flat. If the down move is a :5, then it might be the 'deep retrace' from the diagonal counted provided that price does not exceed the prior high.

The second most likely undisputed item would be that a three-touch trend line has formed in the cash market. The nearly precise rebound off it at the end of the session means the market itself probably recognizes it. So, any break lower and/or back-test & failure of this trend line in the cash market needs to be watched very closely.

The third most likely undisputed item would be the volume on today's close. While a bunch of bulls (green volume bar in the middle of today's session) chomped on the fishhook at the exact high, the red bars started to gain in prominence into the close.

Fourth, like it or not, on this time frame the MACD had a cross and red histogram bars. It remains to be seen if that holds.

Fifth, we counted a wedge to the high. It might be disputed whether it is a true diagonal, and/or whether it has been decisively defeated yet. But the pattern ended on time and without any problems in the measurements. So, it would not be surprising if the up gaps in the chart start filling to the downside, depending on the news tomorrow.

Is there still a way for prices to lurch higher? There is, yet the odds keep getting lower & lower.

Have an excellent start to the evening,

TraderJoe

Three-Fer & The Principle of Equivalence

As you know I count Elliott waves in real time. As far as I can tell, the reason many Elliott analysts make some truly horrendous mistakes is that their Elliott Wave principles are not well founded. As an example, take the ES/SPY (CFD) half-hour close-only chart, below. We are using the closes only - not to hide anything - but to illustrate the overall form of the wave. And we need to tell you that there are at least three reasonably good ways to count this uptrend - being in the channel that it is. The uncertainty in the wave structure is precisely the reason I have developed and added The Principle of Equivalence to my overall wave theory.

If you follow the black count, you can clearly discern the Ⓦ-Ⓧ-Ⓨ triple zigzag count contained within the channel. The two Ⓧ waves would be of slightly different lengths but that would be okay if they are of the same degree. The issue with that count is that we were able to count five-down on the 7th. 

If you follow the blue count, the blue count can correct for this problem by claiming the 'c' wave of a failed-flat at that location. After all, that wave did not travel below the wave on the 5th, and the b wave in that count just ticked beyond the 1.618 external retrace on the 'a' wave down. This is often where the b waves of failure waves end on the upside.

And if you follow the red count, it says there was a gross mismatch ('extreme alternation') between red iv and red ii. But, none-the-less there was no iv to i overlap, so no rules were broken.

So, again, this is why I have developed The Principle of Equivalence. The counts are to be treated as equivalent until there are some distinguishing characteristics available.

For example, we said in the comments for the prior post that because the second Ⓧ wave is larger than the first, it ruled out any further contracting diagonal from that point to the recent high. So, that longer Ⓧ wave is one distinguishing characteristic. We can currently rule out a contracting diagonal and it does not appear on the chart.

Another item to note is within the red count. That count may contain some degree violations because there would then be internal sub-waves of wave iv that would be longer than all of wave ii, the prior higher degree wave in the same (down) direction. And that seems like a violation of degree definitions. So, from this point forward, you can consider the red count to be what I consider a 'cartoon' and just for illustration only. And it will not appear on further charts unless something develops to warrant it.

But - at present - the waves are still in a channel. The timing of the up waves is similar in pace. So, they seem like zigzags. But we also have not confirmed that upward price movement is over. So, a better developed Ⓩ or (c) wave could still form.

But "Wait a minute." You might say. "Isn't The Principle of Equivalence just the same as saying 'there are alternate wave counts'?" In fact, The Principle of Equivalence definitely says there are alternates at some times, but it is also deeper and much broader than only just saying there are alternates. But I will not get into that now so as not to confuse things. But I still caution, The Principle of Equivalence does not say there are any wave labels you like. No. Labels that don't follow the rules or that involve clear violations of degree definitions are still to be avoided to the greatest degree possible.

Have an excellent rest of the weekend,

TraderJoe

Market-suggested trend lines

As of today, the market has suggested slightly contracting trend lines shown in the daily SPY cash index, as below. At this time, they are tentative only.

SPY Cash - Daily - Suggestions

While we were able to count an impulse down, and then either a full or partial (we think the latter) retrace today, the market path is pretty unclear just now. As the daily ES chart below shows, price settled just above the 18-day SMA in a Doji candle.

ES Futures - Daily - Neutral

The slow stochastic is stuck in the middle, so this summertime chart is about as neutral as it can get. Still, taking out yesterday's low - tomorrow - would be more bearish than it would be bullish as it would take out the low of an outside-day-up in less than two sessions (IF it does).

This is a great time for patience, flexibility and small commitments, if any. We're doing our best to count locally, but the number of choppy diagonals on the chart is astounding (see last comments in prior post).

Have an excellent start to the evening,

TraderJoe

Close below 18-day SMA

The ES daily futures today had a close below the "line in the sand", the 18-day simple moving average of closes, as shown on the daily chart below.

ES Futures - Daily - Close Below 18-SMA

This is the second such close and follows a "battle for the line in the sand". The daily slow stochastic is not yet in oversold territory.

With the overnight lower low, the swing line indicator is currently pointed down but needs to undercut Friday's low to firmly establish a downward trend.

From an Elliott Wave perspective, we are watching two consecutive rejections of the 62% Fibonacci level. The first one occurred at the ES 6,377 - 80 level in the overnight session, and the second one occurred after the morning downdraft at the 6,350 level. And the lower low in the overnight may be a bit of a clue.

So, this is a good time to watch the developments carefully and see if a better-defined wave sequence takes place or if price will just bounce around between the Bollinger Bands. We have made the case for the former, but it's up to the market to decide.

Have an excellent rest of the evening,

TraderJoe

The Dog Didn't Bark

In the short story The Adventure of Silver Blaze by Sir Arthur Conan Doyle, Sherlock Holmes helps solve the mystery of the stolen racehorse by noticing for Scotland Yard, that "the dog did nothing in the nighttime." When one would have expected the dog to be barking - with the theft of a horse underway - it didn't. And one had to wonder why. Here in the markets, on the long-term count, we are faced with a similar clue. Ask yourself the following question as you look over this 2-weekly chart of the S&P500 cash index, "Is there anywhere on the chart that even remotely looks like a properly formed sideways triangle?

SP500 Cash Index - 2 Weekly - Potential Diagonal

If you answer the question honestly, you'll likely arrive at the same answer I have. A curt, "No". At this scale, there is no grinding sideways pattern that can clearly form an overlapping a,b,c,d,e which has the characteristic 62 - 78% wave retraces. So, since triangles often (not always) precede the last move in a trend, could it be that - for some period of time - this potential Minor B wave down will form as a triangle prior to the last move up? Maybe. It does not have to, but it is one of the good possibilities.

Degree Labeling

Notice in this count that within Intermediate (3) then Minor A is shorter in price and time than all of Intermediate (1), the previous higher degree wave in the same (up) direction, so that that this wave can qualify as a true subwave. Also, the notice the same is true of Minor C within Intermediate (3). Next, we also note within the potential Intermediate wave (5), then this Minor A is also shorter in price and time than all of Intermediate (3), the previous higher degree wave in the same (up) direction, so that this wave, too, can qualify as a true subwave.

So, what does this mean for potential Minor B? Well, within this wave there is a choice of two prior degree waves in the same (down) direction. So, in terms of price Minor B must be shorter in price than Intermediate (4) down. But, in terms of time, not having been in this situation before at such a high degree, it may be that a triangle for Minor B might have the option of being as long in time as Intermediate (2). Maybe longer because of the nature of triangles to move price sideways, but that remains to be seen.

One's wave counts should try to respect degree labeling to the extent possible. If the degrees are unclear, then it is likely that something hasn't meshed properly in the count.

Have an excellent rest of the weekend,

TraderJoe

Outside Key-Reversal Day Down

From the highest high in the trend count, probably the high of the Minor A wave, up, today made an outside key reversal day down, as shown in the ES daily chart, below at the cash close.

Although Amazon and Apple earnings are not out yet, this is also accompanied by the loss of the embedded status of the slow stochastic and a close approach to the 18-day SMA at this time. The only day the embedded status can be regained is the next day (tomorrow's close).

The high of an outside day down should not be taken out within the following two trading days or it can constitute a trap for the bears. With this in mind, it bears watching the impact AMZN and/or APPL may have on the count. Further, the tomorrow is the first of the new month with possible inflows from the usual passive sources, so some sort of correction may result.

If price starts significantly trading down through the 18-day SMA, and closing there, then the Minor B wave is more likely underway.

Have an excellent rest of the evening,

TraderJoe

Copper Tariffs and Earnings

One more trip over the high is possible yet not required. The black and the red count below are equivalent until they are not by The Principle of Equivalence. This is the SPY 4-hr CFD. Prices today were whipped about by the FOMC results, the imposition of 50% tariffs on copper, and by mega earnings after the close.

It is possible that Minor B started today, but we must watch into tomorrow as the institutions might want to bite on the mega earnings news. The red count allows another trip over the high. But the wave counting remains ugly with few good true impulse waves. So, we will learn what we can from wave invalidations or resistance points.

Have an excellent start to the evening,

TraderJoe

Three

After three daily closes above the upper daily Bollinger Band, price today made a higher high, a higher low and a lower close. The three closes higher than the upper band dropped the odds to about 3 - 5% of today's close being outside the upper band, and it was not. (While the futures are still trading as this is being written, we think it likely represents the 4 PM EDT settlement time of the futures.)

Note that the daily swing-line indicator is still up with higher highs and a higher low over the 18-day SMA. The daily slow stochastic is still embedded. And until the red line of the slow stochastic closes under the 79 level it is possible there are some pros (or Smart Money machines) that might still try for a higher high against the upper band again.

From an EW perspective today we counted a possible non-overlapping fourth wave down, (iv), as an Expanded Flat. So, a fifth wave up, (v) is possible tomorrow. But, being Tuesday it could also be a turn day, as well.

It is likely that the prior swing-line low of 6318.75 would be of interest as it might indicate the end of an uptrend, and, if broken, would likely be below the 18-day SMA.

Have an excellent rest of the evening,

TraderJoe

Waiting Patiently

We promised in our last video that if additional waves higher were made this week, it would require a reconfiguration of the Minor A wave higher. Here is that reconfiguration, Essentially, we dropped the degree of the contracting leading diagonal one degree to minuet degree, symbol (i), composed of the five sub-minuette degree waves, symbols i-to-v. Then minute ⓘ is composed of the five minuet degree waves symbols (i)-to-(v). This count has the additional benefit that minuet (b) is shorter in price and time than minute ⓘ, the previous higher degree wave in the same direction, preserving degree labeling definitions.

ES Futures - Daily - Minor A Reconfiguration

In this configuration, Minute wave ⓥ and Minor A now has a new limit shown on the chart of 6,633 because again the third wave in the futures is shorter than the first wave. 

Critical note: since minute ⓘ is now an impulse, and the leading diagonal is only a minuet degree sub-wave, it is possible for this minute ⓥ wave to be an ending diagonal because it is at a different degree. So, it can either be an impulse or an ending diagonal wave. So, first we will show the current SPY 1 Hr chart in the impulse configuration as another extended first wave, at minuet degree, 

SPY Cash - Hourly - Minute ⓥ Impulse Configuration

We are showing this configuration as the extended wave (i), symbol x(i), because minuet (ii) is only a 38% retrace on the first up wave as shown by the Fibonacci ruler on the right. As you know by now, this is highly characteristic of extended first waves. We note that for the SPY, the lower wedge trend line has not even been broken yet!

As an alternate, we can drop the degree one level for the diagonal configuration as below.

SPY Cash - Hourly - Minute ⓥ Alternate Diagonal Configuration

If a diagonal does form, then we would expect a 50 - 78% retracement of the entire up wave for minuet (ii). In that case, the attack on the lower trend line would fail rather dramatically. Although the preferred case is the impulse, because it is simpler, the diagonal alternate is noted for completeness and as another way to extend the Minor A wave in time as the diagonal would have to extend and further cycle through waves (i)-to-(v) yet again.

Have an excellent rest of the weekend,

TraderJoe

Suggestions

Today, on the SPY hourly timeframe we were watching the Fibonacci 162% external retracement on the three-wave down wave that occurred on 16 July. It's the upper red line on the chart shown. Prices over-ran it slightly but nothing to be very concerned about yet. The SPY Cash 1-Hr chart is below.

SPY Cash - 1 Hr - Some Suggestions

There were two possible indications of a top: First, the potential extended fifth wave of c/iii with this wave shorter than a/i. Second, there appeared to be a diagonal forming that we counted in real time. So, the current up count, if it holds could be a,b,c to a (b)-3 wave. Such a (b)-3 wave could be for an expanded Flat or a triangle.

But we don't know upward movement is over. There are still no downward overlaps, nor the undercutting of any significant lows, yet.

So, watching the trend line sketched in, if prices respect it and make a higher high, we will probably conclude there are five-waves-up at that point, and configure the count with Minor A at the new high.

If, on-the-other hand prices breakdown significantly, and perhaps back-test the trend line and fail, then we could likely be in either an expanded flat or triangle scenario. These are very testy waves at this point, and we must just count what we see going forward. At least we have some ideas of the like possibilities.

Have an excellent start to the evening,

TraderJoe

IF Today's High Holds

In the SPY cash index, IF today's high holds I am only pointing out that there would then be a 138.2% Fibonacci relationship with the prior three down waves. I am doing my best to count by legitimate 'fives' and you can see where I've done that explicitly on the chart.

But whether because of overlap or because the time relationships would otherwise seem too bizarre, there is a point where they don't work well. So, this structure could be (a)-3, down, and (b)-3, up. Today's tiny higher high in cash, still not over that 633.94 level, is on a whopping MACD divergence.

There are diagonals galore in these counts. You can see two of them in the space of a week in the above chart. But, if you want to see the count proceed by fives to the extent possible, then as far as I can tell, that is what's involved.

The above count does - if it holds - mean that the Minor A wave may have finished on 15 July, and we could be into the Minor B wave now.

Have an excellent rest of the day,

TraderJoe

Video Update - July 20, 2025

Here is a brief Elliott Wave weekend update video which is designed to take less than ten minutes of your time, compared to some updates that can take an hour or more. As always, hit the full-screen icon on the video player to see the detail in the charts.

I hope you enjoy the content and look forward to seeing what the next week in the markets brings.

Have an excellent rest of the weekend and beginning of a new week.

TraderJoe

Snoozy Clue (3)

The chart news today is interesting on the ES daily chart, below. First of all, as shown by the Fibonacci ruler on the right, we have a longer wave down than the 7 JUL down wave. This 'should' mean - by the rules - that we are out of what appeared to be a diagonal formation at the high.

Second, while the lower today today moves the swing-line indicator temporarily lower, price is still above the 18-day SMA, although it did come quite close to tagging it before rebounding, Meanwhile the daily slow stochastic (regular calculation) continues to have lost its embedded status.

From a news perspective, it was filled with money-laundering bank fines, tariff news, and quasi-news about firing the Fed chair, all of which made for a whippy market.

From an EW perspective, all we have in the ES is one price segment down (like a small i or a), and then a large Flat wave following it that did make greater than a 50% retracement on the down wave. We'll see if this is enough to get prices moving such that they close below the 18-day SMA or not. It remains to be seen.

Have an excellent rest of the evening,

TraderJoe

Snoozy Clue (2)

Today's ES price movement was higher, then lower. But, it was not a full-on outside reversal day let alone a key reversal day. Still prices did have the odd structure of a higher high and lower close. What might turn out to be a bit more significant is that in tonight's overnight action the series is possibly on the verge of losing its embedded slow stochastic status. If, the red line of the slow stochastic closes below 79 by the close tomorrow it might set a different tone on the daily chart, below.

ES Futures - Daily - HH/LC Day

If the embedded reading stays lost, then price and the 18-day SMA might try to come together again. Still, such price movement would not set a trend lower yet. Lower lows and lower highs below the 18-day SMA are needed for that. If that should occur - and we don't know that it will, then the lower daily Bollinger Band would be the first target after the 18-day SMA. Let's see how it goes.

Have an excellent rest of the evening,

TraderJoe

Snoozy Clue

Green volume in the SPY (cash) hourly time frame went to sleep again shortly after the cash open. It didn't stop prices from gnashing higher. The lower hourly trend line held in both the cash and earlier in the ES futures.

If the three-wave sequences we are seeing are part of a diagonal, then the price limit in cash is shown on the chart as 630.85 and in the futures it would be about 6,348. The alternate would be that if the July 3-4 high is actually a third wave, then additional waves would be needed to form a triangle. We'll cover that count more if it begins to materialize.

The market is getting very testy in terms of stalling and prolonging waves. There is a gap overhead and there might be some reason for the market to fill it. We shall see. We are still looking for the Minor wave A, up, to wrap up before beginning a Minor B wave down.

Have an excellent start to the evening,

TraderJoe

Dow Follow-Up (2)

In a further follow-up to the May 18th post (see post at this LINK), now some two months later, the market continues to take its time to complete this pattern. Now at 139 two-weekly bars, the Elliott Wave Oscillator's (EWO or AO) fourth wave signature, dipping below the the zero line - which is not always required, but did happen this time - is apparent. So too, can be seen the initialization of the fifth wave up bars in the oscillator. The EMA-34 can be seen to be winding through each numbered wave for good form and balance.

DOW (YM) Futures - 2 Weekly - Likely Diagonal

The pattern could take a while yet, especially if the next Minor B wave becomes a triangle. The pattern is trying to put you to sleep and make it difficult to trade at the same time. And, it may be waiting for some news to make you think there is a reason for the decline - whenever it comes. And, yes, the Minor A wave can go a bit higher if it wants.

Is it possible for a pattern like this to fail? It definitely is. But, as of yet, there is not real good evidence of such. And based on the lengths of the prior waves, we are trying diligently not to rush the count and would like to see if the full A,B,C zigzag develops.

Have an excellent rest of the weekend.

TraderJoe

It's Summer 🔥- 5

Between yesterday and today, Jul 9th and 10th, we could count five-waves-up in an impulse to the local higher high today as shown as the right-most c wave on the SPY one-hour chart, below.

Green volume appears to be declining as bulls lose some interest at the highs. Red volume is picking up but nothing to write home about yet. The volume profile on the left of the chart shows the point of control (orange line) for this particular up wave being located within the gap in the triangle. This is a level to keep an eye on.

From the left the first a wave up is an impulse, then a b wave triangle followed by a thrust from the triangle for the first c wave. The next a wave up is an expanding diagonal, followed by a brief and sharp b wave down. The diagonal is then followed by the impulse up of the last two days for the c wave and good alternation in a corrective wave.

I haven't done much intraday posting as few seem interested. Have an excellent start to the evening,

TraderJoe

It's Summer 🔥- 4

So far, the overnight action has an a-b-c, up, as in the ES/SPY (CFD) 30-min chart below. The intraday slow stochastic is meandering around the 50% level.

ES/SPY (CFD) - 30 min - a,b,c up

The a wave up is an expanding leading diagonal, and the c wave is an impulse for good alternation in a corrective wave that has a marginal higher high. Three waves unfortunately does not provide that much information yet except that it looks corrective at this point.

Please be sure to translate this to the instruments you are following. Have an excellent rest of the day and start to the week.

TraderJoe

It's Summer 🔥- 3

Nothing wrong with the current count. Today in the ES/SPY was a halting, grinding, slow day upward to the new high. There could easily be more, within limits. Here is the current count, simply continued from the previous chart on the SPY 15-minute timeframe. We'll be switching to the SPY 30-minute shortly.

SPY Cash - 15 min - Count

There is no clear indication that wave (iii), up, is over, yet. It does not have to be. For a contracting diagonal it must remain shorter than wave (i). So far, it has been. If a fourth wave (iv) occurs it should remain shorter than wave (ii), to continue a contracting diagonal.

Retraces can definitely occur, but not below the low of wave (ii) without repercussions for the count as is shown on the chart.

Have an excellent start of the evening, and an excellent rest of the possible vacation week if you are taking it off.

TraderJoe

It's Summer 🔥- 2

Today was the end of the month and the end of the quarter. How long will they drag it out? We had a near-perfect Elliott Wave analysis today, including the suggestion of the 'front-running-of the-beginning-of-the-month-money'. No one apparently cared much. No one commented. No one charted. So, here's the chart we are left with at the end of the day.

The Principle of Equivalence tells us to be patient. To be cautious. We are so being, we are holding no overnight positions at this time.  Although a further wave 5 can not travel below the low of wave 4, there might be some other clues like the EWO turning below the zero line again. There are definitely ways for prices to extend higher. So, we are again flexible, patient and cautious.

It will be interesting to see how much money is committed to the market tomorrow. And it will be interesting to see if any remaining downside gaps get filled.

Have an excellent rest of the evening, and possible start to your holiday week if you are going on vacation or taking some time off.

TraderJoe

It's Summer 🔥

Readership is down as is usual at this time of the year. Everyone's hitting the beach or their camp to try to stay cool in the heat dome. The tried and true 'Wall Street' expressions of Sell May & Go Away did not work again as they have failed so often. So, we'll just chill and show you the same chart we have been showing for months and months, remembering that since there are so many years now involved, including years in which inflation was rampant, we have switched to log format as Elliott advises.

We have been counting this wave using 'degree labeling' the way it is defined: longer waves are higher degrees. Thus, Primary ④ down is longer in time than Intermediate wave (2), down and longer in 'log price' or percent change. And Minor A wave up of Intermediate (3) is shorter in price & time than all of Intermediate (1), up, the prior highest degree wave in the same direction.

So, if we have entered Intermediate (5) of Primary ⑤, as the new roll-over futures high suggests, then Minor A should remain shorter than all of the previous Intermediate (3), the prior higher degree wave in the same direction. We are looking to confirm its closure, now, along the upper diagonal trend line. And Minor B should remain shorter in log price than Intermediate (4) down - the prior higher degree wave in the same direction.

If and when Minor B gets under way, we just provide the reminder that it could be "any three". It could go over the high again in an expanded flat. Or, perhaps more likely, it could be any of several types of triangles. Those triangles could potentially take months if they occur.

So, drop another cube in the lemonade. It may have to last a while. Have an excellent rest of the weekend.

TraderJoe

Less Absurd

Today in the comments for the prior posts I posted links to two charts I labeled as "Patently absurd" but still following the Elliott Wave rules. By the end of the day those counts had busted by narrow margins as I expected they might. Part of the reason for posting the links was to show what wild things are possible under the wave rules unless a good measure of adherence to the guidelines of wave formation is also thrown in the mix. So, below on the ES daily chart is the best interpretation of the current state of the waves given the extent of today's up movement. The key is not to let the truncation in the lower left be ignored.

ES Futures - Daily - To Minor A

I tried counting without the truncation, meh, I wasn't happy with the results and measurements have since likely busted. I did suggest in prior posts I could see a way we were still in the Minor A wave, but it needed new highs. Today provided them. And there is no sign the up wave is over. A clear reversal candle set, and a break of the new trend line is needed along with a back-test that fails. So far, we haven't had that. The truncation at the low, and the "running fourth wave" both spell strong conditions. 

And, the ES 2-hr chart which is its analog is shown below. The two waves are so self-similar (i.e. fractal) on different time scales it gives one goose bumps to consider it.

Yes, this sure is a weird wave minuette (v) of minute ⓥ. It is hugging the rail along the lower parallel line and keeps threatening - like a summer rainstorm that doesn't happen. But at some point, in the not-too-distant future, it should have a clear turn. The lack of fourth waves that don't make their downside targets is a learning experience to have up here at these extraordinarily high prices and against the daily Bollinger Bands.

Have an excellent rest of the evening,

TraderJoe

Don't Swear

I can't swear to it, but I think this is how it goes in the hourly ES futures. The expanding diagonal off of the low meets the correct length requirements for each of the segments and is deeply retraced.

ES Futures - 1 Hr - Channel

That is i/a and ii/b, the MACD indicates a strong third wave following, and for alternation, there may be a Flat wave following. The alternate is that there was an overnight wave as iv which is complete in a wedge count and the majority of today is the v, up, of the wedge.

So, the parallel is drawn in - as are the retrace waves off of wave iii/c - which ended at the location of a prior ④th wave. But because that was only a 23.6% retrace, the question is whether a deeper 38 - 50% retrace wave will be made possibly beginning in the overnight tonight.

The alternate is given as this is a possible minute ⓑ wave up of an expanded flat, after the minute ⓐ wave down, shown in prior posts, and 'B' waves can be very, very testy.

There are other alternates (such as locating all of the Minor B wave low where minute ⓐ is shown or locating minute ((iv)) of Minor A at the same location. If so, five waves up would end Minor A and we would try for a Minor B wave down, again!) But there is insufficient evidence for them at this time. So, we need to take it a step at a time and resolve a wave at a time.

Have an excellent start to the evening,

TraderJoe

One-bar Detour

We were expecting upward price movement today, and - eventually - that happened. But not before prices started out lower as the result of the war actions over the weekend. Those dropped the market on a futures gap, and the first four-hour bar of the overnight session was a lower low with a close in the upper 1/3rd of the bar as the ES 4-Hr futures chart, below, shows. See brown arrow. The drop was never seen on the opening bar in the cash market. This has often become a sign to me that the PPT (Plunge-Protection-Team) or duly authorized President's Working Group, as it is formally known, is active in the markets. Having a bit of a skirmish, are we? Let's make sure the markets are protected from it.

So, the overall count remains the same. What changed is that the contracting diagonal downward to the (c) wave morphed into an expanding diagonal to that same (c) wave where all the legs are still zigzag 'threes' but now the wave lengths are v > iii > i, and iv > ii with iv overlapping wave i, but with wave iv not traveling beyond the end of wave ii. In the prior post I commented on how the up wave 'ran into a brick wall' at wave ii. And now you know the significance of that. It was 'marking its turf' that wave iv could not exceed wave ii.

Thus, we still count three waves down to minute ⓐ, and that could allow a 90% or greater wave up as a minute ⓑ wave, or something else as a minute ⓧ wave that does not have the 90% requirement.

Note the MACD histogram is positive, and the MACD line is just now crawling above zero, although the signal line is not positive, yet.

From a daily Bollinger Band perspective, price had closed Friday under the 18-day SMA and so had negative bias. The futures followed-true and make a lower daily low bar but ran into the combination of the 200-day SMA and the lower daily Bollinger Band where they found support. Today's bar is an outside-day-up, which is to be respected until its low is exceeded lower.

Have an excellent start to the evening,

TraderJoe

Three-Ways (2)

The front month futures currently show the clearest, countable pattern in the four-hour time frame. As we said earlier the initial pattern is a 3-3-5 Flat pattern, as below.

ES Sep Futures - 4 Hr - Flat Pattern

This makes the low on the 19th either a minute-ⓐ or a minute-ⓦ wave. These down waves - and their hesitation and halting nature - likely represent the "battle for the 18-day average" back on the daily chart.

The current up wave seems unresolved currently because a slightly larger parallel can still be intact. The question is how high a minute-ⓑ or minute-ⓧ wave would go. For example, Friday's c wave stopped almost precisely at the level of the prior ii wave, up, of (c), down. There is a non-zero probability that the up wave is over, and, if so, because it did not reach the 90% level it would be the minute-ⓧ wave, as in the pattern known as a Flat-x-zigzag. The zigzag extends the wave lower. Otherwise, if the 90% or better level is reached, the multiple-flat (double-three or triple-three) pattern might be in play.

For those considering the structures shown, we note that the (c) wave is longer-in-time than the (a) wave down. This again means that the two waves should be of the same degree or else the (c) wave down would be of one-higher degree. For the moment, we see them as the same degree as their price extents are very, very similar.

Have an excellent rest of the weekend,

TraderJoe

Three-Ways

You've heard of "Freeways", right? Where traffic is supposed to zoom along like I-15 to Las Vegas, right? Not like the "405" that crawls you down to a crunch stop on the way from LA to San Diego, right? Well, today's market, so far, in front of the Federal Reserve announcement, dot-plots, and press conference is more like the latter, but what I have termed temporarily "Three-Ways".

ES/SPY/CFD - 2 Hr - Three-wave Sequences Only

As of this morning anyways, the two-hourly ES/SPY/CFD has only three-wave sequences. And last night's up wave was longer than the immediately prior b wave. Further, note the downward c wave stopped around that 78.6% level which could indicate a triangle.

So, the bottom line is that highs or lows need to be broken to get out of this mess. A triangle is possible, overall. A downward diagonal is possible for the most recent wave. Fittingly, the front-month ES contract is only down to the 18-day SMA as of last night with the daily slow stochastic in over-bought condition only (not embedded) - and this is where it often goes in front of major announcements.

ES Sep Futures - Daily - Bounce from 18-day SMA

So, be careful as whippy conditions could prevail. Lots of valid Elliott Wave structures are valid from here, so it is more a case now of ruling out what becomes not possible - or less possible - based on price lengths made today. On the first 2-hr chart, one might especially watch the 78.6% upward level in the triangle eventuality, or the low of the c wave in the downward diagonal eventuality.

Have an excellent rest of the day.

TraderJoe

Cash to 90%+

After three-waves down we noted over the weekend, the SPY cash index went to the 90% level, plus some, as below. The current front month (June) ES contract did also. The roll-over contract went to the level of 1.236 times the down wave.

The ES price is still over the 18-day SMA. The bulls are still in control. That being the case, a (b) wave of a Flat, Expanding Flat, running Flat or of some of the kinds of triangles is still possible, but no conclusions are reached as of this time.

Have an excellent rest of the evening.

TraderJoe

The Extended First Wave Count to Minor A - 3

On the daily chart not too much has changed with the recent hostilities. In terms of the wave count it remains the same, as below. Confidence has increased slightly because, over the last couple of days, a longer wave down has been made than the (e) wave of the triangle, and it traded below that level, as well. Since, triangles often precede the last move in a sequence, there is some greater level of confidence that a top is in place temporarily on the ES daily chart, below.

ES Futures - Daily - Minor A

This also means that the break of the wave ((ii))-to-((iv)) trend line (circle-ii to circle-iv) occurred in less time than wave ((v)), circle-v, took to build. Neely adherents will recognize this as the first step in the confirmation process. Trading below the (a) wave, and possibly filling the higher of the two open gaps would be a good second step.

We say - and we mean - confidence precisely because we are always just dealing with probabilities and odds. For example - at present - we only can legitimately count three-waves-down, so far, on the hourly chart shown below.

ES Futures - Hourly - Three Waves Down

Notice the very precise Fibonacci relationships where - at the b wave high - wave Ⓒ = 2.618 x Ⓐ, and at the bottom wave c = 1.618 x a. Again, this just reinforces three-waves-down in the futures. Then, for the up wave, notice that it is longer in price than the b wave, up. Therefore, it is either of the same degree or one higher degree. At present, we are showing it as one higher degree. However, IF it is of the same degree, then it is possible a triangle is forming (we'll deal with than one if Friday's low is not exceeded lower).

Then, notice the Elliott Wave Oscillator (EWO or AO) is really only showing a significant trough, a hump above the zero line, and another lower significant trough. So, this looks like only a three-down, with a flat for the b wave.

This does not mean it can't start a diagonal lower, but lower lows are needed to prove that case. And if a diagonal forms, then the five minuette waves down, (i) through (v), would form minute ⓐ wave down, because it would take three minute waves, ⓐ-ⓑ-ⓒ to form the minimum Minor B wave down.

The bottom line is more length in the Minor B wave is probably still necessary. Readers of this blog should also plot the daily Bollinger Bands with the 18-day SMA and daily slow stochastic to see that all we have been doing is "fighting the battle at the 'line-in-the-sand'." A close below that 18-day SMA is needed to be a more convincing onset to the correction. So, try not to rush the counts. There are only three-waves-down, so far. The bulls are technically still in control until they are not. Legitimately, the three-waves-down means travel over the top is still possible until / unless Friday's low is exceeded lower.

Have an excellent rest of the weekend.

TraderJoe

The Extended First Wave Count to Minor A - 2

The lack of progress on the Minor B wave downward despite overlap, after overlap, after overlap suggests that perhaps Minor A is still underway with a triangle for minute ((iv)), circle-iv, on the ES daily chart, below.

The remainder of the counting process and conclusions remains the same. Further, we do not know that upward movement is over.

Have a good start to the evening,

TraderJoe

The Extended First Wave Count to Minor A

The concept of this chart has not changed since it was originally published on May 29 at this LINK. It is still The Extended First Wave Count to Minor A. It is now out to 130 candles, and it is still the count that 'best' meets the rules and guidelines of the wave principle, and which follows The Eight-Fold-Path Method for Counting an Impulse Wave. The ES 8-hr chart is below. Please remember that double parenthesis, i.e. (( )) is the same in text as a circle, for minute waves. Thus, in text ((i)) = ⓘ and so forth. With that in mind we have added some recent details.

In the extended first wave count, then, wave ((v)) < ((iii)) < ((i)). Notice wave ((iv)) is actually somewhat longer in price than wave ((ii)) but does not overlap wave ((i)). This is likely a key that the count is correct because the two waves, ((ii)) and ((iv)), should be of the same degree - or else ((iv)) is of one higher degree, since it is longer. My contention is that they are of the same degree. Further, note that all of wave ((iii)) is above a 0 - ((ii)) trend line. And wave ((ii)) is much less than 38% which typically indicates an extended first wave.

We are now likely in the Minor B wave, and in the (b)-3 wave of a B wave at that. So, wave counting here is ugly. That said, sometime soon the first (c) wave lower should occur.

Also, the leading contracting diagonal for wave minute ⓘ should mean that the fifth wave of A, minute ((v)), circle-v, should not be a contracting diagonal by the Principle of Alternation.

If/when the (c) wave lower gets underway it certainly could be an impulse, but it could also be one of two types of diagonals (contracting or expanding), depending on how slow or fast the algorithms want to go. Still some larger down movement should occur to better signal the onset of the Minor B wave.

This is the second post since Friday. Have an excellent rest of the weekend,

TraderJoe

Doji & the Seven-Gaps

Like the title of a bad alt Disney movie, today's SPY contract gapped up starting way before the tepid Payroll Report. We warned we could see some vicious retracement and used the hourly EMA-34 as a marker, but price far exceeded that level and made a new local higher high which is still in an overlapping wedge shape. Price then waffled around lower, making a double-zigzag lower only before heading up near the open to create the Doji bar. Today's gap up created fully the seventh unfilled gap upward, as the daily SPY chart, below, shows.

While the higher prices overall are great for investors, currently, the numerous gaps on the chart, which is not a first, continues to make wave counting a bit more difficult. For the interim, yes, there is an overlapping wedge shape near the high. We pointed out several of those overlaps in yesterday's post. And today added more overlaps to that list. It can still be part of the (b) wave higher as the price difference overall is minimal.

But our most prescient concern is what happens when the algorithms reverse and go "gap hunting" to the downside? At some point that is still likely. Let's just hope they don't go for all seven at once.

Notice 1) price has pulled away from the upper parallel and has made a turn to the right, which is a slowing of momentum, 2) there is still MACD divergence, 3) and also have a gander at green volume here. We have drawn in just one Fib line. Today was the 1.272 from the initial leg of this mess, and the close was almost dead on it.

There are no certainties here, but the wave count feels very much like B wave territory. I don't think the retrace levels are deep enough to consider diagonals.

So, I did get the call to a (c) wave of a larger B wave incorrect for the day. No doubt about that. And, even still, as frequent readers of this blog know a single-candle pattern - such as a doji is insufficent to call a turn. Much better to have a significant closing lower candle. So, Monday could even trade up again, and reverse, or wait until Tuesday to reverse.

What I just really shake my head at as the chart clearly shows how much risk there is up here, and the complacency is amazing to me. Pick-your-gap fill, right?

Have an excellent start to the evening,

TraderJoe