The link between Goldman Sachs and Washington, D.C. is well-known. So many ex-Goldman employees have become Treasury Secretaries, NY FED Bank Presidents, etc. that the "circle" in infused with its culture. Goldman knows how to trade bear markets. Mere mortals don't. So, all that had to happen was to suggest that a well-timed story could create one of those truly stellar bear-market rallies, and it doesn't matter if the news is true or not, or if the news is confirmed or not, it simply doesn't matter. The machines take the input and mechanically provide the output. Pure & simple. So, here on today's intraday wave-counting screen, one can see the 7 am - 8 am bar which was based solely on a news comment - which may have been nonsensical or not. Mere mortals - without access to the inner circle - can't know.
The bar popped out of the intraday Bollinger Band (where statistics suggest new longs should not be initiated) and then ground sideways for the rest of the session.
The purpose of those prior up (green) fractals is to suggest points at which shorts might be stopped out, especially if prices exceed the 18-period intraday "line-in-the-sand", which they hadn't all night but did in short order. Prices went on to exceed the daily Pivot Point (PP), the daily R1 Resistance level, and to stall at the daily R2 Resistance level after banging on the daily S1 support level for most of the night.
The intraday slow stochastic went from over-sold, to over-bought, and back to over-sold near the end of the session. Price tended to find support around the daily pivot point and the 100-period intraday SMA.
It sounds like a lot of technical analysis here. What does this have to do with Elliott Wave? Well, the current keepers of the wave principle proclaim that the news has little to do with wave movement. That it is only or mostly investor sentiment that drives wave formation.
From a more objective perspective than that of trying to sell monthly newsletters, which is itself a very old market paradigm, it is clear to me that a day like today simply disproves that hypothesis. I once learned that if your principle or law can be shown not to be true in certain circumstances, then it cannot be the complete story.
Here there are different constructions at work: 1) the cash market was not even open, yet, when the comment was made, 2) this is an exceptionally good way to let the thin volume force prices to spike higher as the machines trade and people don't, except perhaps stops get hit. 3) This insanity of "is it true, is it not true" is a great way to let one's friends get out of their long positions on the spike if they have been dying to do so in the market decline. 4) This is also a great way for the institutions (like Goldman?) to implement new shorts near the 18-day SMA, on the daily chart, if they wish to do so with less risk. 5) The market mechanics are as transparent as distilled water. Yet the meaning is insidious. The retail trader is disadvantaged not to have the bully pulpit operating for them, or the mega-millions required to co-locate servers at the exchanges and outfit them with news-reading algorithms that can operate faster than a person can even absorb or understand the news and its implications, let alone push a button. We have covered that aspect of trading several times on this blog.
Yet this is the game that the current SEC allows. It doesn't have to, but it does. Market manipulation has been going on since the dawn of time. How can one say that a news story is definitely market manipulation? Well, if the story comes out in a DM, e-message, or tweet without prior warning that there will be a story coming out at a certain time so people can prepare, one can almost guarantee it. FOMC announcements are a good case in point. People know when these occur, and they can sit out of a position and wait if they chose to. On the other hand, if one is subject to some newsmaker's' instantaneous outburst, without prior warning, this seems completely possible to be nothing other than manipulative.
As quarterly company reports demonstrate, timing-is-everything. If major public officials are not constrained, the result is sheer bedlam in the markets - and without other tools to judge - investors will take the famed any port in the storm to find locations for operations. These might be Bollinger Bands, or Pivot Points, or a Fibonacci ratio, or a moving average or a price pattern. If bedlam can occur, why don't people care enough to create change with their lawmakers? Well, as long as the bedlam is to the upside and favors the bull case, the vast majority of investors will say, "whew, prices came back up a bit; nothing to complain about there". Again, that is a "majority" and that means most and in a democracy that often rules.
It won't be until the bedlam is to the downside that there will be the cry & hew that, "something must be done and must be done now" as the long-term players bemoan their reduced holdings. Everything is great in a bull market. Everything is horrible in a bear market. And - eventually - bull markets turn into bear markets ... sure as the night follows day.
Have an excellent start to the evening,
TraderJoe
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