Cobbler

Like the shoe repairman that tries to save a worn-out pair with new soles, or even more like one of your favorite Savannah, GA peach deserts, I have tried to cobble together the count from what was lying around and available for use - segments we counted earlier. Using the ES 8-hr roll-over contract - the one that is most actively traded - provides this possible view of a barrier triangle. At least it does at this time.

ES Futures (Roll-over contract) - 8 Hr - Possible Barrier Triangle

Friday's up wave is so close to nicking the high that we must allow that it might. If it does, then, it might be a second zigzag upward of the double zigzag w-x-y count to the minuet (d) wave of the triangle. And, this wave may be allowed to go over the top, again, within certain limits.

From this high, it is perhaps possible to make the (e) wave of the triangle, which probably (not certainly) would take out the prior x wave lower. Notice the (c) wave, lower, only retraced a little over 62%, so something similar should be expected for the (e) wave. From there, the minute ⓥ wave top should occur as an impulse or as a diagonal to end the Minor C wave, up.

Now, notice the pattern on the Elliott Wave Oscillator (EWO or AO). You can see the contracting lines across the peaks and valleys and fairly tight hugging of the zero line overall that typically signal a contracting triangle.

If the triangle validates, with a higher high after the (e) wave, it might signal "the last wave dead-ahead" for this index. And, often, not always, the thrust out of a barrier triangle is sub-par. It might not travel the typical technical analysis target of "widest-width-of-the-triangle-added-to-the-breakout-point". It might. But it might not.

We have been looking for a formation that might signal the end of the monthly contracting diagonal, and this might be the start of it. Time will tell. And, yes, the current position shown of the C wave is just a placeholder. It is possible that Goldman & Co will try to drive the market to their 8,000+ target, which would be a Fibonacci number of 8 x 1000. But it might not get there, either.

So, why the barrier triangle? The compression of the triangle is trying to shorten up the minuet (e) wave, and thus all of the minute fourth wave triangle to be more equal in price to the minute second wave which was a fairly small wave. Remember triangles are always measured, pricewise, to their (e) waves. And yet the triangle would show huge alternation in time with its second wave, as shown in the daily chart, below.

ES Futures (Roll-over Contract) - Daily - Barrier Triangle

Again, right now we don't have any overlapping waves (in terms of minute ⓘ) to play off of. So, it still follows the 'rules' to call this a fourth wave overall. There are alternates from here. We could have topped but the odds of that grow lower with the higher highs. And it is possible a final upward contracting diagonal is being constructed to drag this thing out into oblivion. But we'll deal with these possibilities if and when they seem to take over the count.

For now, have an excellent rest of the weekend,

TraderJoe

So They'll Never Know

Today we were counting the fifth wave up in an hourly ES impulse, and that occurred until approximately 10:30 am and a price of ES 7,605. The up wave took 49 hourly candles to build. Then, at about 10:30 am a fully 55-point downdraft bar occurred which was a clear stop-runner. Checking an amalgam of newswires, you won't see that "minor excursion (sic?)" explained anywhere. It 'might' have had something to do with POTUS not signing a housing bill, or with the SK Hynix debut, or with the Iran war. No one on Wall $treet apparently owes you an explanation. They won't tell you, and you likely will never find out for sure. The hourly chart of the ES futures showing this bar is below. One thing we know is that in the futures, it went down to overlap bar xi and so likely starts a new wave.

ES Futures - 1 Hr - Five Up & One Bar Down

Of course, being Friday, the machine nanobots bought the bar and squeezed it like there was no tomorrow to make a new higher high. So, psychologically, "mom & pop" and most casual investors will never know the situation occurred unless they may have had a stop hit. All most people will know is stocks closed higher on the day and when they check their daily bars on a chart nothing will look out of place, a high near the high of the daily candle.

Oddly, today we had a discussion on the blog about proportionality in wave counts. So, over the last couple of days, we've had 49 bars up, and only 1 bar down?!! That just seems extremely unlikely, but there it is. The market can try to make restitution if the up wave following the bar is a "b" wave, up, and there is a "c" wave down to follow. Maybe, and likely. Not guaranteed.

Regardless, not only the speed of the recovery, but the complete lack of explanation seems to make the situation just another incident in the never-ending Ponzi scheme of leverage driving this market. The problem is you have to find someone who gives a flying flip. The biggies are passively in this thing, and they literally do not care as long as prices are up. It feels like the leverage is getting more & more extreme. At some point, the leverage will be seen to revealed for what it is. 

Maybe later we'll have more to say about the wave count. Like I said, nothing in the down direction will surprise me. I just can't help wondering about the financial professionals and what they are thinking. Do they see no value whatever in letting some gas out of the system slowly so that it doesn't all come out at once? I guess not.

Well, no one ever blamed the keepers of the keys with exercising judgement that was too good.

Have an excellent start to the evening and the weekend.

TraderJoe

If today was, what was yesterday?

Today from the open we counted most or all of a five-up wave. If that's the case, what was yesterday? Below is the chart of of the ES/SPY (CFD) on the 1-Hr timeframe.

All of the waves up, yesterday, and in the overnight, were so incredibly overlapping that the likely structure up was that of a contracting leading diagonal. The waves have the right length and the right form, and the up wave from 06:00 yesterday to the cash open - which was never seen in the SPY cash - is then well accounted for. This morning's roller-coaster machinations at the open become a b/ii wave. And, so far, the up wave is in a parallel.

Also, as we discussed yesterday, we came almost up to the prior high and almost made yet another double top. As stated earlier, there is significant risk of going over the prior high and/or the prior all-time high.

But nothing has clearly invalidated yet, so it remains to be seen what transpires.

Meanwhile, back at the 4-hr Dow futures (YM), there appears to be a better formed five-waves-down & an upward slanting parallel after it which might bear some watching. The parallel is a smaller version of the one on the ES. But the ES does not count as nicely downward as a five-wave structure.

The market has a very strange feel to it - like every possible excuse for a wave is being used to avoid a decline. Said another way, it feels like the Smart Money knows if a decline is allowed to begin it might quickly get out of control. A similar way to say the same thing that some prior Elliott analysts use is that it is as if the market were waiting for a news story to provide the cover for a decline. Until that happens, it just hasn't, and we'll watch and count patiently.

Have an excellent start to the evening,

TraderJoe

Doubles

You'd think it was a summer co-ed tennis match, but it's this market that is literally seeing doubles almost everywhere. Today, as seen in the ES/SPY (CFD) intraday wave-counting-screen, below, there were double bottoms to within an ES point. And then there were exact double tops later in the day near the upper intraday Bollinger Band.

ES/SPY (CFD) - 30 min - Double Bottoms & Double Tops

The double bottoms are marked by the two down (red) fractals, and the double tops after noon are marked by the two up (green) fractals. As far as I can tell, casually, the double-top/double-bottom scenario is happening with increasing regularity and throws a bit of a wrench into Elliott Wave counting as it's hard to know how those get resolved. Either some large players are doing it as a matter of "support & resistance" trading, or the new meme of retail traders can't get enough of the "levels" trade. Notice, too, how many roughly equal bottoms and tops were made in the overnight session, as well. Curious.

In the next court over from Center Court, the next pair of doubles is the fact that the intraday price so far as this is written has traded back to its 18-period intraday SMA, and, of course, the daily is also back to its 18-day SMA. So, the "battle for the line in the sand" seems to be on.

From an Elliott Wave perspective, the upward triangle and downward diagonal still form a logical pair as we explained with the Principle of Equivalence. We still need resolution.

Have an excellent start to the evening,

TraderJoe

Suspicious Minds - 4

The ES futures today invalidated the expanding diagonal possibility. That leaves a few options. But mostly the levels traders would probably say a new risk area has been defined as on the ES 8-hr (rollover) chart, below. 

So, the primary reason for the chart is that the formation just doesn't at this time look like a triangle. The wave labeled a/i/b is probably not deep enough for a symmetrical triangle. Or, if we are making a barrier triangle, then today's up wave is not high enough. That could change, of course.

The down wave is currently labeled as a/i/b because it could be a five-wave contracting diagonal instead of the expanding diagonal. So, that could be a/i or it could be just a three-wave structure as a b wave which might be part of a larger upward diagonal.

But, let me be clear, there is real risk of going over the top again. That could still happen in a triangle or in a diagonal. But we don't have quite enough waves to better visualize those right now.

Today was very, very overlapping and whippy. The down wave was too. So, the count remains undefined until we get more information. I would keep an eye out on that Local Trend Line.

The day after a holiday is often an up day in a relief rally when nothing seriously bad happens over the weekend. And Tuesday is often, not always, a reversal day when Monday is an up day.

We'll see how it goes. Have an excellent start to the evening,

TraderJoe

Suspicious Minds - 3

In the prior post on the ES September futures (front-month only) daily contract we showed the possibility of breaking up or down out of a triangle, upward, or an expanding diagonal, downward. The internals of those charts are shown below on the ES roll-over contract. This is the lead month prices stitched onto the prior expiry on the volume roll-over day in the 4-Hr timeframe.

The panel on the left shows the 15 June high as a :5, the fifth wave of the Minor C wave. That high truly is a higher all-time-high on the rollover - just not on the lead month contract when considered alone. And that high's rather impulsive look suggests it could be the fifth wave after a fourth wave flat.

If so, we may be getting an expanding diagonal downward with the remaining sequences. 

Still, The Principle of Equivalence says we should at least give roughly equal consideration to the equal and opposite pattern of a possible fourth wave triangle that is wasting a lot of time before making that final high. We haven't seen a real triangle in the Minor C wave, yet, so, yes, this could be the one.

As an Elliott analyst one has to be agnostic about the outcome until certain benchmarks are achieved such as either a new all-time high or a lower low than the 10 June low. As a trader, the job is to try to put the odds on one's side. For example, a current contraindication of price going down is that it is still closing above the 18-day SMA, and so the daily bias remains up until it does no longer. Whereas, from an Elliott perspective, if the peak on 15 June is 'actually' a five-wave sequence, then it has no business inside of a triangle pattern, which must be all three-wave sequences.

So, for example, in the triangle count it is still possible to make a lower low than the prior wave low and still be inside the triangle unless the Ⓒ wave is exceeded lower. Even, then, it might be possible to extend the triangle by dropping the lower trend line a bit, so long as the Ⓐ wave is not exceeded lower. This would make the triangle possibility extended in time by several days.

Of course, once the Ⓐ wave is exceeded lower one is well on-the-way to knowing that the diagonal is likely completing. And after the diagonal completes a pretty still retrace stiff might be expected.

This is just the market's inevitable way of having its say and not letting the profit possibility be one-sided.

So, it is still a time to be patient, calm and especially flexible. The market - as a whole - will speak, and things will become clearer. They always have and likely will continue.

Have an excellent rest of the weekend.

TraderJoe

Suspicious Minds - 2

How do you like them apples? Or Odds? You see right now, the daily ES has a pattern whose wave sequences 'might' be able to all be counted as 'three-wave-sequences'. The daily ES chart is below.

So, the odds are roughly 50-50 that there is a break upward out of a triangle, or a break downward into a diagonal. Even if you're a decent wave counter, the roughly equal odds give one a pause regarding action to be taken - at least until things become a little clearer.

It is often said that "a triangle represents either indecision or a balance of forces". Well, so be it at the moment.

Tomorrow morning's Payroll Report and Unemployment Report would have to take out some significant lows or highs to make the wave count more apparent. Maybe they will. Maybe they won't. Time will tell. It seems curious after months and years of counting waves to be in this position, but here it is. We can still count the innards of a downward diagonal. And we're not oblivious to the shape above as a possible triangle or the fact that we are soon going into a major holiday weekend. So, there we are. 

While I'm on the subject of odd, or odds, I came across this peculiarity when measuring some waves in the SPY today. 

SPY Cash ETF - 1 Hr - Boomerang of Rebalancing Candle

It turns out if you clone the length of the candle that was involved in Russell rebalancing and just add that distance to the bottom of the next candle you get a perfect length match, upward as shown by the blue boxes which are copies. It's almost as if someone's ETF boss said, "look, you broke the damn thing, now fix what you broke." You don't think those kinds of shenanigans really go on, do you? Well, I do, and a whole lot more.

One other minor thing. Of course, that SPY candle breaks the definition of a contracting daily triangle because it made a lower low. But it does so only for the SPY. The other products (ES futures, SPX, etc.) seem fine. Oh well, odds are odd.

Nothing to the downside will surprise me. The volatility is frustrating. They ain't making it easy.

Have an excellent start to the evening,

TraderJoe

Suspicious Minds

Don't let the reference to the Elvis lyric throw you. Things are working out OK, so far, on the ES 2-hr with the potential contracting diagonal lower. There have been no invalidations at this point in time.

ES Futures - 2 Hr - 'Potential' Expanding Diagonal

None-the-less, there are five things to watch: 1) the high of wave 2 - please use OHLC bars for that, but I would get very, very suspicious above the current high of wave 4, 2) watch the up channel of the a-b-c zigzag to that wave 4. A significant breakdown below it, and back-test that failed, would likely indicate more lower, 3) that is the reason to watch the channel. If price regains the channel upward, it 'might' impulse. We are not there yet. 4) watch the EWO/AO as - while it is red - it should turn below zero again for this count to play out, and finally, 5) watch for more significant downward overlaps of the 'a' wave of that 4th wave.

Have an excellent start to your "no forward guidance" day. Warsh may not give any. Would you consider the above?!

A 'closer in' 15-min wave count is included below, as an "extra free bonus". Lol.

ES/SPY (CFD) - 15 Min - Local Count Currently

TraderJoe

Tonight's the Night (Or Not...)

With apologies to Sir Rod for the title, there is a decent chance the ES futures may form an expanding diagonal in the downward direction. The 2-hr closing-only version of the chart is below just to show the form of the wave, but most of the components are in place in about 130 candles.

To complete such a pattern, there would need to be a new daily lower low and a fifth wave that is lower than and longer than the third - tentatively shown above.

IFF the pattern can not complete downward, and moves to the upside, that would leave only a clear three-waves-down and we would have to consider as alternates some extended fourth wave patterns (like a double-flat, triangle, or even diagonal upward) in a larger daily upward move. But, right now, it is what it is. It counts like it does. So, I'd rate the odds at about 55-45% lower because one could ask the question, "why did the structure form at this time exactly the way it has?"

There is further a recognizable pattern on the Elliott Wave Oscillator (EWO) with the expanding trend lines, so let's see how it goes.

Have an excellent start to the night (day).

TraderJoe

Fighting

Like different groups preparing for a revolutionary war battle, the daily ES timeframe and the intraday are currently practicing their maneuvers - and probably in lighter volume as we head into a holiday-shortened week and one in which many, many people take the whole week off for their vacations. While, today, price is just barely below the 18-day SMA on the daily chart the intraday situation is at odds.

Overnight the market has ground up and is still currently over the intraday 18-per SMA. The intraday slow stochastic is waffling around and is not yet embedded. The uptrend pattern is very overlapping at this point, but I could see a way where it is not a war injury that won't heal. But this does remain a warning sign. It remains to be seen if the two timeframes can get in synch.

Have an excellent start to the day.

TraaderJoe

Micron: Nay-I

Today after the close were the earnings for Micron Technologies (MU). These followed a day when the ES futures first made a lower daily low then, primarily in the after-hours, reversed to close higher as in the daily chart below.

The lower daily low kept the swing-line lower, and the close under the 18-day SMA keeps the daily bias down for now.

I'm glad Micron is working on A-I. But the current state of information flow is just awful, artificial or not. I waited on several sites for the MU earnings release. I almost never do this. One of the sites specializes in earnings, and another is connected with a well-known financial news TV network. The site that claims to specialize in earnings said they would be released at 4:00 pm (ET). Simple enough - by about 4:01 pm the earnings came out but not the revenues. 

A couple of minutes later still nothing from the TV site. Not even the earnings. I kept refreshing each of the pages for several minutes, still no revenues at the earnings specialization site, and still nothing over at the TV website.

I waited 'till about 4:10 pm and then had to leave for an appointment. Nothing changed. I kept refreshing and refreshing. Nothing different.

I came home to write this about 2 hrs later and both of the sites were updated with earnings and revenues. Yippee! (Not).

You see, everything a trader or investor needs to have in an earnings release can be summarized in about five lines.

1. Earnings per share
2. Revenue
3. Guidance
4. New Products
5. Special Situations/Challenges

Why in the world such a simple statement can not be released at the agreed upon time is absolutely beyond me. It should be available "on the minute", not on repeated refreshing nor having to check several sites.

What good is A-I, if information release itself is going to be so scatter-shot? Artificial Intelligence can analyze a lot - but not if it isn't given the information in the first place. The more I interact with the trading/business world, the more ridiculous some of these lax practices seem.

So mighty Micron will make more money making more chips. For what? You want more data centers? For what? As I was watching for the after-hours earnings, one could see the ES futures move steadily higher at least in unison with the initial earnings per share (actually starting about 15:30 ET somewhat in anticipation). Is a new data center going to change that situation?

Yes, a new data center might better help you plot your personal voyage to Betelgeuse, so you can study the supernova - if and when it happens - in person. (The computers used to guide Apollo to the moon are probably not good enough.) Oh. But guess what? Even though you plot your course, get it laid-in the Nav system, and get launched in the right trajectory using your new super A-I data, your lifespan isn't long enough to survive the 672-light-year journey even IF you could travel at the speed of light; which you can't yet.

Go ahead. Make more chips. Make a LOT more chips. Pollute the air and the water doing it, only to have them become as obsolete as my old Pentium-3. At some point, data processing is at least sufficient for most tasks. I'm not sure what benefits the 14th generation I-7 is even delivering compared to its first couple of iterations. It certainly didn't make the earnings release happen any earlier.

Get my drift? Have an excellent start to the evening,

TraderJoe

Yawn?!

Today provided a lower high and a lower low on the swing-line indicator for the ES futures with a daily close under the 18-day SMA. This sets the daily bias as lower - at least for the time being.

ES Futures - Daily - Swing Line Lower

Some of the internal movements were a bit whippy, so it wasn't a total yawner - one had to stay on their toes a bit. But it is summer, and a lot of people have other things on their minds like vacations, World Cups, staying cool in hot weather, etc. So, less interest might be expected.

Still, from an Elliott Wave perspective, the current wave structure counts like it is unfinished, so it might be possible for price to target the lower daily Bollinger Band. Note that the daily slow stochastic is nowhere near over-sold yet. And price is still in a downward sloping parallel so lower lows might still be expected.

Have an excellent start to the evening,

TraderJoe

Weaks Away?

(Pun intended). Is the Dow Jones Industrial Average, and its futures contract, shown below, days or weeks away from a major top? With 109 candles on the 8-hr chart, the pattern we posted in the comments of a prior post can still be playing out. It would be that of that overlapping expanding diagonal pattern with the 3-3-3-3-3 internal sequence, which is classified as a terminal pattern.

DJIA (YM) Futures - 8 hr - Expanding Diagonal

The three-wave sequences of a-b-c's are clearly shown. There is good form & balance with every numbered wave on an opposite side of the EMA-34. Nothing looks rushed, and we are trying to give the last wave as much time as it likes to play out because typically the waves expand "in time", too.

Sometimes, the last 'b' wave in this pattern will be a triangle. That can stretch the timing out some if the market wants. But the overlap seems like a key clue to this pattern. And there is a lot of room for algorithmic back-and-forth within its daily Bollinger Bands.

Unfortunately, I'd have to say that while a higher high often, and most usually results in this pattern, it simply does not have to if it is the true end of a larger pattern. The last wave can fail - which will also make it a bit of a cat & mouse game. But the (v)th wave has already exceeded the length of the (iii)rd and so the pattern is 'qualified' by the rules.

Further, also as previously noted, the expanding pattern shows up clearly in the waves of the Elliott Wave Oscillator (EWO or AO).

The b wave can be quite intractable, as usual, and it can be 'any three' including zigzags, multiple zigzags, flats, expanded flat or a triangle as noted.

But the last c wave, up, should be countable as a 'five' even if it truncates.

I'm really happy to see that the once mighty Dow, the once king of the indexes, has lost its following at this time, and everyone is all "NASDAQ & Mag10, and don't bother me with anything else." Maybe this once great index will still have a story to tell.

Have an excellent rest of the weekend,

TraderJoe

The Battle of Juneteenth

This famous historical battle is being fought at the 18-day SMA on the ES daily chart below. The snapshot was clicked about 9:30 am - just a few moments ago. It's hard to get closer than that.

So far, the correct answer to the question of, "will the up (green) fractal or down (red) fractal be broken first?" is, well, neither. Reminder: Globex only has a partial day today.

Have an excellent start to the day,

TraderJoe

Warsh-It (2)

Gesundheit.  Whatever you thought of the new FOMC Chair's performance today, the market sneezed enough to flip the daily bias to lower with a close on the daily ES futures below the 18-day SMA, filling a daily gap in the ES futures in the process. This condition needs to be monitored as to whether the new up (green) fractal is taken out before the down (red) fractal or vice-versa.

ES Futures - Daily - Bias Down

I've seen a lot of corporate CEO types come & go. I've worked for some. Yea. They always start with "what a great team we have here", and "things are gonna change beginning now". And, when they don't know what to do so immediately, they typically create lots of committees to 'study things'. 

As the reporter said at the press conference, "if you were serious about cutting inflation, you would have raised rates today." He didn't. He listened to his other peers who likely told him, "You're gonna have a bad enough market reaction just saying you're serious about inflation without the rate hike. Raise rates too and you're going to see real problems".

Instead, he let his jawboning both take the edge off some assets and raise rates over in the bond market too.

And, ironically, he said he needed a task force to "study" the reason for inflation. Meanwhile, everyone on the committee and in the room is snortle-chuckling thinking, "uh, don't we create inflation by printing money and destroying the value of the dollar? We need a task force for this, huh?"

And, when asked whether financial conditions were easy or tight, he rightly answered, "well, they are certainly different in the housing market than elsewhere." Boom, chacka boom. And what organization was it that raised interest rates from 0.25 to 5.25% in a couple of years? Oh. Meanwhile, his speech today raised interest rates marginally on the longer ends of the curve: the end of the curve housing depends on.

So, all-in-all, it's a "kick-the-can-down-the-road" performance, just as many of Jerry's later ones were. Of course, the three blind mice (Bernanke, Yellen & Powell) weren't really blind, except to inflation. They just knew if they stopped printing money, then asset prices might fall. Meanwhile, prices at the imaginary Grocery have just about doubled (i.e. 100% inflation). And, the Grocery is only imaginary because it's not counted in "Core PCE". I don't know about you, I think they just about have the "core" backwards. I need to count on food & energy the most, right after shelter, so it shouldn't be excluded from anything.

But, when you make decision by committee, this is what you get. Committees are fine except you have to watch out for a committee's natural tendencies to 1) be too polite, 2) water things down too much, 3) stall and ask for more time, 4) ignore the more vocal - and usually the more correct members - because for some reason, they seem to have a temper. When, really, the answers are simple - just painful to implement. And no one wants the pain.

Have an excellent start to the evening,

TraderJoe

Warsh-it

When I needed my clothes cleaned because I got them muddy as a young kid, I would ask my mom to wash them. Apparently, when something is muddy in the Midwest (particularly 'round Ohio, Indiana and Illinois) you ask to have them warshed - well you say it that way. The wave counts are currently a bit muddy, maybe the meeting tomorrow can help make them cleaner again. The hourly ES futures are below.

It looks like - at the moment - there are three waves down from the high, but they currently count best as two zigzags, starting with the diagonal "a" wave we pointed out yesterday from the high.

Of interest, the second wave down is 1.618 x the first. And price got under a prior overnight low. I'll be a good boy and not suggest that it means that upside & higher all-time highs can't happen. I won't suggest that maybe the ES & SP500 will truncate. I did not say that. You did not hear that. Being over 78% it could still be the fifth wave. With an FOMC meeting tomorrow a lot could happen. And much could happen over-night. I would keep my eye on that overlap warning level, and on the 18-day SMA which price is still above.

Today was an inside day. A day of rest. Have a good start to the evening,

TraderJoe

Risky Business - 2 (Why It Can't Be Any Other Way)

Today did not take out the risk area proposed in cash or either sole ES futures contract (JUN or SEP), but it did exceed it in the roll-over contract (SEP stitched to JUN on the volume roll-over-day). The risk area could be history in the next day or two - especially with a FOMC meeting coming up. Or it might hold. But the odds favor the former.

Any number of people complained about the ugliness of the market movements today, and how ugly structures are made or typical technical levels broken just to trick the public into different counts. I want to tell you why it has to be so. Think of it like this ... I do.

Hint: You are Not Dressed in White

Look when - as a trader - not an investor, you sign up with a brokerage firm, they know everything about your finances - which is all they care about. They could care less about whether you're a Moving Average Trader, or a Breakout Trader, or a Range Trader, or an Elliott Wave trader.  Not relevant.

You sign up (if with a futures firm) and you must agree to the following conditions: A) a Clearing Firm will clear all of your trades - that means they know which trades you put on and where you put them on in the market, and where you take them off. B) They know the size of your trade. Did you just trade one micro at the market? Did you trade 10 E-mini's on a limit-entry? Regardless, they know. C) They also know your margin - and in fact, display it back to you in real time (big hint: they are tracking it!). They are required by law to track it, so you don't wind up in a margin call. D) They also know historically when you trade. Do you usually stop trading at the close - possibly because of margin? Do you usually stop trading at 11 pm so you can get some sleep. In short, they know. They know you. E) Your brokerage agreement also specifically states that your brokerage firm may take trades against your position. Really? You heard it. And if that isn't bad enough, F) Your margin may be swept by the brokerage firm, so that they can earn interest on the balance or use it otherwise. Listen to that again: let's say you go short a futures contract. You post the margin to do it. The clearing firm sweeps that margin balance to your brokerage, and the broker can use that money to trade against you.

Your money being used against you. This is just as long as they segregate your funds for the brief reporting period at the end of the day, so they can account for what is yours and what is theirs (they robbed from you). All of that became clear in the MF Global bankruptcy and following settlements.

Now can anyone tell me they signed a brokerage agreement that says, "This Brokerage will not keep a historical record of their client's activities over time."? Well, certainly not. The brokerage might need that information to defend themselves in court. And what says they won't store such data to build a profile of you - including your typical risk tolerance? Is Bob ok with a $1,000 loss usually? Does Janet usually bail at $450 in the red?

Do you get the picture here? Look at how much information they have about you. Period. Now ask yourself, "what do you honestly know about them?" Do you know what trades are on Blackrock's servers? Not a chance. That is proprietary information. Do you know what Megacap company is going to do a buyback, on what date, in what size & what time of day? Not a chance. That is proprietary information, too. Do you know how much money Goldman allots to the "closing buy-back" that usually lifts the market at the end of the day? Not a prayer. More proprietary information. (Although this is a documented fact that their customers once publicly complained they were not keeping a big enough balance at the close to keep driving the market to higher highs). Oh, and let's not forget the FED & the Treasury. Do you know when the Treasury is going to force a change in currency spreads to work a balance issue? Do you know exactly when the FED is going to reverse-repo somebody out of a problem?

They know. You don't. They can usually trade on it and mange it. They have the size and the capitalization to give them flexibility. You most assuredly don't know when. And if you did, you probably don't have the size to manage it.

Now look, nobody - but nobody - can manage this market & economic complexity without computers, and probably without A-I. We know there are so-called market-making algorithms to handle the trades. We already know Blackrock is using A-I. You think they're doing it to feed your account?

See, if you're a trader, you actually signed up for this. It's all part of the Ponzi scheme. They win, and if you place enough trades over time, you will probably lose. You might have good weeks, good months, but it is hard to beat their track-records with the information they have and that you don't. And it is legal that they win. There wouldn't be a brokerage business if they couldn't.

So, you think I'm done with this rant? Heck no. I've only hit the tip-of-the-iceberg, above: the legal stuff. Never, never, never doubt there is illegal stuff being done to you, too. Besides Congressional insider trading, and possibly higher, I'll give you one other example.

I'll never forget when Gary Gensler, then Chair of the Securities and Exchange Commission came on a TV interview and admitted, shortly after the pandemic, "look, during Covid, I had to literally call these several hedge fund managers up and tell them to stop texting each other with 'trading ideas' that would be otherwise be considered as 'market manipulation' as we were keeping a record of it at the SEC." They stopped. Did anything become of it? Never heard of any prosecutions as a result. But they had already done it!

They have to keep the music playing. The game must go on. One OTHER small problem is most of us can't see the nano-trades. In today's market, algorithmic trading accounts for roughly 70% of ALL trades, including the High Frequency Trading but other arbitrage & similar schemes, too.

All I can say is "the prices are in the waves", the trade details are not, except a bit with volume. So, if it were me, knowing the above, I would trade like there's a robot facing me, saying "Go ahead, punk. Make my day."

Have an excellent rest of the evening,

TraderJoe

 

Risky Business

In yesterday's post, I said the area between Friday's high and the all-time high in the ES futures (or CFD) was a "risk area". A daily CFD chart is shown below. The cash market has not even opened yet. The Dow futures and the Russel futures are at new all-time highs. That suggests that if the risk-area gives way in the ES futures, then a very non-proportional count like the one below has to be considered.

Because a potential fourth wave, red circle-iv did not downwardly overlap, even though it is exceptionally disproportionate looking, the rules say it can be considered. Further (x) is shorter than circle-iii, up, so it works by degree labeling there, but how about that (y) wave down? It would be longer than minute-ii, circle-ii, the previous wave of one higher degree. And that is likely a violation of degree definitions. So, it's either 1) a second wave up still in the ES, or 2) this or 3) we'll have to later switch to a diagonal structure if a new higher high is made.

The problem is the (y) wave down can be counted as three-waves to a new low in the futures. It can not be in the cash market (SPY).

In the ugly fourth wave count above, circle-iv, then the fifth wave still is restrained by 7,607 as it would otherwise become longer than circle-iii, which would break the 'rules'.

So, things are getting good & ugly at near a top. That's the way they're supposed to be. A second wave in the ES has not broken yet. It could. Risk is risk.

Have an excellent start to the day.

TraderJoe

The Main Event

Like some fake prize-fight, which may be fixed or not, this is the Elliott Wave count on the ES/SPY (CFD) on the 8-hr timeframe whether I like it or not.

ES/SPY (CFD) - 8 hr - Minor C Wave Count

It's a count with an extended first wave. The RSI is diverging at each new peak. Wave ii up does not come close to a 38% retrace, and that is one key to an extended first wave count, as this is. Further, waves ii and iv show good alternation on the way up. The timing of this first down wave a/i was perfect such that a fifth wave up, v, did not exceed the length of the third wave up, iii, as it is shorter than the first wave. Why would that happen if this wasn't the local count?

The test will come either this week or next as to whether we make a new low or not. It depends on how much time the b/ii wave wants to take.

There is lots of thin structure that can be retraced below the market (free-fall zone?).

The reason the first down wave is currently labeled as a/i is that it is always possible for a wave-set lower to start out with a diagonal, either as an overlapping 5-3-5-3-5 or 3-3-3-3-3 or as an impulse, and the market will have to be watched for clues.

I honestly think if there was a good local alternate, there would be something wrong with the lengths of the waves at the moment, and I just don't see it. The count does have a clear invalidation, and that would be if there is a new all-time high in this index or the ES futures.

Given the above, this makes the distance between b/ii and the all-time-high a clearly definable "risk zone" when the phrase risk-reward is thought of with the reward possibly down to the B wave low.

Well, if there isn't a good close-in alternate, is there a longer-term alternate? The answer to that is "yes". We can suggest two possibilities if Primary ③ becomes longer than Primary ① in the chart, below.

ES Futures (Roll-Over Contract) - Monthly - Alternates

They would take the form of the impulse or the expanding diagonal. But we will deal with these more in upcoming days if needed.

For now, enjoy the rest of the weekend, and get some rest.

TraderJoe

Borrrr....roar...oarrrr...ing!!

My blog is boring (and you thought the market was boring). People might be asking themselves, "why don't you follow the NASDAQ to count your Elliott Waves?", or "what's wrong with the Russell 2000?", or "why don't you follow some hot stocks to show what people are thinking?" Well, here are some cold facts just for you to consider in the form of a three-block chart of daily volume. The top chart is SPY, the middle chart is QQQ, and the IWM is the bottom chart. 

SPY, QQQ, IWM - Daily - Volume Peak & Average

I'm not sure how well you can read the chart (please expand to fill the monitor if you can), so I'll provide the salient facts below.

Tradeable                   Peak Volume              Avg Volume

SPY                            164.16 MM                  53.78 MM

QQQ                           116.27 MM                  48.24 MM

IWM                             99.62 MM                   29.68 MM

Clearly, in terms of volume, the SPY is hands down the winner with both greater average volume for the one-year period studied and greater peak volume. These are simple facts. Hopefully they are not up for dispute.

And Ralph Nelson Elliott suggested that the purpose of the Wave Principle was to help assess the overall level of mass psychology in the markets.

So, this suggests using the tradeable that has the widest following, the widest participation. And that is hands down the SPY and its counterpart the ES futures at the moment to best gauge overall technical sentiment regarding equities. 

Please don't hear this wrong. It doesn't mean that the NASDAQ is not important or that the MAG10 didn't really create a significant price spike in the market. But what it does mean is that if one excludes the major tradeable from consideration, then one is losing 53 - 54 million votes per day. Why throw those away from your bullish or bearish read on things?

And let's say one was solely focused on the Russell and its ETF or futures for trading. OK. But then one is losing roughly 102 million votes per day, a number of votes far outweighing the constituents of the index being followed if one is trying to use wave theory. And with so many fewer votes, it means that a large trade in any one stock or by any one operator can have a more sizeable influence on the price level of that index.

Folks. Elliott was an accountant. How Borrrring!!!! is that. But he understood averages, and he understood weighted averages. And he used the averages to smooth out the spikes of emotion and ego that rule the trading world. For him, it provided an edge.

For us, it means that if we try to use Elliott on an individual stock, or a sub-market index, we need to be aware that we may be getting less than the full picture and probably are getting less than the full picture. 

Think of it like people voting with their money to buy something or not. And, oh, yes, it sure is sexy when the App crowd decides they're going to do a short squeeze on a certain stock. But how often do such individuals know 1) when to get in, 2) how far, and 3) when to get out. Sure, they may play it by ear and strike the big one. More power to them. Or they may not, and they may be one of those that got in later and got hung out to dry - either by price - or by the regulators for market manipulation. 

Either way, it's not Elliott. Elliott is boring.

Have an excellent rest of the evening,

TraderJoe

Time, Time, Time ...

...see what's become of me. With no apologies to Simon & Garfunkel - who certainly don't need mine - the purpose of this post is only to note the time relationships between the down wave and the up wave in the ES/SPY (CFD) 2-hr chart below.

As of right now, there are only roughly half the number of up bars as down bars. And strictly speaking that's ok, but slightly lower odds. Often times corrections take as much time or more as their motive wave counterparts. So, in the comments for the prior post, I outlined some ways that this correction - which certainly looks like a Flat - could extend in time as a multiple flat or a Flat-X-Zigzag.

Predicting such is horrible stuff, and the market could always decide that the downward pull of a third wave (C wave, or not) is simply too great for now and a next wave could break lower at nearly any point. Keep in mind, today's up wave was made on news and sometimes those form weaker waves because only the pros/bots/machines get to react other than retail stops being hit.

Nonetheless, I do think the presence of the Flat wave - whether it continues or not - with its lower "b" wave argues more for a follow-on wave lower than an immediate return to the high. This is all a game of odds, and the Flat tilts the odds a bit in favor of a continuation wave lower.

Looking at today's daily bar, it was an outside day up with a close still below the 18-day SMA. Also, it is the second bar after the outside day down on Tuesday, so a trap was not set for the bears. But being an outside day up, it's low should not be taken out within the next two sessions or it would constitute a trap for the bulls.

The daily slow stochastic is still over-sold.

Have an excellent start to the evening,

TraderJoe

Meanwhile ... back on earth

I realize everyone is focused on Friday and a certain IPO that is about to transpire. But, here - back on earth - the debt clock is about to register $40 Trillion.

And look whose logo is in the lower right. I could have sworn that when the debt was only $35T, a certain POTUS hired a certain CEO to get the debt down through reduced government spending. Gee, what happened, it 'mysteriously' seems to have gone up by roughly 12 - 14%?

So, let me get this straight, people are just gonna schlepp their money over to a huckster who was hired to correct a problem & didn't? OK. That shows truly great skill and demonstrates both acuity and integrity, right? Yeah, right (not). If I were applying for a CEO job, would that "previous employment" section show up on my resume? I'll bet he still got paid for it. You gotta think. Let me see, would I trust this guy to get me to Marz? Um ... since his A-I has been trained with all the earth data known to man and monkey there is no way I'd trust it on the Redd Planet.

So, what's up? It's pretty simple, the guy is just selling you something to make him rich(er). He doesn't care if its SpaceChex, Teslex, RobotEX, Cutex or Riddex. Just buy something, please! As long as it has an "x" in it. It's what every carnival huckster does, and it's completely legal.

Am I jealous of this guy? Well, a bit envious? Not quite. It's hard to be those things when you're just tired of being taken... and taken...and taken by a few with little concern for their peers. And you "are" his peers. You just won't say so. You'll just stand there gawk-eyed and not do a darn thing about it. Do what? Like enforce anti-trust laws and deconcentrate corporate wealth though business law and the tax code.

Ah, well. Not to worry. Why should one worry? Ask Ray Dalio who is trying to help people see what is coming. Search YouTube and watch one of his recent videos if you haven't already.

Meanwhile, back on earth...

Have a great start to the evening,

TraderJoe

Band on the Run

With due apologies to Macca, today we made a fifth wave down that pierced the lower daily Bollinger Band - and ran it a bit - but did not fill the futures gap as per the daily ES futures chart, below. While the futures are still trading as this is written, if the close remains near here, then there is an outside day down.

I had cautioned in the comments to be cognizant of that lower daily band as the Smart Money often like to take profits there. And there was a significant rebound back inside the band to near the open of the bar. So, with five-waves-down, according to the Principle of Equivalence, all we can claim is that there is an a/i at the low of the day.

Today's rebound is very short in time compared to the length of the down wave, so there is a way it can persist for a while. Further, the down wave has downwardly overlapped some additional up waves. It is possible price can go sideways inside the band for a while as the daily slow stochastic is now in over-sold territory.

Today being a weak outside-day-down be careful of the high of today's bar (ES 7,491) for the next two trading sessions as if it exceeded, it might set a trap for the bears.

Make no mistake, this down wave now measures too large to be a simple correction to the up wave. Probably there will be at least one more down wave to follow it, maybe more.

Have an excellent start to the evening,

TraderJoe

LL MC

Today was a lower low (LL) day for the ES futures, with a middlin' close (MC) as in the daily ES chart below. While the futures are still trading as this is written, we don't expect too much change before the end of their session.

Some interesting elements were 1) there was a lower low overnight in the futures which keeps the swing-line currently headed lower below the 18-day SMA, 2) there appeared to be at least initial rejection at the 18-day as price settled lower, 3) price did not reach either the lower daily Bollinger Band or the prior May 19th low which is still intact: it could, 4) the daily slow stochastic did not yet enter into over-sold territory, and 5) I showed one futures gap earlier from May 22nd that closed. I'm showing above another such close-to-open gap from May 4th which might be the next to close.

All-in-all today still feels like the fourth wave of a downward impulse until/unless that should change. But with price having two closes below the 18-day SMA for the first time in a while, the daily bias has flipped to lower for the present.

Have an excellent rest of the evening,

TraderJoe

Brother, Can You Spare ...?

...no, not a dime, but a few years? The depression question, of course, was "brother, can you spare a dime?" But this post refers to the fact that there is a "time" relationship in a potential ending diagonal and a 'prediction' that the chart below makes. The chart is of monthly log style in the S&P500 cash index using the Zigzag Indicator to get the price vertices correct. And it has a lot going for it including a rather nifty overall look.

S&P500 Cash Index - Monthly Log Scale - Degree Resolution

The degree labels seem to resolve really well. Inside of Primary ⑤, Intermediate (1) is log shorter than Primary ③ the previous higher degree wave in the same direction. Primary ② and ④ look well-coupled and, for alternation, whereas Primary ② is a "running flat", Primary ④ is an "expanded flat" with a more extended Intermediate (B) wave and a lower Intermediate (C) wave.

From the indicator, the peak of the RSI is on Minor 3 of Intermediate (5) of Primary ③, and the first divergence is on Minor 5 of that same wave. The RSI is diverging since.

The Prediction

So, the prediction from the wave structure is that since the low of the diagonal was in 2020, then the entire diagonal should be retraced down to its Primary ④ beginnings in less time than the diagonal took to form. With the current year being 2026, that means it has about six years to accomplish this. Often, though, in an aggressive down move it can take 50-75% of that time, there being no published "rule" to this effect - just a tendency.

We know that traders tend to be an impatient lot as a group. They want to see fireworks to kick this thing off. That could happen. We have yet to see a 1-to-10 or 1-to-12 down day on the NYSE Advance/Decline line. But those have happened before, so we'll be on the lookout (BOLO) for one fairly soon to start a breadth thrust to the downside. We're not going to assume this will happen. It simply won't surprise us if it does - and we wouldn't call it a 'capitulation' as the financial media will likely try to say. Rather, it probably would be a "kick-off" to any downward wave sequences.

Epic Fail

Could we go higher from here? I suppose it is possible, but I can't yet find another good count to do that with. We have already tried one alternate ending diagonal, published it on this site as an alternate, and the market simply wouldn't have it. That failure seems to be one more signal that the market is more intent on correcting at the moment, than in going higher. So, we'll monitor closely for other alternates up to a point, but not for long. In the interim we'll listen to the market and see what it's telling us.

Meanwhile, have an excellent rest of the weekend. This is the second post since Thursday and if you have not read the first one, you might want to check that one out, too.

TraderJoe

Don't Assume

Every Tom, Dick & Harry internet analyst will tell you about how they recognized a possible top today. They used their cycle work. Or they reviewed their "volume profile" and saw how rarified things were getting up here. Or they used their AVWAP (Anchored Volume-Weighted Average Price) and the five-day moving average and saw the breech of them. Or they used their support and resistance lines to tell you, "Once this level was gone, the next level was so & so". Or they will tell you how their upper Bollinger Bands "acted as a brick wall yesterday to stop the price advance". They will typically do this to try to sell you some subscription or some market service, or to get more clicks for their YouTube videos (and, hence, ad revenue). 

I will not do that today. I will instead plead with you not to assume anything. I will offer you one chart, with more discussion below the chart. The chart is of the S&P500 daily in September & October 1987.

I beg of you to look at this chart and learn its lesson. The decline started modestly enough with about ten down days in late August & early September. Then there was almost a month of dickin' around in a flat wave back to about the 50% level before the October decline started. Some people probably felt pretty good about the rebound. But here is the lesson. When the decline got started, did it stop at equality (100%)? It did not. Did it stop at 1.618 level for wave three? It did not. Did it stop at the 2.618 level for wave three? It did not.  It kept going until the Fibonacci 4.414 extension level was reached, wiping out all those might have assumed at the 1.618 level there would be a turn for a fourth wave. And it took only two days from 1.618 to 4.414!

So, then what? Is that the end of the assumptions? Heck no. One would then have to think (sic) with a down wave being so large in price, there simply must be a fourth and a fifth wave to make another lower wave after that to finish the impulse. Right?  Well, as the chart shows - while there was a new 'closing' low, price did not ever make a new intraday low. The bottom in December was what we call a truncation - and a fair sized one - and the rest is upward history.

So, on to today. Yes, today was impulsive well enough. But there are only three-waves-down from the recent all-time high. So, what are we to think? Well, not too much. There must be a fourth wave the adheres to the 'rules' and then a fifth wave lower than it and at least roughly equal to wave one to claim an impulse. Is it likely it will happen? It has odds. The odds are better than 50%, but not by much. Why not? Because with only three-waves down, the market could 'by the rules' form a diagonal structure to move lower. So based on the state of knowledge right now, the odds might be 55-45. Then, depending on the overnight and the open on Monday, the odds can be updated. In other words, look to see if it happens, but don't assume it will.

Let's extend the lesson to today's wave.

Here we see the three waves. Did today's wave stop at equality? It did not. Did it stop at 1.618? It did not. Did it stop at 2.000? It did not. Did it stop at 2.618? Well, we simply do not know yet. There is no proportional turn to the second wave in the series. The Elliott Wave Oscillator (EWO or AO) is still bright red and pointing down on this hourly timescale.

Does that mean we should expect a fourth wave overnight on Sunday into Monday morning. No! We should not expect it. It has odds! Maybe you and I rate the odds as pretty good. Maybe someone over in Japan or England - that couldn't sell when they wanted to today - has other ideas and wants to unload at their earliest opportunity and not wait for more pain to set in. Maybe it's a true crash wave and hits one of those larger Fibonacci numbers hardly giving anyone time to react (like the two days in 1987). Those scenarios can change the odds.

Or maybe there's news announcements during the weekend or on Monday that overrule the urge to sell, and it all stops here or only slightly lower for the time being.

The point here is not that Elliott Wave is useless. It has some benefits in the market. But, rather, the point is that the market is a wild non-linear and chaotic system. And it's going to give profit to some and knock others out as it sees fit to accommodate the buy & sell orders it receives or does not receive.

So, if you can't necessarily count on Elliott Wave, what can you count on? Well, I'm here to tell you to be careful. You might wake up one morning to find the internet out, and so orders become difficult to place. Or you might wake up to find a limit move in your favorite stock or commodity and you become trapped in your position. Stock & index futures trading have limits and halts, too. I truly hope these things do not become bothers for either you or I. But market history has a way of saying different at the worst possible times.

So, please do not assume anything, particularly as regards Elliott Wave. How you trade is strictly your own business. I am here to show you - among other things - it's not always what it might seem. And especially to remind you that people with much, much more money than you or I have can make a rational or an irrational decision at any moment and it can affect the retail trader greatly. Further, the government can affect markets with announcements good or bad at any time - and I can assure you they won't consult me first.

So, be patient, be calm, be flexible and realize to most market opinions there are associated odds which may or not be in your favor. You might assess something as 70-30, but it's the 30% that comes through for some reason you might not be able to see. You might not be considering the truly big money and what they have to gain or lose. Or you might not be able to assess it accurately because they can act irrationally, too. Or, they think they are acting rationally, but all they do is scare people. Like the story that comes out today with the headline, 

Social Security recipients may lose $500 monthly in 2032, report says

Great. Good job people. Thanks for getting everyone all riled up and thinking they might have to sell some investments earlier because they will lose some Social Security. This kind of stuff is what helps make the market so chaotic. Even if no one acted on the specific story, you have salted the very idea of it in the back of someone's mind. 

So, try to remember that IFF we enter a bear market, everything will be backwards from a bull market. All of the assumptions that went into financial planning (you know the 60-40 balanced stock-bond allocation kind of stuff), interest rate assumptions, home value assumptions, etc. all get turned on their head. For example, right now there are people on the internet telling others what specific combination of new ETF's can guarantee them X% return per month. And a lot of these people assume linear growth in the A-I stocks. It's a warning flag. And they assume these products will trade in all bear market conditions. Another flag. Some of these things are untested.

Be careful out there. Some cities just fixed the potholes from two winters ago - if you get my drift.

Have an excellent start to the evening,

TraderJoe