Like a basketball off the backboard, stocks prices on Friday - as measured by the ES E-mini futures - hit both the upper daily Bollinger Band and the (red) 1.618 external retrace of the potential minute ⓐ-3 wave, and at least temporarily recoiled from that level. In the process, the bar formed was a doji. As far as I can tell, this would otherwise end a minuet degree (w)-(x)-(y) should upward movement end in this vicinity. Because of the exceptional length of Minor A, there is no time violation for minute ⓑ-3 as things stand. But the issue is the typical price lengths of ⓑ waves in expanded flat corrections. Price appears to be roughly there.
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| ES Futures - Daily - Near a Limit |
There are two additional issues. The first is that the daily slow stochastic has just embedded - which often occurs before continued moves. And the second is the premium of the December ES contract is currently +50 or more points over the current level. The impact on local prices is not known yet. It could be a substantial driver, if not this coming week perhaps later in the year. Certainly, reversal is a potential around the quad witching that occurs this Friday.
So, we have two suggestions. First, if prices extend instead of reversing, then we simply suggest counting the Minor A wave as follows in this best alternate.
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| ES Futures - Daily Close - Best Alternate for Minor A |
The sub-waves in the above chart can be 'forced' to work, so we'll just accept it if that is the case because the identification of a Minor B wave is certainly difficult in that circumstance. This count would simply recognize all of this wave as the volatility squeeze since the tariff low.
The second suggestion relates to the roll-over. The suggestion here is to just use the December front-month contract for local counting. Don't back-adjust it, don't make it a 'continuous' contract - just use it as is and see what it provides.
In terms of local actions, the current ES 2-hr pattern suggests a wedge with three-touch trend lines, as below.
What the chart suggests is that for any significant down trend to begin, there should be a break of the lower trend line, a back-test of it, and a failure below the overlap level. All we can do is watch to see if and/or when larger sellers show up to reverse the current situation.
Have an excellent rest of the weekend,
TraderJoe
Sub waves of b definitely perplexing. Their time relationship to the entirety of a seem wildly out of all reasonable proportion, granted the torturous nature of the corrective triple ZZ. Weird!!!
ReplyDeleteET - Here is the link to the declines I was referring to marked by the white lines.
ReplyDeleteThey seem to be longer than wave (2), which made me not consider that count.
https://www.tradingview.com/x/JtgvfCMq/
Within iii, the net distance travelled between Ⓐ and triangle Ⓑ is much less than ii.
Deletehttps://www.tradingview.com/x/0ayBlG8M/
So, I think the observation, in short, is being fooled by a triangle. A triangle is one of the few places where degree violations can seemingly temporarily occur because, the net measurement of a triangle is always to its (E) wave - and that is whether the triangle is contracting or expanding.
TJ
Thanks ET! So, in this case we can ignore the lengths of (A) & (C) (which are sub waves of the triangle & are longer than ii) & just consider the net distance between Ⓐ and Ⓑ. Since these lengths were long, I was forced to consider end of iv as ii. Wow, its amazing that you could do that in real time.
DeleteThanks TJ. Fed cut will reduce the govt. interest paid on debt by almost 1 trillion + higher equities bring more corporate tax + tariff tax collection + (in process)no income tax till 200k(85% of US population-India already did)+ fed setting a new inflation norm @3% target + $ depreciation which gives competitiveness. With all these things hard to imagine 50 points difference in Dec contract. corrections may come in between but seems long term SPX/ES targets are way way ahead.
ReplyDelete