Golden Slumbers

With apologies to the Beatles lyric, I was asked back in July if I thought Gold had bottomed. At the time I said "not likely because of the three-wave sequences at the low". Practically the instant I said it, Gold, as measured by Gold futures (GC), went on a tear higher as the chart below shows - traveling about $700 higher. But a new all-time high was not made - nowhere near the $5,600 high - and this set up a huge bull trap, because, as the chart below shows, Gold for December has made a new contract low over those July lows.

Now to be fair, the November contract, and the roll-over contract have not made the new lows yet. But they might. That is to be determined. So, the question now is, "what is to be made of Gold, now?" Well, my original count was that we were making a contracting diagonal lower into July, as the weekly chart below shows. The five-wave contracting diagonal could easily be the Intermediate (A) wave of a zigzag, lower. This seems to be validated by the lower low just seen.

So, the new low in the December contract could be one of two things. First, it could be a stumpy (C) wave which may or may not be over. It can currently count as five-waves down, nearly complete. And remember, a 'C' wave could truncate. They certainly do happen. And the three-waves down, now, might start a larger Flat wave - but that is not required as the damage is being done.

So, with the five-waves-down now suggested when it ends it might start the larger upward move. We will have to watch closely to try to verify it, but an upward move would be confirmed over the (B) wave high. Other counts are possible, too, such as the start of a very, very large triangle. But there is insufficient evidence to begin a count like that at this time.

Have an excellent rest of the weekend,

TraderJoe

Someone Say "18-day"?

Prices in yesterday's daytime session pipped up over the 18-day SMA and tried to close strong-ish with a close above that average as the ES daily chart shows below. That seemingly would turn the bias up, but the swingline indicator had no up-trend. But, after the boring earnings conference calls from Meta and Tesla started - which were long on promises and short on details - prices began wavering. This morning they are falling off fairly sharply and are again below the 18-day SMA.

ES Futures - Daily - Intraday Lower

Prices could head back to the 100-SMA and/or the lower daily Bollinger Band, and a key question is whether or not a daily fractal will break lower or not. If so, then the next immediate target would be the up-gap fill from the daily close of 31 July. The daily slow stochastic is not yet in over-sold territory, and there is some chance it might start the process to embed lower, but we need to take that a step at a time. First, we need to watch the red (down) fractal to see if it is exceeded.

Again, no amount of down movement will surprise us. So far, the price action is consistent with my primary EW count and the potential truncation. Let's see if it holds. If you are a newer reader here, I will point you to my paraphrase of broker Ira Epstein's guidelines for trading here at this LINK that I have summarized from his publicly available videos back in 2015.

Have an excellent start to the day,

TraderJoe

Break-ie, Break-ee

Attached is the daily chart of the ES futures (rollover contract) with the steps for potential diagonal confirmation clearly shown. The chart uses the Zigzag indicator, so the wave terminals are accurate.

The first confirmation step may be checked (or tic'd, as they say in the UK) as complete. The remaining are yet to be seen.

What happens if confirmation is not obtained? Then, one must look for a different structure, such as a large Flat at the high, or possibly a triangle, or something similar - even a larger diagonal.

Let's see how it goes. Have an excellent rest of the weekend,

TraderJoe

Current Suggestion

Tops of any degree can be darn difficult. In our local case, we don't know for sure that a truncation has occurred. But, if it did occur, it could have happened in one of two places. Those are both shown in the SPX500 (CFD) 4-hr chart below, market with the red asterisk and question mark.

SPX500 (CFD) - 4 Hr - Channel

So, the best suggestion at this time is to draw the parallel, as shown and see if today's high is exceeded higher. If it is, then the A/B/C count lower may best pertain, especially if there should be upward overlap. Otherwise, it will be harder to claim a larger degree "five-down" until or unless there is a new low from here. Then, if there is, there could still be confusion with the nominal high made on 6 Oct. And that is why there is also a purple 1 & 2 shown in the count with purple 1 near the low.

If the market is to truly be weak, then it must show that character. If it is to be stronger, it could still wheeze upward into a larger diagonal. So far, the buying has persisted into yesterday. If the market can truly be perceived in a down trend at this time, that buying would seem a bit odd - unless the buyers are ignoring all the warnings (or those doing the buying have nothing to lose - like government officials, etc.)

So, caution, patience and flexibility are still highly recommended until the market speaks more clearly.

Have an excellent rest of the day and start to the weekend.

TraderJoe

Caution Flags Flying

Because today 'can' be currently counted as 'five-waves-down', there is some probability that, contrary to the 8,000 hype, the upward count is over. Note, this count, the truncation count, still requires better confirmation, but it should receive serious consideration because of the sloppy upward progress of the last several sessions.

The count is shown here in the ES rollover contract, but cash would be similar. There is no reason that a throw-over of the upper wedge is required, and those who think this must happen might be abandoned by price. The RSI hasn't quite broken a larger trend line from late July, yet. But it could.

We will have to wait and watch for both that and further confirmation signals in upcoming days.

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

TraderJoe

Nary A Touch Lower

Overnight the ES futures (and the SPX500 CFD, below) made a higher daily high near the R1 daily pivot level. But, as the SPX500 30- minute intraday wave-counting-screen, IWCS, shows, price could not close outside the lower band this morning.

SPX500 (CFD) - 30 minute - IWCS

Further, price could not close on or below the daily Pivot level (P) and is headed back for the 18-period intraday moving average after the intraday slow stochastic lost its embedded status.

Short-term we continue to follow the local technicals as prices continue to try to resolve to a fuller EW count.

Have an excellent rest of the day.

TraderJoe

EWaves Envy ?

As you might know, Elliott Prechter, the son of Robert Prechter from Elliott Wave International, has spent a LOT of time and money developing the EWaves program which is purported to automatically scan thousands of markets or stocks quickly and look for their conformance to Elliott Wave patterns. I have no doubt that with today's computer capabilities that is largely or at least mostly true. For my part, I am just here to say that at least for daily and weekly charts, you can "mimic" what the EWaves charts look and feel like, just by using the Zigzag indicator on TradingView as the daily chart of the ES futures (roll-over contract) shows below.

ES Futures - Daily - ZigZag Indicator Wave Counting

This chart is current as of today. EWaves intentionally avoids using circled letters and numbers for clarity and, instead, uses larger or smaller numerals, and/or colors for wave-degree distinction.

If the ZigZag indicator is used in TradingView, one just hides the price series so that the overall form of the wave appears. The purpose of this ZigZag indicator is to provide the true "terminal points" of the move - which are often inaccurate if just closing prices are used.

When you look at this chart, among other things you might ask, "why were the letters A & B assigned to the blue labels?" It is because B wave retrace is only about 38+% which is typically smaller than a second wave, which is most often 50 - 62%. That is really the prime rationale, but the other portion of the rationale is the look of A wave - which has the look of a non-pullback wave. These no-pullback waves are often either A or C waves.

Now, we don't claim this method can scan a lot of stocks or indexes. Nor does it do the automatic labeling that Ewaves does. But if you have a few that are of interest, you might try this method to improve your own wave-labeling skills. It is very, very possible that EWaves is on to a real advantage here - and one that can take out some of the emotion. But it likely may be too pricey for some individuals and seems largely targeted to subscription services and institutions.

Have an excellent start to the evening,

TraderJoe

Everyone Raise their Hands

This is the question that literally everyone knows the answer to: When wave three is shorter than wave one, how long can wave five be? Don't everyone raise their hands at once. Of course, it should be (for a valid Elliott Wave count) that wave five should not be longer than wave three. That is because in any count the third wave is never the shortest wave. So, in the daily chart, below, a measurement is possible.

ES Dec Futures - Daily - Measurement

Thus, in the lead month futures contract (ESZ2026), if the count above has the third wave at the August high, then the fifth wave simply should not exceed 8,093. Yup, that is the question everyone knows the answer to. We know that today the NQ futures and cash S&P500 and SPY did go on to make higher highs. Interestingly, the ESZ did not, as you see above.

But the question a few more are hesitant on is, "what if the third wave is still in progress"? If there is a misinterpretation that the late-July, early-August up wave is actually a "5", and not a "3", then perhaps price is making a diagonal "(c)" wave of minute-iii, ((iii)), or circle-iii. That is possible at this point.

I've seen diagonals do a lot of freaky things to try to stall before the inevitable. This one might also - given that index pricing could easily be driven by a large leveraged bet in a high cap name. If that is so, then a third wave could become longer in price which might drive the fifth wave to a higher high than shown.

So, while there are quite a few ways price could take a steep plunge from here - that we are on our toes for - there are still ways for the market to delay, to frustrate, to whip, and to mislead. We will not be surprised if the market does that.

And we are calm, patient and flexible, not only until an ending count can be determined but also until there is decent confirmation of a turn. We remain vigilant if a truncation should occur. We continue to follow the local technicals as we did today, paying keen attention to prices being over the upper daily Bollinger Band in an over-bought condition on the daily slow stochastic. And we are monitoring the intraday wave-counting-screen (IWCS) to give clues to more immediate price direction. But at the moment, price is still well over the 18-day SMA, so the daily bias is up at this time. That could change. There could be an outside reversal bar at any time, but until there is, there is mostly the "hard right edge of the chart".

What else is there? Well, there may be a time when the right question becomes, "what is a good time to build a core position for a turn lower?" Don't everyone raise their hands with the answer.

Have an excellent rest of the evening,

TraderJoe

So far ...

Prices have come soooo far since 1932, since 1974, since 1987, since 2001, since 2009, since 2021, and so far, prices still have the right look for both a larger and smaller contracting diagonal. We have shown the larger two-weekly one many times, and it has the right look on a log-scale chart. The daily one is below is shown, and it has the right look currently on either scale.

The initial B - to - ((ii)) trend line was broken in what may be the underthrow for the overlapping fourth wave. And a fifth wave may be in progress. The PPO indicator currently diverges on each subsequent peak, and has touched the zero line twice since June. The upper trend line has multiple touch points. The only item that would be nicer would be if the retraces for the second and fourth waves were closer to 62% or more.

On Friday, the Payroll report gave prices another lift higher, but then they stalled. It seemed like an ideal time to take prices over the prior high, but they just wheezed. We're not making too much of it. We're just remaining calm, patient and flexible pending short-term technical developments. The NQ futures did go over the high again. Still, the four hour chart can give one some markers, as below.

At the moment, the odds slightly favor the uptrend in force. But one needs to watch the recent trend line and Thursday's low for a presumptive invalidation of the uptrend should it occur this week (with better confirmation below 7,575). The prior high is certainly a target for a continued move higher. If slightly higher highs are made, it may wind up only be the minuet (a) wave of minute ⓥ with a (b), and (c) to follow.

But, make no mistake, ES prices are stretched to inanity, and declines should not surprise. I say that because so few stocks and or indexes are participating in the rally. The NYSE Advance/Decline line is clearly not at new highs at this time.

Sentiment is also stretched to an extent not seen before - with my proprietary bullish sentiment indicator indicating more consecutive weeks over 60% bullish than at any time in the past. It's not the highest reading ever, but it is more sustained than in prior runs. People are rotating from "Good news is good news", to "Bad news is good news". In other words, they want to see economic weakness to drop interest rates some to lift stocks more. This has happened in many prior cycles too. It may be a sign of hope developing. And remember, a bear market skids on the slope of hope - should one begin.

One can argue that the Dow and the Russell 2000 have begun significant declines. If so, the Dow especially would just be validating the longer-term two week contracting diagonal. It had quite a few days down, which might indicate  a turn of degree, but one would want to see a greater price extent.

Have an excellent rest of the weekend,

TraderJoe

Outside-Day-Down

Today, we were counting downward for the potential Ⓔ wave of a triangle representing the end-of-month and end-of-quarter window-dressing. We warned that the current scenario supported multiple counts, and we got one which broke the triangle lower in the futures - after the cash SPY had broken yesterday. The selling into the close was sufficient to make an outside-day-down, after we had counted three waves up. So, the conditions of the chart, below, are now an outside day down, and a swing-line indicator with a lower high and a lower low, and a close below the 18-day SMA.

ES Futures - Daily - Outside Day Down

The daily show stochastic is no longer over-bought, it has 'worked-off' that condition, but it is also still above the 50 level, and so, it is not over-sold. So, an analyst like Ira might give the advice that "until the high of the outside day is exceeded higher, then price might try to make a run for the 100-day, the lower daily Bollinger band, or - even possibly - the 200 day SMA."

And any low below the low of 16 Sept might set off the potential truncated top shown by the red asterisk *. So far, it looks like if we go up, it might be by diagonal, and if we lower there is one way it might be by impulse, but there are insufficient waves to show it yet.

So, tomorrow is the first-of-the-new-month, and the first-of-the-new-quarter. We'll see how many money managers want to fire all their bullets at the first of October, and who want to keep some powder dry. Since, a truncated top is a real possibility, no amount of downward movement should be perceived as out of the question. The question is whether further upward waves can be made or not. If they are, we have one count for that, but it would invalidate below that 16 Sep low.

Have an excellent start to the evening,

TraderJoe

Stuck at the 18-day SMA

Five of the last six days have at least seen prices touch the 18-day SMA in the ES Dec futures, just the lead month, as below.

Today made a lower low in the SPY cash ETF. It did not in the ES Dec futures, and instead price just scampered back to the 18-day SMA to close near there. The market currently is quite sideways. The Elliott wave counts we posted yesterday, and have been following for months and years, allow it.

This is just a reminder that tomorrow (Wednesday) is the last trading day of the month & quarter, which often sees window-dressing and portfolio adjustment. And then Thursday is the first trading day of the new trading month/quarter which often sees the typical inflows from passive investing, Corporate bonuses, 401k rollovers, dividend reinvestment schemes, pension fund contributions, etc. So, step gingerly - if at all - through that and remember, some very large corporations have announced huge stock buy-backs, which the retail trader might be swamped in (Nvidia announces $150 billion buy back on Sep 28th, the largest in Corporate history according to Yahoo! Finance) should the buy-back become 'active'.

Have an excellent start to the evening,

TraderJoe

Roll-Over Beethoven

I said that if prices made a new high in the ES futures contract I would address the possibility of a third wave as an alternate. Well, like the NDX, the ES rollover month contract has done that - made a new high. So, the current count and best alternate fit like the ES! daily chart below.

ES! Futures - Daily - Rollover Alternate

Unfortunately, neither cash nor just the lead month contract can be counted in this (alternate, red) way because the new high needed for circle-iii, minute-iii, is just not present for them yet. To count them as a diagonal would be in the current count with a potential failure if price can not soon establish new all-time-highs. Please remember there is an end-of-the-month and end-of-the-quarter scenario ahead to be followed by the potential of the first-of-the-month, first-of-the-quarter passive inflows on 1 October.

Have a good start to the day.

TraderJoe

Whippy

Today was whippy - as we warned. The news background fosters it. The brokers love it. The odds are all in the middle-of-the-road here. Play at your own peril. There are only certain markers that will establish new wave counts: higher than the prior all-time-high or lower than the prior two-day fourth wave low, below (use OHLC for the exact number). Simply said, nothing in the last couple of days has changed the progress of this wedge.

It really is that simple. You can make more of it or less of it as you like. IF the new high is made and there is not the failure, then it might also be possible that minute wave-iii, circle-iii, will get an extension. But the new high remains to be seen first. We'll address any extension later. Things are already incredibly overlapping in the ES futures - which tends to indicate some exhaustion going on.

Have an excellent start to the evening,

TraderJoe

Oh, No! Not Again!

Once again in the SPY cash index, the Kennedy Channel technique is not quite applicable (this is also  known as the "base channel" technique by R. N. Elliott). As you can see from the SPY 15-min chart below, a parallel channel drawn around waves i/a, and ii/b does not afford the result of a third wave popping out of the upper channel boundary to announce itself. Maybe it will tomorrow, but it hasn't yet.

And, yet, in about 106 candles the EWO is darn-near down to the zero line: certainly enough to be in fourth wave territory. So, The Eight-Fold-Path-Method says the two sets of labels are equivalent until something comes along to distinguish them. We need to see if a valid fourth wave can hold up without overlap, or we need to see if wave three stops downward travel here and extends, or if the fourth wave busts as so many have done in the past.

The odds are only ever-so-slightly in favor of the impulse because the third wave is slightly longer, but just. Again, in a situation where the odds are nearly even it is either pure guess-work or near-gambling to test those odds with ones own money. My approach is simple, "we need a bit more information".

Have an excellent rest of the evening,

TraderJoe

Bing, bing, BING!

No. Ricochet Rabbit yells "Ping, ping, PING!" (or often heard and written as "Bing, bing, BING!") right before shouting his own name - Ricochet Rabbit - as he bounces off objects. This was confirmed in autographs signed by the voice-over cartoon actor. But today, the ES futures on the daily chart, can be seen bouncing off the bottom Bollinger Band, and without hardly stopping at the 18-day SMA, ricocheted to the upper Bollinger Band.

The Principle of Equivalence says there are at least three good ways to count this formation. They are listed below.

• First is minuet (a), (b), (c) of minute ⓥ failure. This formation would seem to 'rush' the count as degree labeling can not be used to confirm the lengths of (a) or (b), we don't know the up movement is over, and there is no overlap of concern at this time.
• Second is smaller degree sub-minuette i, ii, iii of minuet (a) of minute ⓥ. The supporting evidence for this is that the hourly MACD is on a high, we don't know the up movement is over, and there is no overlap of concern at this time.
• Third is even smaller degree micro Ⓐ, Ⓑ, Ⓒ of i of diagonal minuet (a) of ⓥ to extend the entire sequence in time and try to get the waves to survive until the end of the year.

There is, of course, still the option of a third wave up because in contracting diagonals, the smaller up waves, and the smaller down waves still fit in with the nested 1,2,i,ii scenario which always, always, always makes counting diagonals tricky.

At this point, the middle scenario is the most reasonable. This is counting the three up waves as i, ii, iii the three sub-minuette waves of minuet (a) until we know more, there are some confirming overlaps or news reports that dump prices. This would also still allow for the Elliott "over-throw" if that should occur, after the under-throw that we wrote about in the prior post.

At the moment, the daily bias has instantly turned from down to up. But there is no swingline trend: just a lower swing-line low, and a higher swing-line high. The daily slow stochastic is not over-bought yet, but I'd watch tomorrow's readings. Further, as things were still settling out, on the NYSE there were only 1,527 advancing issues versus 1,226 declining issues on a day which could easily have seen a ratio of 5 or 6 to 1. It didn't. And, again still settling out, there were only 26 new 52-week highs on the NYSE versus 154 new lows. So, some stocks are behaving against the rally - which is interesting.

For our part, we continue to measure & count; measure & count. Can I say it again, "measure & count" as best we can and look at the evidence. We'll not predict the future - especially not when The Principle of Equivalence tells us there are multiple scenarios with odds spread out amongst them. The odds above can be roughly rated as 25%, 50%, 25% for the three scenarios. Today you saw how fully seven closes occurred over the upper intraday Bollinger Band which had odds rated at 0 - 2%, and yet that occurred before prices closed back inside the band. Granted it was an intraday chart. Still. if 1% events can happen, one has to be very, very judicious with 25% events - or else one is just gambling, not using wave-counting skills for what they are intended for.

Have an excellent start to the evening,

TraderJoe

Eclipse

Like a full solar eclipse, sometimes you are in the right place at the right time and can gleefully shout, "I saw it, I saw it" along with the full other range of phenomenon that day - like sky darkening, or Bailey's beads. You can say you were there to experience them all. In today's market, if you draw the daily closing trend line up from the April low, you might see what is famously termed the "Elliott under-throw". Here is that daily chart in the SPX500 (CFD), trend line included.

If you look to the day of September 16th, you might see what Elliott termed the "under-throw" in a contracting diagonal. This is price action that breaks the trend line to get people more bearish, and then begins to recover to potentially make a fifth wave, and which can then result in the more famous "over-throw". Clearly from my post of 4 Sep ("How Nasty") I was prepared in advance for such an event, and now the sudden reversal higher.

If prices make the new high, then the under-throw will likely have been confirmed and then you can say "I saw it, too!". Further, Elliott will have been proven correct at an extraordinary degree of trend. And even if prices don't make the new high, and instead fail, he would still be correct.

Did the under-throw drive some fear into the market? Well, the CNN-Money Fear and Greed Index was last down to 27 (Fear) from its August highs in the (Greed) category near 66, so it looks to have had some impact.

The only item a little dissatisfying about the diagonal currently is that the retraces are not 62% or better as in the 'guidelines' for wave formation, but they are just that 'guidelines', not rules. So, to follow the rules now, the wave structure only needs a fifth wave that is shorter than the third.

We'll see if that happens. If not, we'll adjust. One adjustment 'could be' that the third wave, ((iii)) or circle-iii is still underway. Have an excellent rest of the weekend.

TraderJoe

Another Clue

For months and years readers of this blog know I have been watching the cumulative NYSE Advance/Decline line for signals as to when topping might occur. Without this index diverging, I said it would be difficult for any true bear market to start. An updated daily chart of this technical index is below.

Readers can see that as of yesterday's FOMC day, the index has fallen off 'almost' as much as it did in April, but not 'quite' as much. The two arrows lengths are copies of each other. Now I'm not saying it is 'required' for this technical measure to make a full diagonal like price might. It is possible this might fail to make a new high while price goes on to make a higher all-time-high. But, clearly, there is already overlap with the March peak after a shorter wave up in length.

So, market breadth conditions should again be watched as prices rise to see if there is any divergence again with the average stock at the exchange level on significant rallies. Further, should the April low in this measure be undercut, that should start to send out some additional warning signals related to how frothy price might be, and whether or not speculation is ruling the trade or whether price rises accompany economic expansion of a more meaningful type.

So far, we have had economic expansion, some from data center build-outs. Some from programmers being hired to build A-I, some from increased retail sales, partly due to inflation, and some from higher commodity prices themselves, not to mention, unfortunately, those economic increases that accompany a military conflict.

Should the market decide to once again undertake its 'discounting mechanism' role, we'll see if it leads changes in any of the aforementioned sources of GDP growth. It's definitely worth watching.

Have an excellent start to the day,

TraderJoe

 

Clue

This morning in the wee hours, a lower low was made below the Prior Low (PL) of the previous post. As such, the upward variety of expanding diagonal invalidated in a bout of sheer whip. The SPX500 (CFD) 4-hr chart is below.

This now leaves the potential downward contracting diagonal as a way to end minute ((iv)). This count is subject to the usual rules for a contracting diagonal. First, we don't 'know' that wave iii is done, but it would have to remain shorter than i for a contracting diagonal. Then, too, when wave iii is done, wave iv would have to remain shorter than wave ii. And, of course, in this scenario wave iv can and would likely overlap wave i but not travel beyond the end of wave ii. If that succeeds, then wave v would have to remain shorter than wave iii.

This is also a reminder that wave v in an overall (c) wave of minute ((iv)) is allowed to 'fail' if it wants to in order to signify the end of a downward wave.

None of this is locked-in-stone. It is all contingent, but the lower low does provide a clue as to possible price direction. Again, nothing lower will surprise us. There is a way for price to have topped in this and in other indexes. But this is an effort to give the broader market a ending pattern at large degree. We'll see if that happens.

I will also note that some other Elliott Wave analysts were expecting a (ahem) [iii], up, here. I guess they got fooled by the new low, and we did not. But, I've been fooled before, too. Very few readers read the prior post, so, if you haven't, you may wish to review it now.

Have an excellent start to the day,

TraderJoe

Up For Grabs

Overnight, the market as measured by the ES futures has more than overlapped the prior possibility for a 1st wave up as shown below. But it has not taken out the prior low (PL) either. The chart below is of the SPX500 (CFD) 1-hr timeframe.

So, the primary way to make an 'A' wave up is with an expanding diagonal. But, if the 2nd wave marker is undercut, then there is no way to make an expanding diagonal, up and still follow the 'rules'. On the other hand, if the low is exceeded, then perhaps look for a diagonal downward to end the fourth wave, minute ((iv)). A contracting diagonal is the more likely downward, but we'd also have to look for the expanding possibility if the contracting variety should not be valid.

IF a diagonal is being made, in either case, then the internal waves could be quite whippy, instead of trending, and trading might be quite difficult. So, patience, calm and flexibility remain key tools to success.

Have an excellent start to the day,

TraderJoe

Full House

Think of it like a full-house hand in poker. You have three aces and a king & a queen. The question is what will be pulled from the deck.

We're just patient until the cards are dealt. The degrees are difficult to consider because the lengths are quite similar. Also, in the futures it is very hard to count that initial (a) wave up in the first diagram as it is very hard to count five-waves-up. And, if it has a truncation it may be the c wave in the second diagram making an overall (b) wave up in that diagram.

Have an excellent start to the evening,

TraderJoe

How Nasty ?

The wave counting has been ugly. The trading even worse. One question to ask is how nasty will this market be in the short run? Yes, price can still certainly go upward to finish a fifth wave of an (a) wave up on Monday. But the question has to be asked, "what if it doesn't?" What if price goes down before it goes up? Below is a very nasty alternate count in the hourly SPY cash contract.

The gist of the count is that it's possible for the minute fourth wave to extend a bit in time, break some upward trend lines in the process, and temporarily getting people more bearish. We do not know it will. We can only suggest this alternate might be in play IFF the overlap warning signal is fired off before a new high is made. In other words it is possible there is a (c) wave down to follow after what might be a failure flat (b) wave up.

It's something to watch. It was brought about by the Payroll Report wave being very deep and making one overlap, by the failure of the SPY to make a new high above the prior high, and the lack of a solid impulse to end the day today.

So keep an eye on it. Don't let it rule the roost unless the signals fire off. Meanwhile be flexible, patient and calm. The market will re-establish a trend direction at some point. Right now, price is fighting with the 18-day SMA, and the Smart Money needs to be sure things are good & confusing.

Have an excellent start to the evening and the long weekend if you are celebrating,

TraderJoe

Trend Lines Drawn by Cash

The market drew these trend lines in the cash S&P500 2-day chart. They are three-touch trend lines. I am just acknowledging them as best I can. Included is an overlap.

If the pattern plays out, confirmation will still be needed. At the moment, trading is awful. Every wave is throwing shade (meaning typical lengths are not being made). Perhaps that will right itself, eventually.

Have an excellent rest of the evening,

TraderJoe

Just a Caution

Just a cautionary note. The latest downward wave in the SPX500 (CFD) and in its cash equivalent, the SPY, does not show evidence of breaking a base channel (or Kennedy Channel Technique - KCT) lower yet. So far, the recent down wave has stayed away from the lower channel boundary.

There is a non-zero probability, and maybe a substantial one, this sequence counts as w-x-y, down, and might overall be a (b) wave of some degree, especially being against the lower daily Bollinger Band. The correction from 30 Aug to 1 Sep is at or less than 38%. But because there is no upward overlap yet, we can only look and wait to see if a lower low is made. If one is made, then the whole sequence might count as one impulse with an extended first wave in a wedge. That would be perfectly fine, but the down wave with a lower low must form first to conclude that.

Whereas if a lower low is not made, and the upper channel boundary breaks, first, then it is possible the structure is w-x-y as a larger (b) wave.

Have an excellent rest of the evening.

TraderJoe

Two-Faced Fed

Just a clip from JackAssSon Hole. They know it. They've known it all along. Peter Schiff has known it for decades. Milton Friedman knew it before then with his often quoted, "Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

Hit the full-screen icon [  ] in the lower right to enlarge the video. 

But more importantly, they've done everything they can to fuel it, including:

• Agreeing with the move to get the U.S. Dollar off of a Gold Standard (not fighting it).
• Tacitly agreeing with the move to end Glass-Stegal by not lobbying against it.
• Dropping interest rates to near zero at times.
• Poorly supervising the banks to allow pumping up of the housing market at times.
• Out-right buying of mortgage-backed-securities.
• Lying about 'not doing Q.E.' (Bernanke), and then doing it in spades.
• Out-right-buying Treasury Debt.
• Not lobbying for improved anti-trust enforcement to reduce business concentrations, or refusing to make loans to permit such.
• Allowing their banks to pay a non-market rate of interest for deposits (0.02% on savings!) when their banks get to make 6 - 10 % on a loan.
• Not lobbying against Corporate buy-backs using bank debt, etc., etc.

They know they are two-faced 'bad actors' that won't face up to the 'moral hazard' they have created. They will claim they are 'brave (spineless) public servants' just doing what congress wants. Then, they will literally 'beg' for bailouts of their banks, large financial institutions (think not only 2008-9, but Silicon Valley Bank recently), and big companies that get in trouble. 

The little guy? The little guy gets the shaft in the form of poorer conditions to do business in, higher interest rates for their small business loans, inflation eroding away the savings of those on a fixed income, threats to alter or eliminate social security because it 'can't be afforded'. Of course it can't be, not when you spend billions to bail out & reverse repo the banks instead. And excessive financial market volatility - both up and down.

It is two-faced. It is sickening. The rot in America - a condition I do not want to see - will continue until the situation is fixed, and I believe a very large part of this problem lies in the banking system and its supervisor, the Federal Reserve - and certainly with Congress.

Have an excellent start to the evening,

TraderJoe

Warsh-It Gold, Too!

The FOMC Chairman's remarks at the JackassSon Hole Conference last week were also not good for the price of the yellow metal, as this hourly chart of Gold futures, below, shows. The price was hit for more than $134, overall.

As you can see, the decline took the form of the expanding diagonal, with v > iii > i, and iv > ii, and wave iv overlapping wave i without going above the high of wave ii.

Why does this form keep happening? It is likely because the 'Smart Money' senses the risk and tries to protect themselves early on until the lower lows and lower highs become more convincing, and then the announcement finally breaks and those not in the know previously then sell on the news as best they can.

Again, such a pattern is also likely part of the modern market's survival mechanism - grinding and stalling small players into oblivion until a directional move finally is allowed or forced to occur. The market also spikes the bulls into thinking there will be a new high after the 9:30 am open, then pulls the proverbial rug out from them too. All-in-all it's a dangerous situation 1) unless one is counting and paying attention, and 2) unless one follows Ira's dictum to avoid major market news days like FOMC meetings, payroll reports, etc.

For our part, the speech did little good. Yes, it did raise long term rates a tad. And that might have a minor positive impact on inflation. Or maybe it won't. If businesses are saddled with higher cost long term debt, they may be forced to increase prices to make up the profit differences. Who can say?

No, the problem is not whether the CEO's and FED Chairs can have nice lunches and make speeches to each other at a resort in the peace and security of their enclave. The problem is, in short, whether the enormous level of wealth inequality will be allowed to persist.

For example - while the rich were noshing, above, certain hospitals in Florida announced United Health Care will no longer be accepted for payment of medical claims (a large percentage of Floridian's have Advantage Plans through United Health Care). And why not? Supposedly because UHC won't pay it's bills! Apparently, as the press reports UHC is in arrears $100 Million!

And the Warsh-It show goes on & on. Twiddle with interest rates here, hike them there. Blah, blah. Real lives are not as affected as much by it by it as are affected by lack of free, consistent universal health care. That is a major stupid problem in this country where we put insurance middle-men between the doctor and the patient. We (the government) are so ignorant to accept this idiocy. We let insurance salesmen get a large slice of every medical dollar. People don't get healed because of it. Some children don't get well fast-enough because of it. Some of us die because of it.

Meanwhile, over at the U.S. Treasury some guy named Scott Totally Absent (Totally is his middle name) is reportedly taking BILLIONS of dollars to buy-back some other BILLIONS of dollars. This is shear lunacy in a country where "Congress (can) regulate the currency and set the value thereof." Please! Government Officials, please, start to do something useful. Put the billions to work to improve health care delivery, or help house those without, or help provide decent inner city schools.

In the absence of true purposeful behavior - the country will continue to crumble, and the rich won't care a whit. Where is the law in the UHC case? If I owed $100 Million you can bet they'd throw my behind in the clinker. And where is the law, here regarding anti-trust, to stop the criminal agglomeration of wealth whether it be in health care, computing and technology, or retailing (i.e. Amazon). I have nothing against wealth. I only have something against 1) shameless wealth, i.e. collecting it for it's own sake, or 2) wealth that goes untaxed at the rates the rest of us pay, or 3) wealth that is obtained through disadvantaging others.

Yes, I just count waves. But I also wonder just who got hurt in Gold on Friday with these stupendous, idiotic and needless market movements because of some inane pronouncement. I know I didn't, but it was only because of counting waves, money management, and luck. 

To show the stupidity of what is going on, you only have to remember that Gold once traded for the longest time at $35 / per ounce. Friday's market movement alone was literally 4 times that historical level - in less than one day!  The lunacy continues. Why do we need such volatility in our markets? How does this help anyone? Please ask yourselves what we need to change before even more dire consequences occur.

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

TraderJoe

Honorable Mention

Everyone already knows it. Prices today in the SPX, SPX and ES futures spiked on the Jackson Hole news conference by the honorable FED Chair Warsh. Then one could say they turned around on any number of concerning snippets. The initial result was the last remaining overhead price gaps in the cash market was closed as shown in the daily chart of the S&P500, below.

S&P500 Cash Index - Daily - Gap Closed

The situation now is that all the daily gaps are currently below the market. The market turned today very near the 70.7% upward retrace level which we have seen as often being a replacement for the 62.8% Fibonacci ratio in down markets. It is calculated as 1/1.414 (or 1 divided by the square root of two). In previous down markets the 62.8% retrace level had just become "too popular", and markets seldom turned there.

Today the ES futures did close below the 18-day SMA, turning the bias down. But, the market has a lot of work to do to make a lower daily low so that a down-trending parallel could be drawn. The slow stochastic indicator is in over-sold territory, so we need to have our antennas up for unusual formations if the market is to go lower.

We shall see. Have an excellent start to the evening and the weekend.

TraderJoe

Battle for the Line In the Sand

The ES daily swingline indicator currently has a lower low and now, today, a higher high bar against the 18-day moving average as in the chart below.

So, a flat or more extensive combination off of the low is still possible. The daily slow stochastic is still in over-sold territory. It feels like "summer quiet" and like someone sucked the energy out of the market.

Have an excellent start to the evening,

TraderJoe

Six Days in August

First, the long-term count consideration: regular readers of this blog have seen me repeatedly write that I have not "ruled out" the expanding diagonal interpretation of a Cycle Vth wave. That remains true: I have not ruled it out. What is new with this week in August is that such a count can now be specifically "ruled in". That does not mean it is the operative count. That means, specifically, that there is now evidence for it, as in the ES monthly chart below.

ES Futures - Monthly - Log Longer Wave Up

Notice that wave (3) on the exponential form of the chart is now "log longer" than wave (1) as shown by the Fibonacci ruler at high. This is the evidence that makes the expanding diagonal count now possible, according to the 'rules'. That is why we labeled the prior high with an alternate red (3) in Tuesday's post. Further, we don't 'know' a top is in. So, the expanding diagonal is a valid interpretation on the log scale chart. And, the question is whether the up waves better count as 'fives' or as 'threes'. According to degree labeling we get better counts with 'threes', but we can't argue with the logic that there was, indeed, a significant higher high, after wave (1) - which possibly makes it, wave one, a 'five'. We just couldn't find anything like a long-in-time fourth wave in that wave to count it as such. Readers can also verify that within red wave (3) that red wave A and red wave C are now about the same length, a truly interesting detail but not proof-positive.

Now for the local count of the six days. As shown in the S&P500 cash index below, there appears to be an impulse lower that kicks off with the third wave breaking the 'base channel' lower from the Kennedy Channeling Technique (KCT).

S&P500 Cash Index - 30 min - KCT

We showed this count before in the comments for a prior post, caught the bottom to within the half-hour, and price has since rebounded to the upper parallel channel line. Notice that wave ④ came back to the underside of the KCT which is an expectation of the technique. And wave ④ now offers also a retrace to an approximate 62% Fib level. Wave ③ occurs on a low of MACD, and wave ⑤ occurs on a divergence with MACD. So, this appears to be a textbook impulse wave. And that means its high is very important. So far, we think there will at least be a lower low after it. But, the caveat is it is just not that long, overall, and it did not overlap anything important downward. Maybe a subsequent wave will. It just hasn't yet.

But, readers should question, why did this hourly down wave follow the KCT, but the monthly up wave does not? The market is fractal, right? Shouldn't an upward impulse follow the KCT, too? But, clearly the upward monthly wave does not. This might be a clue why the upward wave is not an impulse but a diagonal. Its grinding character might be another clue.

Two channels are shown on the monthly chart, above. The smaller blue channel are for those who might expect a grinding wave upward. The lower, larger, gray channel is for the possibility that maybe the expanding diagonal does play out. It might allow red wave (4) to overlap with red wave (1).

And what about the contracting diagonal, for the indexes? Nothing has ruled that 'out' yet. It is still a perfectly valid count. It might have some more grinding to do, but we'll have to watch it's length. As a reminder, here is that count.

ES Futures - Monthly - Contracting Diagonal

While this is the currently operative count, there are some factors that tend to rule it out. They are the higher highs in the MACD, and price exceeding 78% in the current up wave. Then, there is always the pesky fact that the S&P500  did not downwardly overlap in 2025 like the Dow and the NQ did.

But the only thing that rules it out definitively is a price high above 8,508.50 as the fifth wave in a contracting diagonal can not exceed the third wave.

So, we have learned a lot in this month of August, and we will learn more if the prior all-time high should be exceeded. That is the spot to watch.

Have an excellent rest of the weekend,

TraderJoe

Retreat towards 18-SMA

The ES daily futures lost their embedded status and price has concomitantly retreated down towards the 18-day Simple Moving Average (SMA), as per the ES futures daily chart, below.

ES Futures - Daily - Loss of Embedded Status

So far, the swing-line indicator only has a higher high and a lower low. For a trend, one would want to see lower highs and lower lows below the 18-day SMA. So, a retrace upward certainly could be expected. For this reason, and the fact, that we can count five waves down on the SPY (cash) 15-min according to The Eight-Fold-Path Method, as in the comments for the prior post, one should place a wave-counting-stop (WCS) above the prior high.

Have an excellent start to the evening,

TJ

Current Count and Alt

Here's the current situation on the SPX500 (CFD) 4-hr chart. The black diagonal count reflects the fact that there is no good divergence yet with the NYSE A/D line.

The wave up from blue (b) to blue (c) or red 4 to red 5 is an impulse in either count. This is another good illustration of how The Principle of Equivalence plays out in practice: some impulse segments can be parts of two counts.

Three key factors in either count are: 1) the current down wave has traded below the Ⓐ wave of the prior triangle, at micro degree, 2) the current down wave is longer in price than wave ii of the prior impulse, as shown, 3) while a Flat for blue wave iv is still technically possible, it looks to be much lower odds at this point because it's up wave would be longer-in-time than the prior wave iii, the previous higher degree wave in the same direction, and this would seem to be a violation of degree definitions. So watch the high of this down wave.

Have an excellent rest of the day.

TraderJoe

Werds

Some people can take up so much of your time with their shameless self-promotion, subscription fees, videos that contain advertising, or channels that provide them with clicks or likes. We decided long ago this was unacceptable. So, we'll provide the effort-saving chart, below.

It would be nice to see a few more of the items to be in evidence. That's all. Simple.

Have an excellent rest of the weekend.

TraderJoe 

Wedgie

The currently wedging and overlapping SPY (5-min) has filled its opening gap up, and filled its prior gap in the down direction, as in the chart below.

SPY (Cash) - 5 min - Wedging

The pattern needs to be watched to see if it breaks upward or downward with conviction.

Have an excellent start to the day.

TraderJoe

Threatening - But Not Yet Imminent

When looking over the Dow daily chart, there are several examples seen in the prior high on Jul 6th where one can potentially count a diagonal. However, none of those diagonals came to pass - they were not fully retraced in less 'time' than the diagonal took to form - and, in fact, there has been a higher high since. This usually happens when the potential diagonal is part of a sickening "b" wave upward. Regardless, we now know they were not diagonals. So what does this mean? Well, I think it helps to back off and look at the Dow futures daily chart, as below.

Dow Futures (YM) - Daily Close - Parallel

As the chart shows, the wave up from the April 2025 low parallels extremely well. This is supposed to mean the move is corrective, unless the price gets substantially over the upper parallel. As of this time price has not even reached the parallel. And, as the saying goes from the Elliott Wave Principle by Frost & Prechter, "A line drawn from the start of A to the end of B, with a parallel copy placed on the end of the A wave often shows the end of the C wave."

Now clearly that does not work every time. That is, in part, what the Kennedy Channeling Technique (KCT) is about: when a wave bursts through that upper parallel, that is when a third wave can often be identified.

But, here again, this is only a tendency of the KCT, too, because sometimes a C wave is 1.27 x A, or even 1.618 x A, depending on the circumstances, and then prices peek up out of the channel and then revert.

Nothing works all the time, and again, this is almost always a situation with odds. Last night I was playing tile rummy, and the first thing you do is draw tiles numbered with integers from a pool of 100 tiles. You draw twelve tiles. So, that means roughly from the pool of integers, one should expect six even and six odd tiles from a well-mixed set of tiles - which they were. What did I draw? Fully 11 odd tiles and only 1 even tile! Can you imagine the odds of that? Yet, the low odds event did occur - sure as I'm writing this.

So, even though the Dow looks like it might want to lead down first after some further potential upside - just like it did in 2000 - that does not mean it's a 'lock'. As of yet, the only alternation in the chart above can be stated as "long A, short C". One might have hoped for "Impulse A, and Diagonal C", but that is not on the board yet. It could be. So, I retain that option if things drag on & on.

In the meanwhile, just like a view of the weather radar, one has to say the potential severe storm that is several states away is "threatening, but not yet imminent". It could get rough, soon. So far, it hasn't.

Have an excellent rest of the weekend.

TraderJoe

CoD

This is a Friday morning Chart-of-the-Day (CoD), the SPX500 (CFD) 30-min intraday wave counting screen (IWCS). After a pop up on the dismal Payroll Report, with traders hoping for a rate cut, the up wave could not sustain the fourth wave of an impulse and instead lost the embedded reading of the intraday slow stochastic (black circle).

SPX500 (CFD) - 30 min - IWCS

When that occurred, price returned to the intraday 18-SMA and also overlapped the prior wave downward, with a longer wave in price than the prior down wave. Since then, price has popped again in whippy volatile trade. This seems to suggest that price will either make a triangle or a fifth wave expanding diagonal upward.

Comments for this blog remain on moderation. Have an excellent rest of the day.

TraderJoe