With All Due Respect

With all due respect to wave counting, which is a lot of fun and very useful, today the market as measured by the ES daily futures stalled in its up wave right at the 100-day SMA (green dotted line) and then fell off in another whippy wave as on the ES daily chart, below.

ES Futures - Daily - Reversal from 100-SMA

Further, we see prices closed outside of the lower daily Bollinger Band which only roughly happens about 5 - 7% of the time. Further, we see the 200-SMA, the brown line, is sneaking up from under the market. It would not be unusual if they touched, or more. Price has not hit the 200-day in more than 300 days - as we mentioned earlier. It is due.

Ira notes that often the retail gets most bearish when price cracks the lower band. And while that is true, the Smart Money often uses the lower band to come out of their short positions entirely, or at least partially, perhaps letting some profits run.

With about 5 - 7% odds, lower prices can happen. So can whipsaws. Which this will be remains to be seen. We do note that the daily slow stochastic is currently only in over-sold territory. It has not embedded. Embedding would be the best sign that that Gorilla-Glue trade to the downside might occur, where price latches on to the band and doesn't let go for days. But, as stated, embedding hasn't happened yet.

Perhaps price will just touch the 200-day, and bounce; it will be interesting to see if there is any reaction. Still, according to Ira's methods, there is nothing bullish on the chart until or unless price closes back above the 18-day SMA and the swing-line indicator turns up. Right now, the swing-line indicator has a lower high and lower low, so very little can make it outright bullish, either, at this point in time.

There are still multiple ways to count this beast. This weekend I will review some additional wave degree information. And while nothing to the downside will surprise me, one of the few ways I could see a true top at this point is with a truncation - as follows.

ES Futures - Daily - Alternate Truncation Count

For the truncation count, both of the Key Levels shown would be expected to be undercut is relatively short order. One issue to note is related to the Elliott Wave Oscillator, EWO, or AO. Note that after it turned down into the January 14th lows for what looked like a fourth wave, it subsequently rebounded to give the appearance of a short fifth wave, above the zero line, and has since turned back below the zero line. So, that is one sign - albeit not definitive - that waiting for a longer in time Minor 4th wave for too long may not be the most prudent.

We shall see. It is still The Fourth Wave Conundrum (that happens at every degree of trend) until it is not. Remember that tomorrow is the end of the trading week, and the end of the trading month. So, some book-squaring may occur tomorrow waiting to see if First-of-the-Month inflows from the previously identified sources are waiting to be invested.

Have an excellent rest of the evening,

TraderJoe