The economic reports before and during the stock market open were almost uniformly negative, indicating declining economic activity - which inversely should argue for lower interest rates in the future and higher stock prices. Except that the University of Michigan Consumer Inflation Expectations came out at 3.5% vs 3.3% and may dissuade the FED from lowering rates. The stock market, as measured by the ES daily futures, ran away from the upper band yesterday, traded below the 18-day SMA and closed darn near the lower band. This temporarily both changed the daily bias to lower, and temporarily - at least - caused the daily slow stochastic to lose its embedded status.
Further, the drop was low enough, being 62% of the prior wave, that for the first time we can count a triangle on the daily chart, as follows.
Is this count correct? It is still difficult to say. For the first time, the trend line up from the January low was exceeded lower. Triangles often do this. Further, the MACD is as flat as a pancake and this, too, often happens during triangles.
But the item of concern is that the ES lead month contract (ESH2025) has simply not made a higher high since December like the cash market has. So, the formation might be a barrier triangle. And we're OK with it if it is.
But we ALSO can see the possibility of any of the following: 1) a larger triangle with the b wave where it is shown in red, 2) a lower ⓔ wave or 3) an even larger fourth wave flat for Minor 4 because the up wave is at least 90% of the down wave.
So, we must bide our time and count locally until we get a breakout or further breakdown. Yes, it is somewhat exhausting trying to count and wondering which pattern is playing out.
But, what else should one expect if we are getting a longer sideways pattern for a fourth wave? So, we look forward to what Monday brings to see if further information can be gleaned. IF there is an immediate, swift reversal of consequence it may reinforce the case for a triangle. But that remains to be seen.
Have an excellent start to the evening,
TraderJoe
TJ this is not meant as any kind of criticism but I am curious as to why your proposed counts from Tuesday , both the primary and alternate showed only bullish patterns. The reason I ask is I was wondering about a b wave possibility or a triangle both of which meant a significant decline was possible. I realize with EW counts we are always talking about probabilities and one cannot always chart every single one but I was surprised that a bearish count was not included as an alternate. Thx.
ReplyDeleteThe answer is simple, but before providing it, let me say that if you 'ever' criticize me I will fall on the floor, break into pieces, melt into a pile of goo and never post another chart again (LoL, not!). Oh, the answer? You have not been reading. Lots of downside alternates were provided here.
Deletehttps://studyofcycles.blogspot.com/2025/01/options-fourth-wave-conundrum.html
BUT, as clearly stated, price was still in the parallel, AND the daily bias was up. One counts what one has in front of them. I further 'clearly' stated several times that upside risks were high. I also clearly stated that 'nothing' to the down side will surprise me. I 'personally' have no upside money at risk in this market overnight. Not ETF's, not equity futures, nor 401k's, nada, nothing. Not up here. I can't track markets while I sleep. So, I come fresh each day and see what the news does.
That's it. It's simple. Period. No amount of downside will surprise me.
TJ
Wonderful Candor
DeleteTj, if you have time help us with the issue..Thursday up-move was same for cash and futures during the regular market hours.. However futures made one more high over night and cash did not. How does one reconcile both counts ..need to solve this mystery. That can help us with our trading.
ReplyDeleteI had identified the Thursday count quiet accurately during regular hours but the futures high after hours just threw me off. https://www.tradingview.com/x/L8xQfYrU/
DeleteGiven the size of the down move on Friday, this suggests they are both either 2's' or B's. And the down move is either 3 or C. The Principle of Equivalence says you will not know the difference between them until/unless you see a valid 4 and 5 (or not). TJ.
DeleteOk thks
DeleteThrowing out another option if Monday morning low if the end of C
ReplyDeletehttps://www.tradingview.com/x/AvOn8A8U/
Jack, as I said, the ES front month contract just 'doesn't' agree with that view because there are no higher ATH's yet. A contracting diagonal typically has higher highs. I know cash does. Futures just don't yet. TJ.
DeleteOk good point. I missed that one
DeleteSo, let's say for the moment that cash & futures "need" to reconcile. The cash has higher highs, the futures does not. If we have only made a ⓑ wave up in the futures, then this larger Flat 4th wave is 'possible' instead of the triangle.
Deletehttps://www.tradingview.com/x/hfPvrop6/
The current triangle is OK. But it is only one of a good couple of alternates. People tend to 'hate' long-in-time fourth waves. But that is their wave personality. They can be very frustrating and difficult to count. Keep in mind that cash does not care at all how highs it's ⓑ wave might be around this level.
TJ
The iwm could be finishing c of b with a higher c next. Just throwing it out there. It still has a gap above at 235 and spy has a gap now open at 612. A "B" wave up on spy could fill it and especially rally the Iwm which has been extremely weak. Bears are salivating right now but another rug pull to the upside on Monday wouldn't shock me. 4hr rsi on ES is as low as it usually gets before a larger pop up. I know this time can be different, but so far it doesn't look different - yet.
ReplyDeleteIf this is what you are talking about, I'd say it has a pretty good shot.
Deletehttps://www.tradingview.com/x/TNdgCdxW/
TJ
Yes exactly that, thanks 🙏
DeleteGOLD (GC) futures 4-Hr: price has eked out marginal higher highs on divergences. Possible diagonal or triangle.
ReplyDeletehttps://www.tradingview.com/x/O5JHoITh/
TJ
ES 30-min: from the intraday wave-counting-screen, there are three closes under the lower band. Odds drop to 2 - 5% of next close under the band (not impossible, just lower odds).
ReplyDeletehttps://www.tradingview.com/x/OQdFbLJ0/
TJ
..also intra-day slow stochastic just in over-sold territory. TJ.
DeleteIs the move from high to today's low 5 waves down on ES?
ReplyDeleteFeb 19 to Feb 24
DeleteI see 5 down from 21st so far..could be wrong
DeleteProbably imo, unless we get an extended 5th.
DeleteJust to add i see 5 down on cash from 21st. I suspect in futures it's still playing a triangle which might breakdown tonight some time..and then reverse before cash market
Delete5 down this morning complete third wave. If so another leg down coming after this fourth wave completes. Then need to figure if the entire move down is first wave of a much larger selloff, or a C wave to complete the correction that leads to new highs. Since the algos seem to love three wave moves and prevents five wave impulse moves, I'm leaning toward bottom soon as C wave completes.
DeleteES 5-min: to me, this is the immediate issue. Higher or lower? Lower could be the b wave of an expanded flat. Higher could be five of 'c' an earlier flat on cash.
ReplyDeletehttps://www.tradingview.com/x/G7qTYqMf/
TJ
At 6,023.50 overlap has occurred. TJ.
Deleteor perhaps end of waterfall 3, then abA up now B down soon C of 4 up to R @6070 cash (don't have es) ... then new lows on a divergence.
Deletehttps://www.tradingview.com/x/gUmgq2H6/
ReplyDeleteES greater than 90% of the low. Likely 'at least' a 'b' wave of a Flat, lower. TJ.
ReplyDeleteA new post is started for the next day.
ReplyDeleteTJ