Second Close Under the Band

Overnight initially gapped lower, traded lower for a few hours, as we suspected, and then there was a gradual but steady rise into about 7 AM eastern time. This was in keeping with the guidance that initiating new naked short positions under the band is fraught with risk. The turn-around in this case was 120+ ES points. Then from 7 AM forward, after prices were back inside the band, prices declined all the way back down to the overnight low and exceeded it a bit, as shown on ES daily chart below.

ES Futures - Daily - 2nd Close Below the Lower Band

Thus, there is now a second close under the band, dropping the odds to about 4 - 6% of the next close being outside of the band (not impossible, just lower odds). The regular calculation of the daily slow stochastic is still over-sold only and not yet embedded.

From an Elliott Wave perspective today appears to be some or all of a fourth wave. I lean more towards some because of the brevity of the wave, so far. Fourth waves tend to be malingerers. This one isn't yet.

Have an excellent start to the evening,

TraderJoe

Cash in a Parallel

Ralph Nelson Elliott would say, "use a parallel to help find the count." While we were less confident of the count on early Friday, the count likely became clearer Friday afternoon as certain benchmarks were exceeded lower and we stated we were likely in wave (iii). So, here is a SPY (cash) 4-hr chart with the current count on it. We called the Expanding Diagonal as it was forming.

SPY Cash - 4 Hr - Line Chart in a Parallel

We used a line chart so the overall form of the waves could be seen but we have crossed checked for any wave violations on the OHLC version. There is some question of overlap in iv of (iii), but the final wave in iv does not appear to overlap. The rest looks good, including the waves in the diagonal which should overlap.

Note the MACD is still wide open to the downside. We do not yet have confirmation that wave (iii) is over. Maybe that will come Monday or Tuesday. But also note there is a greater than a (iii) = 1.618 x (i). Also, note in wave (iii) that wave iii > wave i.

Yes, the chart is still an uncomfortable one. There is one heck of a lot of room for a fourth wave (iv) to form. And it might try to come back to the fourth wave of one lower degree.

Since the daily chart of the ES closed below the lower Bollinger Band in just an over-sold condition, this, and the count both suggest the initiation of new naked short positions (using the paraphrase of Ira Epstein's Guidelines for trading) would be quite risky, and Ira wouldn't advise it. Here is that daily chart for your reference.

This chart does not mean that prices can't go lower, particularly overnight, it just means that it is likely that the Smart Money will take some profits against the lower band, and the small retail trader might wind up bucking their movements in the wash of their activities.

Again, price has exceeded the 150% rule in the cash market for a minute ⓔ wave of an expanding triangle. So, this wave down might better be labeled as minute ⓒ of Minor B.

So, the overall expanded flat might be counted like this on the daily chart.

ES Futures - Daily Close - Likely Expanded Flat

Again, the futures have not really violated the expanding triangle, so if we need to go back to it, we will. But, the cash market has, and that seems like the reason to take this view for now.

Have an excellent rest of the weekend,

TraderJoe

Redux

Trade all day, short and choppy lower, and then get this kind of move at the end of the session on the ES/SPY (CFD) 30-min chart, importantly, importantly after the close of the cash session.

Once again, someone is really working the thin volume, and if it weren't for me adhering to Ira's guidelines, they'd be working my last nerve, too. It's too bizarre that in five minutes someone gets to move the market almost half as much as it moved in the entire day. The day session has the volume, and this?

Avoiding this kind of scenario is what a recognition of chop will do for you.

Have an excellent rest of the evening,

TraderJoe

Goldman Told 'Em ?

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

Three Years in a Channel

First, here is an update of the monthly count in the S&P500 Index. I am just reposting this from the prior comments in case some did not check them. In short, nothing has changed yet, except we can show the level that would have to be reached to invalidate the Minor B wave down. Price is nowhere near close. So, the five-plus year contracting diagonal remains intact to this date. Let's see if it continues.

But a chart I really wanted to show was this one of HYG (High-Yield Debt) on the 2-week time frame which shows prices in a three-year (+plus) "best-fit" channel that has not broken out to the upside.

It certainly looks as if prices have a failure at the mid-channel line, and as if the MACD has crossed lower, though it is not under the zero line just yet. The count would be a contracting leading diagonal for Intermediate wave (A), Flat for Intermediate (B), followed by an Impulse for Intermediate (C) which would show excellent alternation in a corrective wave. This suggests a path for high-yield-debt is lower, and possibly to retreat to the prior low, or more.

Note that HYG has a multiple divergence on a long-term chart with the S&P500's recent all-time high. This is because the HYG all-time-high was back in 2013 at the level of 96.

Have an excellent rest of the weekend.

TraderJoe

A Long Slog ..

The daily SPY cash chart now has about 108 candles since the Minor A wave top. It's been a very, very long slog but there are enough waves to claim that the Minor B wave formed as an expanding triangle, currently meeting all wave rules and guidelines.

SPY Cash - Daily - Expanding Triangle option for Minor B

Can this current wave go lower? It can. It has not yet reached the 150% length given as a 'rule' for each of the waves of the expanding triangle.

Just a couple of quick notes. Each wave of the triangle is longer-in-time than its prior wave in the same direction. The up waves never exceeded 150% of their prior waves, following the 'rules' for an expanding triangle.

Neely says he has never seen an expanding triangle for a fourth wave. Well, this one would be a B wave, concurring with his observations.

Further, we can only state that it is possible for the same waves that make up an expanding triangle to make up an expanded flat if price pressure really gives way.  But, so far, it hasn't so we need to see what upward retraces there are, and how far they go.

Lastly, this structure took place on the daily chart which carries some overall weight. It's not like this is a five-minute, or hourly chart. It's made up of lot & lots of individual and collective votes from around the world. So, if this structure holds up, it may play its part as occurring before the last wave in the sequence. In fact, Neely indicates that often the final wave after an expanded triangle fails to make a new high. This will likely be a good test of that observation.

Have an excellent start to the evening,

TraderJoe

Odds Get a Little Better

Today's seeming failure wave, and outside candle lower, increases the odds a bit for the completion of either the daily expanding triangle lower or the daily expanded flat lower. The ES daily chart (roll-over contract) is below.

IFF the diagonal that we sketched out in the overnight waves completed a c wave, up, of the minuet (b) wave, up, then the count, should it break the low, might go back down to complete the minute ⓔ wave of the Minor B wave lower. So far, the price structure keeps failing at the 18-day SMA, so this increases the odds as well.

Again, the prior daily low must be exceeded lower as must the 25 Nov 2025 low be exceeded lower for a valid expanding triangle to be claimed. And, if price keeps heading lower than certain levels, it is possible the expanded flat version of the wave will take over. We will sketch that out in days ahead, if it is needed.

As with all outside days lower (ODL), the high of the ODL should not be exceeded higher in the next two trading sessions or it might form a trap for the bears.

Have an excellent start to the evening,

TraderJoe

Back in the Bands

After a lower open overnight in the March 2026 ES futures contract, price turned around and tried to head for the high of the prior daily bar, as in the ES daily chart below (for the March contract). The lower open continued the swing-line downtrend, but that could change with a higher high bar.

ES Futures - Daily - Close Back in the Band

As we noted, Friday's close was the second consecutive close below the daily Bollinger Band. This diminished the odds of the next close being below the band, and today price did close back inside the band resetting the number of consecutive closes. But the day's action is a good illustration of why one should not (according to my paraphrase of Ira Epstein's trading guidelines) take new naked short positions in futures against the lower band. That is because price only stays outside of the band only about 5% of the time, and the Smart Money is likely at least taking profits on some previously established short positions at or below the bands.

Note, too, that the daily slow stochastic is only down in over-sold territory which often does not yet attract a lot of new money on the short side. It is not embedded. Also, the two most recent fractal locations have moved down to the bars shown.

We have in mind a count that could allow price to get back near/above the prior up (green) fractal. And we also have one that allows one to go lower and exceeded the prior down (red) fractal.

From an Elliott Wave perspective, we counted one way to get a 'five-up' today. We'll simply have to see if a retrace wave hold off of the lows or not, or whether that five wave continues into the overnight to make a larger wave.

Have an excellent rest of the evening,

TraderJoe

Friday was Fast

...but Tuesday through Friday overall was slow and overlapping in a channel. Therefore, it appears with the waves we have there is most or all of an a, b, c down. It may be a corrective wave with the basic form shown in the ES hourly chart, below. And, if it is a corrective wave, the structure would be diagonal for a, then impulse for c - which would be good alternation in a corrective wave.

But I caution, this is definitely not the only way to read the chart. The current b wave could be only part of a larger corrective flat, before making a larger wave down. Still, we'll count what is before us and, if the market says differently, we'll accept it and fit it into the larger picture. Remember - at minimum - on the daily chart we are still looking for a minute ⓔ wave that breaks the prior minute ⓒ wave low, for the expanding triangle, and maybe more if the expanded flat is to occur for the Minor B wave.

Interestingly, this count started out with a diagonal for the (A) wave, down, of wave ①, and it is a good illustration of a fractal-in-a-fractal, or a smaller degree wave being self-similar to the larger degree wave a which was also a diagonal, overall. And, wave-counters-beware, while it is tempting to count everything including Ⓑ down as part of the diagonal, there is a Flat in the futures (which makes a lower low) that prevents such a count as wave four in a diagonal cannot be a flat wave.

So, that's what we have at present. Could the wave go down to 90% of the prior up wave and make the larger b wave of a larger flat since 8th March? It could. Could the wave break the low again? It certainly could. Again, nothing to the downside will surprise us. If anything is surprising us at present it is the lack of upside. Even though short-term wave patterns like a double zigzag are being invalidated, the daily bias is still to the downside, and, as of Friday, the intraday bias is still to the downside as well.

Still, daily prices have made two consecutive closes below the lower daily Bollinger Band, dropping the odds to about 5 - 7% of the next close being lower than the band (not impossible - just lower odds). And the daily slow stochastic is in over-sold territory and not embedded. So, one should tread cautiously and patiently in the interim.

Have an excellent rest of the weekend.

TraderJoe

Watching for Activation

According to the daily ES chart, below, the wave count has been proceeding pretty much as anticipated given all the number of diagonals to fit into the picture and to figure out how they alternate.

ES Futures - Daily - Watching Prior Low

The wave degrees are noted in the chart. We are watching to see if either the expanding triangle or the expanded flat gets activated by prices moving below the low of the prior minute ⓒ wave this week or next. If it does, then the pattern becomes a matter of the length of the wave down because so far - from a time standpoint - this down wave has already consumed more time than the prior ⓒ wave which is what is classically expected in an expanding triangle.

We will note that tonight price filled the up gap in the futures from 25 Nov 2025 if you look back to the left. Still, there is a gap down tonight, and a gap down from 27 Feb 2026.

The daily MACD is currently headed lower, and the 200-day simple moving average in the futures has been tagged or broken, depending on whether one is using the lead-month contract or the roll-over contract. Further, price has broken the lower daily Bollinger Band for the second day and tagged the weekly one.

So, one might look for signs of the Smart Money to take profits on shorts near the bands, maybe letting some ride, and this may create some whippy action in this area.

P.S. I would put a wave-counting-stop (brown w.c.s) above the wave labeled (b)/(ii) as an indication that a different count is playing out.

Have an excellent start to the evening,

TraderJoe

Hourly Parallels

The whip in the ES futures is on in full force. Here are a couple of hourly parallels for your consideration. 

ES Futures - Hourly - Parallels

The wave structure up was a three-wave sequence. The wave structure down is in a parallel and might also be a three-wave structure or a complex in the futures. This makes prediction of the wave structure very tenuous. While it does feel like we might be in the minuet (b) wave, further confirmation of the form is required.

Today price finished in the middle of the range but still well below the daily 18-per SMA. So, the bias remains down at least temporarily. It can't be said often enough - calm, patience and flexibility are key requirements for this period of time.

Have an excellent start to the evening,

TraderJoe

Until Today ..

Until today, the lengths were not correct. Yes, everyone recognized the whippy, range-bound, overlapping nature of the wave-count. But, until today, the waves were not long enough to call the down structure an expanding diagonal, as in the ES 12-hr chart below. This is the case only in the futures and not in the cash market. The SPY contract has too many waves missing from the count.

It's an odd timeframe to have to be charting or even following. Yet today we can see that a fifth wave, v, is longer in price and time than the third wave iii. So, this could mean that if price is making the expanding triangle downward, then this wave could be the minuette (a) wave of the minute ⓔ wave yet to come of the Minor B wave.

Again, we don't know that that is the case, but its likelihood is growing every day. The downwardly biased chop feels like a diagonal grind. And, today, prices again overlapped upward which is hard to explain using pure impulse structures. We also know that prices got down and through the lower daily Bollinger Band on this contract - where the Smart Money likely lightened up at least some of their positions - and prices did not quite make it down to the 200-day SMA.

So, again, because of the whip & the chop, please be patient, calm and flexible. 

Have an excellent rest of the evening,

TraderJoe

Most Wedges

Most wedges - so the theory goes - break around the 80% mark if they are going to break. Applying this rule-of-thumb to the SPY daily closing chart, shows that this closing price wedge may have broken around that level.

SPY Cash - Daily Close - Wedge

To apply this rule, you extend the proposed wedge trend lines to the apex and use a Gann Box to subdivide the linear length of the wave. The red up arrow shows where the 80% mark is located. While this chart doesn't prove anything, the closing back-test of the wedge is certainly interesting. The reason that nothing yet is proven is that while there are lower closing highs, there are not lower closing lows. There certainly could be, but we remain flexible, calm and patient.

The Elliott Wave count remains highly uncertain at this point. IFF (if and only if) there are lower lows the February high can be Minor A, minute ⓑ of a large, expanded flat, or minute ⓓ of an expanding triangle as we have discussed on this blog earlier. The answer to that puzzle will likely depend on the extent and internal count of any potential downward movement.

And IFF there is a downward count started then it might be starting like the following, meaning it would be great if it started with an impulse wave per this hourly chart on the SPY cash index.

SPY Cash - Hourly Close - Impulse Started?

The current wave count down is highly dependent on the Monday trading hours, which could be a mix of war news and the regular monthly passive inflows impact on the market. For example, it could be there is a complex wave ②, up, which is building or in place. So, we need to see what things looks like when the cash market opens.

Until then, have an excellent rest of the weekend,

TraderJoe

New Fractal Break Needed

A lot of words could be expended, but - at present - the reality of the situation on the ES daily futures is that a new fractal break is needed.

ES Futures - Daily - Compressing

Right now, the pattern is compressing. It could break up as a triangle, or it could break down as a diagonal.

We're just giving things lots & lots of time to play out. So, calm, caution and flexibility remain the operative themes until the market gets more directional.

Have an excellent rest of the evening,

TraderJoe

Three-Wave Sequences

Tonight's market has a small gap down (shown as a red circle), which may be related to re-imposition of the 15% tariffs after the Supreme Court invalidated prior tariffs imposed. This is seen below on the ES 30-min chart, the intraday wave counting screen.

ES Futures - 30 min - Potential Diagonal

The up waves prior to the gap down count best as three-wave sequences. So, since there is a possibility of an upward contracting diagonal (either leading or ending), then the measurement on the right shown at 6,877.50 becomes important. That is because, below that level, a fourth wave of a contracting diagonal would become longer than its second wave.

Then, if a fourth wave holds, the fifth wave should not become longer than the third wave.

Let's keep an eye on the levels and remain flexible, patient, and calm until the market gets more directional.

Have an excellent rest of the evening,

TraderJoe

Some Rejection

US equity prices as measured by the ES daily futures made a higher high day today as in the chart, below. Prices got up very near to the 18-day SMA where they formed a triangle that we warned about in the comments for the prior post. The triangle was a barrier triangle and, often, these have a mediocre thrust out of them - because of the energy spent by the market to bust the barrier (or so the theory goes). This one did.

ES Futures - Daily - Some Rejection by the 18-day SMA

Regardless, prices experienced some level of rejection near that average and backed off a bit. If this up wave, so far, is a three-way sequence, it suggests placing a wave-counting-stop above today's high.  It's not that higher waves can't be made, but it would well mean there needs to be a different count applied whether it remains a three-wave sequence or somehow morphs into a five-wave-sequence.

Prices have closed below the 18-day average for four consecutive days, only meaning that the daily bias is still lower.

Have an excellent start to the evening,

TraderJoe

The Expanding Triangle Idea

Several of us on the blog have discussed the idea of the Expanding Triangle as a way both to make a wave that is deeper in price for a correction, as well as to make a wave that is long-enough in time to be a companion to the Minor A wave, up, in the diagonal Intermediate (5)th wave. The good news now is that there are enough waves to visualize this possibility, using ES daily closing prices in the chart below.

A key feature of an expanding triangle is that each wave should be longer in time as it expands in price, and so far, that criterion is working out. Second, the ⓔ wave of the triangle must do two things. It 'must' both cross the center of the triangle lower again, and it must go on to make a lower low than ⓒ - at least intraday. If the lower low is not made, it would be difficult to distinguish the pattern from a failed flat.

Typically, the waves in an expanding triangle are limited to 150% travel, by rule, which so far has held up.

The advantages to considering this pattern are that 1) it might help provide divergence with the $NYAD, the NYSE advance/decline line before a more final Minor C wave, up. 2) it might be another way to explain to explain the stuttering of prices and very hesitant price drops other than by a diagonal, 3) it might be a way to burn time before the mid-term elections. Note that many Elliott waves end with a triangle in the next-to-last position. This would be that triangle.

The disadvantage of the pattern is obviously the difficulties of trading any triangles with the abrupt starts and stops, the periods of grinding ranges, the sharp drops and the eye-opening retraces that seemingly come out of nowhere.

That said, this is still an alternate at this time. It's a very good alternate. The pattern itself is recognized both in the Prechter & Neely descriptions, although Neely refers to it as a horizontal triangle, and so it should be kept in mind as price progresses to see if the pattern is validated. In the Neely description, though, he suggests that the ⓔ wave can progress to the 1.618 or even 2.618 level. I'm not so sure where he gets the evidence for the extensions and wish he would have provided a live example, or two. I'm not sure if those come from the currency or other markets, but I don't recall seeing them recently in the equity markets.

In any event, this is the second post since Thursday. Have an excellent rest of the weekend.

TraderJoe

Something Would Need to Change - 2

Today the ES futures initially made a lower low overnight, then tried a rally when the cash market opened, but it was both overlapping and muted, not making much progress before there was another sell-off into the afternoon. The daily chart of the ES futures is below. The swing line has a lower low and a lower high.

ES Futures - Daily - Lower Low Candle

Notice that the morning low touched the lower daily Bollinger Band before bouncing away from it, and the close was still below the 18-day SMA which keeps the daily closing bias as lower. Further, the daily slow stochastic is still pointed neutral-to-lower.

The form of the candlestick today might be a "spinning bottom" meaning a doji near the low of a retrace but this implies that the high of candle needs to be exceeded before the low - and there needs to be a significant higher close - for the single candle pattern to be confirmed.

So, if there is a b wave down, it is a 78.6% wave as an expanded flat - which implies a higher all-time high is possible. The odds of higher highs are getting lower and lower, but we are within the range of the algorithm, clearly.

If there is weekend news - or something does change dramatically, the bottom could fall out in the expanding triangle - or other - pattern as we have discussed. Until then, there is a new up (green) fractal as shown.

Have an excellent start to the evening,

TraderJoe

Something Would Need to Change

In the SPY Cash 4-hr chart, below, today made a 78.6% retrace on the prior up wave. While not definitive, that is getting into the when where failure has to be considered. As the chart, shows, the region between today's low and the prior swing low at 675.79 is a significant area of risk. And the CPI report is tomorrow.

Contrary to what might be difficult to discern the close-to-open gap close on this chart is at 677.45, so this is a level worth watching.

On the daily ES chart, price closed below the 18-day SMA, so the bias switched to lower. Price also went down to the 100-day SMA, and almost made it to the lower daily Bollinger Band.

The relevant prior up (green) and down (red) fractals are shown on the ES daily chart below.

From what I can see, no major stock index has yet exceeded the down (red) fractal yet. If it does it would open the door to a topping count. But, often, the Smart Money might start backing out at the lower band. So, we have to treat this area gingerly, be patient, flexible and bide our time. 

We had cited in prior comments we were looking for an expanded flat down. That may have happened as we thought. We just need to keep our guard up for a failure at the high, too. If the down fractal should be exceeded lower, it might open the door to the expanded triangle count - or others. First things first, right?

Have an excellent start to the evening,

TraderJoe

Higher High, Lower Close

Nothing too serious. It looks like the bars up from the recent low are a five-wave-sequence. It was possible to count it that way. But the retrace was quite shallow, so far.

ES Futures - Daily - Higher High & Lower Close

The measured retrace from the high is not even 23.6%. The daily slow stochastic is in over-bought territory. The monthly payroll report is tomorrow morning. It could be a market mover, so we'll just post-pone discussion until we see more in those results.

Have an excellent start to the evening,

TraderJoe

Too Many Waves!

I mean that in a kind way. Markets are allowed to have whatever waves work. Counting them is another issue. The DJIA having broken out to a new higher high forces us to count a little differently - still with an extended first wave xⓘ. That is because some of the recent down waves were longer than other ones, and by degree-labeling definitions, then, they should be larger degree waves. I won't belabor - the weekly chart and count are below.

DJIA (YM) Futures - Weekly - Diagonal, Possibly Leading

The problem is that the Nov 2025 down wave, ((ii)), circle-ii, or minute-ii, is too large for the wave at minuet (b), and for the previous wave at brown ii, so that means it is likely of higher degree. I think the only way that happens is if the entire Minor A wave is a diagonal with minute-ii, circle-ii, as the second wave of the diagonal. It is outlined with blue trend lines. Otherwise, there are too many waves for a motive sequence. The down waves are almost impossibly short waves to be in a typical impulse structure. We could clearly see the impulse sequence within wave minuet (a), and we have labeled those waves i -> v. But now the (c) wave of minute-i, xⓘ, looks like it is a diagonal too, with overlaps galore but always trending higher. It is outlined with brown trend lines.

We don't make this wave count lightly. First, we note that the $NYAD (NY Advance/Decline Line) is at yet a new higher high on Friday. Again, we don't think a major bear market starts while this line is making new highs.  Second, there is room yet for the ⓥth wave to continue higher. Recall, it can be almost as long as the third wave. Third, this count implies that if Minor A is a diagonal, then Minor C should be an impulse wave. Fourth, we have recently commented that the DJIA divergence with the transports was cured with all-time new highs in the transportation index. Lastly, we note that while many of the Mag-7 stocks are having difficulties, the FED's FOMC still has the spigots open - which might counter some decline, provide money for company buy-backs, etc.

So again, we are patient, calm and recognize how long a Primary-sized diagonal ⑤ could take. Meanwhile, we have not even seen a 38% retrace in these waves. Hopefully, such a wave, or larger, would be a Minor B wave. I realize that it is easy to make mistakes counting waves. If this labeling is a mistake, then it is the $NYAD which is providing the false signal. Time will tell. 

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

TraderJoe

Discount Double Triangles

On the ES daily chart, there is an outside day, up, with price tagging and over-shooting the 18-day SMA but eventually closing lower than it, as below.

ES Futures - Daily - Outside Day Up

From the truncation high, there is now a c = a, down, and potentially a c = a up. The problem is we don't know upward movement is over. It could be, and if so, great. If not, we'll continue the count upward since there are only three waves down.

ES/SPY (CFD) - 1 Hr - Three Waves Down

In the downward count, the parallel channel is pretty clear. The measurement of c = a downward is approximate, but pretty close. There are two triangles able to be located, the b wave one, and one for the ④th wave of c. Both would be in the correct place. We said the halting pace of the decline likely meant it could be a diagonal. Today, we were counting upward after the AMZN earnings drove the market lower in the after-market and then price swung around for the cash market session.

We understand other markets made new highs today. ES has not, yet. Today's upward count (in futures and CFD) can be counted like this.

ES/SPY (CFD) - 15 min - Three-waves Up

The wave starts out with a diagonal wave which converts to an impulse a wave, followed by a short in time b wave, followed by a potential c wave which starts when the cash market opens. The measurements are uncanny, at present, but again, we have no confirmation that the wave is over. It is suggested that the a wave, up, has to be overlapped to claim an end to the c wave.

It can be seen on this timescale that the MACD diverges, but this needs to be monitored. If a downtrend resumes, it will likely be in the form of a diagonal due to the degree of retrace.

We remain flexible. The only perplexing item at this time is the failure to make a new on Tues 03 Feb, as it seemed to indicate a truncation. We are keeping this in mind in the count. Perhaps we'll have more on the weekend.

Have a good start to the evening,

TraderJoe

Bearish Engulfer with A Lower Wick

There is nothing yet proven in the wave count. Today, the SPY cash index made a slight new daily lower low while the ES did not (yet). So, the main count is shown below on the SPY daily chart.

SPY Cash - Daily - Potential Diagonal

Note today that the local prior low (purple) was exceeded lower. And the daily alternate is shown below with red labels. 

SPY Cash - Daily - Alternate

Diagonals (or potential diagonals, better said) are always tricky. We will note, though, that the MACD is diverging and that is one sign to pay attention to. We want to give the potential diagonal all the time it wants, but we have certain limits. If the wave-counting stop is exceeded lower, that would be a serious wake-up call. The wave-counting stop is the same in both counts. Given the bizarre differences between cash and futures, we think, if today's low holds, then it would best count as a b wave.

There are currently no cash gaps above the market, but there are numerous ones below the market.

Have an excellent rest of the evening,

TraderJoe

GOLD - The Next Parallel

It has been stated several times in this blog that I am counting GOLD in parallels until that is no longer possible. This brings up two views on the question of the count. The first view is that price movement since the 2011 Cycle Wave III top is a very compressed triangle as Cycle Wave IV. That view is shown below on the log scale 3-monthly chart, below. It has been presented before. The measuring objective for this triangle "the widest width of the triangle added to the breakout point" has been met and exceeded, as shown. It is astonishing that GOLD has been up in nearly every quarter since October 2023 (still recognizing this quarter is only just started).

GOLD (GC Futures) - 3 Month - Log Scale Triangle Target

So, it is entirely plausible we had a top in the vicinity of the target. But is it the top? Well, two nagging problems abound. The first is that the internal ratios of this barrier triangle just seem "too compressed". While it is a 'legal' triangle under the rules, usually, not always, triangles have 62 - 78% legs. This triangle does not. One is free to ask, "why not?". The next problem is the "indicator problem". Most of the indicators - whether Elliott Wave Oscillator, MACD, or RSI, etc. - are still screaming "third wave!" if we can believe them. So, what then?

If we look at a slightly shorter-term chart, the one-monthly view, we can see a possible answer to this conundrum. 

GOLD (GC Futures) - Monthly Log Scale - Running Cycle IV

In order to find that next parallel, what IF Cycle Wave IV actually ended back in Jul-Aug 2018 as a "running fourth wave", instead of as a triangle? On a log chart that produces the potentially acceptable channel shown above and provides for reasonably sized Primary waves. Notice, the indicator problem in this chart: both indicators are at highs in 89 candles. Bear in mind Mr. Elliott would applaud you for using a parallel on a long-term log chart.

So, what does this mean? Given such a stellar advance, what if GOLD largely traded sideways or made a large properly shaped triangle for its Primary ④th wave? Notice the lower rising parallel trend line and EMA-34 are both now high enough to prevent overlap - especially if there is more sideways wave travel. If this count is not adopted, notice the otherwise difficult problem of trying to find the Primary waves within Cycle Wave V.

Could GOLD go over the high again in this scenario? It certainly could: the Intermediate (B) wave of a Flat, an expanded flat, or a "running triangle" for Primary ④ could certainly go over the high. From a trading perspective, "range traders" might find it ideal (not trading or investment advice), but so might the algos that revel in creating havoc in the volatility. So, the utmost caution and low position sizing would seem prudent for retail traders. And, lastly, the Weekly Chart below helps provide more information.

GOLD (GC Futures) - Weekly - Spinning Top Candle

Note that price is still over the 18-week SMA, so the bias is up, and the weekly slow stochastic is still embedded. Yes, there is a red "spinning top" candle here which is not confirmed on a weekly basis, and confirmation is always needed of a single candle pattern. But note also, price has not been back to the 18-week SMA since the beginning of 2025. And price has not been back to the lower weekly Bollinger Band since October 2023 (not shown but interested readers should look it up).

Further, notice how broker Ira Epstein's advice of "not buying new" over an upper Bollinger Band was quite savvy in this instance. Now he is largely talking about trend trading, but if one bought new positions at the high outside the Bollinger Band two weeks ago, then the close this week is lower. Yes, he might say (imitatingly), "sure you would have ridden the rocket perfectly, and gotten out at the top... um, not likely. I wouldn't have, only you would have." This is distinctly different advice than I heard Peter Schiff (Gold Dealer) give hours before the high on YouTube (paraphrase). "Buyers must buy the all-time-high. Because if they don't, then the all-time-high is only going to get higher." And that was right before the $926 excursion from high-to-low in the last two days of this week. Let's hear it for sentiment.

Please be careful out there. Be patient & flexible. If you don't know what a wave count is at the moment, that is a good time to 1) stop, 2) take measurements, and 3) use the Principle of Equivalence to determine what wave patterns best fit those measurements. I've done what I can do. Now, it's up to you.

Have an excellent rest of the weekend.

TraderJoe

Chuck Wood

How much wood would a woodchuck chuck if a woodchuck could chuck wood? Chair Powell did an awful lot of wood-chucking today - dispelling everyone's concerns about every conceivable thing. There was an awful lot of jaw-flapping for not changing interest rates at all. Inflation? Not a problem. Employment? Not a problem. Artificial-Intelligence? Not a problem. Energy prices? Not a problem. Gold & Silver and Asset prices? Not a problem, as GOLD reportedly goes up over $100 per day now.

Yea, well, he doesn't mention too pointedly how the enormous $34 Trillion in debt he helped create has destroyed some/much of our purchasing power. He doesn't mention that the $40 Billion each month he now just gives to the banksters is largely responsible for the great wealth inequality, while they laugh "tee-hee" in the Press Conference about how the wealthy are 'mostly' responsible for creating the economic growth. Yes folks, don't ask the hard questions. Don't be investigative reporters. Go along for the ride. Don't make it seem like there are real people out there who are really, seriously hurting. As for the next FED chair, I'd vote for Chuck Wood, PHD (Pile it Higher & Deeper).

For my part, today's chart is of the contracting ending diagonal I called in real time and documented in 2014/2015. I recreated this chart, below, that I recalled so well, so it might be instructive to you. I'll have a couple of notes below the chart.

SP500 Cash Index - Weekly - Contracting Diagonal

First & foremost, look at how long it took for this diagonal to form. It took forty weeks! A full eight months. Consider: would you have had the patience to sit through this thing? Next, note the retraces were not the 62%+ that would be indicated by the guidelines for a diagonal. That is exactly why they are guidelines and not rules. Third, note that interior to the larger diagonal (blue lines) is what looks like a diagonal, (itself shown with brown lines) except it is more properly a running 'b' wave. All these things serve to confuse and confound the wave count - which is why one must remain patient, flexible and calm.

Next note the declining MACD throughout the pattern and finally note that the start of the diagonal was eventually exceeded in less time than the diagonal took to form.

Will this happen again at this possible top, some 12-to-Fibonacci-13 years later? Will FED Chairs continue to say, "no problem" as they hand out cash to the bankers and corporations? Only time will tell.

Have an excellent rest of the evening,

TraderJoe

Bias Flip

Today was an outside day up, and a close over the 18-day SMA. So, the daily bias - at least temporarily - flipped to up, as the ES daily chart below shows. In the process, the prior downward gap in the SPY cash and ES futures was filled.

But the swing line now has a higher high after a lower low, and therefore a new trend is not in force yet. So "outside day up" guidelines are in place in which the low of an outside-day-up should not be taken out in the next two sessions or it constitutes a trap for the bulls. The daily slow stochastic is not embedded. Neither is it over-bought at this time.

IFF a new all-time high is made it would be possible to say that the contracting diagonal higher is still on the table. It would just be extending with the prior high as (i), and Wednesday's low as (ii). But this is yet to be seen.

We remain calm, patient and flexible.

Have an excellent start to the evening,

TraderJoe

Fives or Not ?

Are we trying to count by fives in the upward direction or not? That is the very basis of the Elliott Wave Principle. The Eight-Fold-Path-Method tries to better quantify a chaotic and non-linear wave form by always examining the time frame that looks for between 120 - 160 candles. (If you have questions, see the post in the upper right-hand-corner of the main blog page under the Purpose and Ground Rules). This chart has been shown several times in the past. The bar count is currently up to about 153 two-weekly candles.

The chart is of the S&P500 Cash Index using just the Zigzag indicator to provide accurate wave termination points and illustrate the overall form of the wave.  The RSI indicator and the Elliott Wave Oscillator (EWO or AO) are shown and are currently diverging. The distinctive fourth wave signature can clearly be seen with the EWO briefly dipping below zero before quickly rebounding.

Although it is possible to count a top here long-time readers of this blog will understand that one objection to doing that is the NY Advance/Decline line is at an all-time high this week and last. Few, if any, true bear markets have started in this condition - with the advance broadening out and little divergence seen.

Countering this, though, is the NASDAQ Advance/Decline line which is diverging.  And, remembering that it was the "A.I. trade" that largely built this wave segment, one could wonder if just a few high-tech stocks were largely responsible for the advance, what will happen if they seriously decline? And, we're not even entirely convinced every Mag-7 stock has topped for good.

With that in mind, the Principle of Equivalence says to be patient, be calm, and be flexible as the market overlaps in this area. As the red arrow towards the end of the price series, above, indicates we could easily see a deeper drop for a B wave, before a final C wave advance that provides more in the way of divergence.

The bottom line is 1) we are attempting to count-by-fives, 2) it is possible we are topping now, but we question only how likely that is at this time, and 3) therefore no amount of downside will provide a surprise to us as the risks continue to mount and mount.

Just remember, if we are attempting to count by fives, then this up wave, when over, would be (5) of ⑤ of V of [III] with [IV], ahead, and [V] after that. If you would like to see the difference between counting by fives, and not counting by fives, you should have a look at a fairly recent free NeoWave blog post at this LINK. I have learned a lot from Glenn Neely, but it's very hard to say Elliott would agree with his counting technique.

Have an excellent rest of the weekend,

TraderJoe

Just A Couple of Notes

On the SPY Cash 4-hr chart below, it is possible that the last wave up is a truncation. That is because it 1) counts better as an upward wave, 2) it is still inside the lower trend line, and 3) it did retrace over 78% of the prior up wave. Today's wave is the one that broke the more pertinent three-touch trend line.

As you probably know, today's up movement after the open did not close the gap shown by the blue bar. So that down gap is open as is its companion up gap after the first of the year. So, too, is the gap after 17 Dec still open, and many others.

As far as a downward count, I'm just counting as a tentative a/i for the moment until there is a meaningful upward retrace, a potential lower low, and/or a more definitive channel to work with.

Have an excellent start to the evening,

TraderJoe

It's Not My Fault ...

It's theirs. In the 1990's I invented my own proprietary sentiment indicator and have religiously updated it every week for which the data was available. Luckily, the data source I used remained stable over that time, so no changes were required to the formulas or to the data sets used. Here is what the weekly data show in the chart below.

For 2026, the Weekly Bullish % now stands at 64.8% bulls, across a wide swath of investors from professionals to newsletter writers to small investors. It was not higher at any point in 2025. This level took a big 3-point jump in this past week, which is no small feat. And, in pure simple terms, investors as a collective group are now more bullish than they have been at what is labeled the "B Wave High" which is the 2007 stock market top, before the 2008-9 debacle. Can this measure go higher? It can. People can feel what they wish. And, certainly, sentiment is currently lower than the 68.9% registered at what is labeled the "Minor Wave 3 High" - just before the peak in 2018. Can sentiment go there? It can. Can it go higher than that? It can. Still, it should be clear from the data comparison that we are reaching rarefied air and that risks continue to abound.

Along with a simple percent bullishness, there used to be a sentiment indicator called The Magazine Cover Indicator, which was said to fire when a number of prominent magazines (Time, Newsweek, Barrons, etc.) featured bullish stock market stories on their covers. Of course, most of these magazines have now gone from print to on-line presence, both reducing the effectiveness of their impact and of that of the indicator. Still, we will note that the Time Magazine 2025 Person of the Year, was, of course A-I, as below on its cover.

And you know that just recently, possibly as a result, the A-I stocks (or a lot of the Mag7, anyway) have been flailing and not yet making new highs along with the rest of the market. How, could it be worse than this? 

Easy. 

Below is just a mere sampling of what you can see when you scour social media even slightly and think about what you are seeing and what they are presenting you with.

Apparently almost everyone is now a self-styled investment guru willing to teach you how make money in stocks or avoid fees, or how to live a comfortable retirement life. No problem, right? The kids in the upper left and lower left lived through major bear markets, right? Not.

So be cool. Be cautious. Be patient and be flexible. In the words of some of the old-timers on Wall Street, 'the boat is getting a little heavy on one side'. It's not my fault. It's theirs. I'm just showing some evidence. It happens almost every time. People get excited when they win or make a lot of money. And the opposite will be true at a bear market bottom.  Sentiment will decidedly go the other way - like the 25.3% bullish in the first chart which occurred at or near the "C Wave Low" of the 2009 bear market bottom.

And to be fair, there is a problem with sentiment. It often precedes a top (or a bottom). That means that even though opinions are getting stretched right now, it doesn't mean people will head for the exits tomorrow. But, like a passenger strapped in on a jet airplane, while you don't want to prematurely open the cabin door and jump, you might just want to amble around the plane a bit - like if you're surveying where the lavatories are - and at least check out how many exits there are, where they are located, and how they operate without being obvious, of course. Because nobody likes a fidgety seatmate. Right?

Tomorrow is not scheduled to be a cash stock market session as it is the MLK Holiday, although there may be some futures trading hours. Have an excellent rest of the day, weekend and holiday. 

TraderJoe