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

Provisional Top - 2

For today's post I said in the comments I would post the potential alternate count found after the overlap was made in pre-market session in the ES 4-hr futures. I mentioned I couldn't find one last night, and this one wasn't made possible until the lower low this morning.

There are things to dislike about the alternate - which is why it is the alternate - but as you probably know price in today's session has already gotten up to 78.6% of yesterday's down wave. So, either count is on the table. We'll see if the down movement after the close creates a gap-n-go or not.

One thing I was monitoring all day - as I do every day - was the intraday wave-counting-screen. Overnight I had noticed that it was possible the futures & CFD were getting an expanded flat wave that never showed up in the cash market, as below.

And it was interesting to note that the level of 2.618 x a-3 added to b-3 was right at the R1 daily pivot today. My personal confidence in this expanded flat is only about 60-40 by-the-way. That's because while second waves can be flat waves, they are a little less typical than those made from zigzags.

In the cash session, price broke the three up (green) fractals in the middle of the chart and never looked back until the close. It was also interesting to note that no additional fractals were made, up or down, until the closing candles which made an up (green) fractal. So, this is where a wave-counting-stop would go in my book. The market has made sure to widen out the risk of a fractal trade to all the way back down at the early morning low for the time being. That might change overnight.

So, either a top is "in" and we had an expanded flat at the low. Or, possibly, there is still a triangle working given the 78% retrace. In either that case or the diagonal, it is possible to go over the top again. We'll see how Friday goes.

Have an excellent start to the evening,

TraderJoe

Provisional Top

Here are two charts providing the provisional count to a top. The first chart is the ES futures only on an 8-hr close-only basis. The count consists of five minute-degree waves from Minor B to Minor C which would form the Intermediate (V)th wave of Primary ⑤. Under this count the wedge at the top would likely not have been a diagonal; just part of the overall wave Minor C which is part of the monthly diagonal shown in many, many posts on this blog. Within the five minute-degree waves wave minute ⓘ is the extended wave in the sequence. There are ~140 candles in the chart and the wave four indicator on the Elliott Wave Oscillator (EWO or AO) circled right where it should be.

The next chart is of the ES/SPY CFD on the 30-minute timeframe showing how the day unfolded into the cash close. The top shows a tiny truncation (*) in the ES futures, but not in the CFD or SPY.

ES/SPY (CFD) - 30 min close only - looks impulsive

Note there is a five-wave structure to potentially end the move on a divergence with the EWO. Then, there appears to be the start of an impulsive wave lower. (As this is written the after-hours just made another lower low past the daily S2 level to 7,550 in the ES futures, only, so far). Note there is a 2.618 wave down for a third wave.

If this top holds, it would end the contracting diagonal from 2021. The reason the count is provisional is that post-pattern behavior is required in three forms: 1) an impulsive wave in good form should be confirmed, 2) there should eventually be a retrace wave that does not go over the high, and 3) there should be a lower low that significantly exceeds the  low of the original impulse.

The confirmation steps, above, are in the future. It is difficult for me to see an alternate at this time due to degree labeling and current overlaps, but I will keep looking.

Have an excellent start to the evening,

TraderJoe

MOAD

In the ES futures (and SPY CFD) 30-minute chart, is it possible we are in the Mother of All Diagonals (MOAD)? This is because of 1) the prior triangle - which could be a 'b' wave, 2) the new overnight high, and 3) the current numerous overlaps as the 'first-of-the-month money' has helped send price to capture the intraday 18-period SMA at least temporarily. There are also some downward fractal breaks to consider.

ES/SPY (CFD) - 30 min - Intraday Wave Counting Screen

At the present time, the diagonal could point either lower or higher (with higher currently shown). But the invalidation of the upward diagonal is clearly shown.

Have an excellent rest of the day.

TraderJoe

The Nothing Bagel

Is that a plain bagel, or a nothing burger? While the world waited for a decision on the situation in the Middle East, nothing was delivered. It's like the Uber driver entrusted with keeping the meal warm, ate it for themselves on the way to your house. Meanwhile, back at the market, prices made a new higher high and then appeared to put in much of either a triangle or a Flat. This was the likely end-of-the-month sloppiness known as window-dressing.

It might be that the message was deemed to be best delivered when the potential 'first-of-the-month' money, the passive monthly inflows that usually occur around the first trading day of the new month, could reliably blunt any news that was perceived negatively - even if it was supposedly good news.

Bear in mind a flat or expanded flat could potentially challenge 7,560 - 7,530 on this chart if a triangle should not be in play. But, as far as the potential triangle goes, its centerline, the wave 3 peak, was crossed over again toward the end of the futures session, as shown. (Degree labels shown are just for reference and will be adjusted later.)

So, let's see how things go on Monday.

Have an excellent rest of the weekend,

TraderJoe

The Everything Bagel

Sorry I really meant the everything bubble. But like one of those bagels at your favorite coffee shop that has every conceivable manner of topping and seed on it, this market has now really taken on the characteristics of an 'everything bubble'. We knew about the debt bubble, we knew about the equity bubble, we knew about the housing bubble, we knew about the crypto bubble - to name a few. But now we also know we have an A-I bubble, and further, a war bubble. And that means bubbles in commodities, like oil, and even still Gold. Some would even add that we have a bubble in war babble. And now you can add a bubble in government owned enterprises. Intel was not the first. A former President had the U.S. government buy a lot of shares of a flagging car company called General Motors. Of course, that was at the bottom of one of the more notorious financial problems in 2009. This is near a market high. It certainly feels like the stakeholders are truly getting "all in".

Maybe I'm wrong, maybe we need a bubble in planet ownership. Oh, wait, yeah, there is a certain IPO scheduled for 12th June isn't there? Something about rockets and space exploration, I think.

Meanwhile, back at the chart ...

ES Futures - Daily - Days since 18-day SMA

This is just a reminder that price has not hit the 18-day simple moving average in the last 35 bars. That is almost twice the length of the average. And all-day today after the 10 AM bar price did not even hit the intraday 18-per on the ES 30-min chart. No worries. I'm sure the algorithm is going to do what's best for us all in the end. Right? Ha. Meanwhile, can I interest you in some cream-cheese?

Have an excellent start to the evening,

TraderJoe

Best Alternate at this Time - 3

The daily picture in the ES futures still looks like the chart below. Nothing has changed there, yet. We are still waiting to see if a fifth wave, minute ⓥ, completes and if it completes with good form. Since the third wave in this configuration is shorter in price than the first wave, the Fibonacci ruler is shown to see if the fifth wave stays shorter than the third. There isn't an upward length violation at this time. If there should be, we will adjust.

As far as the local count on the SPY cash 30-min chart, there is a leading expanding diagonal first wave (where the zigzags first started coming from - because they initially couldn't be counted as clean 'fives'), then a second wave zigzag, then a third wave which just notches out a wave that is longer than the first. This chart starts with minute-iv, circle-iv, or ((iv)) at the lower left. From there, this would be the minute ⓥ wave.

There is one way to count the pattern as complete, but it doesn't match up with the futures. A further way to see the pattern ending would be with a ivth wave triangle. Right now, a parallel is being maintained. If a triangle forms, the parallel could be breached. We note the Elliott Wave Oscillator is not near the zero line yet on this timeframe.

Have an excellent rest of the day.

TraderJoe

Best Alternate at this Time - 2

The ES daily futures got within 90% of the prior high, qualifying for the 'b' wave of a Flat, or the next impulse, higher.

The upward wave 'currently' counts best as a double zigzag. That could change. But the wave is high enough to wonder a little bit about a truncation.

One might want to keep an ear out for the news over the long weekend.

Have a good one.

TraderJoe

Best Alternate at this Time

Like an 'eighties John Travolta movie with Bee Gee's soundtrack if this market decides it is Staying Alive then this would be the best alternate I can offer on the ES daily timeframe. The market has been very hesitant and whippy in its declines. There is some possibility it is a fourth wave.

The down wave is the longest decline on the chart in the up series from April already, so the degree may have turned. But it has not yet overlapped - a key sign of a loss of momentum. The down wave might continue to the 18-day SMA (see prior posts) or it may go much farther than that.

The MACD has only just curled over from its high peak reading. Yet, the wave is currently in a parallel that we will acknowledge until/unless broken lower.

And wild cards are 1) the FED meeting minutes tomorrow, 2) NVidia earnings after the close, and 3) the geopolitical news background.

Again, nothing lower will surprise me but did I want to cover my commitment to review reasonable alternates to the wave count. And, if the third minute wave is shorter than the first minute wave, then the fifth minute wave should be shorter than the third if it occurs.

Have an excellent start to the evening,

TraderJoe

Watch the Embedded Reading

Monday's session ended with the ES daily slow stochastic below the 79 level at 78.90, and tonight the reading is around 71 - 72. The only day the market can gain back the embedded status immediately is for both the %K and the %D lines to close back up over 80 in Tuesday's session. This is not impossible, but it will take a large rally. The daily chart is below.

If the embedded status is not regained, it becomes more probable that price and the 18-day SMA will try to come together. As it stands right now the daily bias is still somewhat positive as the closing price was over that 18-day average.

Today - in the comments for the prior post - we said that any potential expanding diagonal upward invalidated in the Sunday night session. It's good to have that one off the table.

Whippy and grindy - as it is - this is my best estimate of the what the down and the up wave counts are in the half-hour ES/SPY (CFD).

ES/SPY (CFD) - 30 min - Count

The overnight waves, and those made in the cash session best count as a Flat wave, so far. There are two fourth wave locations nearby - shown by the blue box. But the lower low in the cash session may have been a tip-off.

In a perfect flat, the a-3 wave can be taken out and exceeded higher. If there is some overnight news or for some other reason (like a big whale gets the willies, or something) the flat can truncate. Don't put anything past this market. Attempt to count what you see.

Have an excellent rest of the evening,

TraderJoe

Pinbar

Don't exhaust yourself this weekend. Every YouTuber, stock trader and technical analyst will try to sell you their wares (trying to at least get your attention for views, clicks, and/or to get you to purchase memberships, ads, or subscriptions). Don't bother. Get some rest and relaxation instead. The ES futures made a weekly "pinbar" or "spinning top" candle - the likes of which we have not seen in months. It is not confirmed yet. Still, it is a green pinbar which is a tad weaker than had it been a red-bodied candle.

ES Futures - Weekly - Pinbar

A one-candle pattern is not necessarily the end of the move. It could be, but it isn't confirmed. So, next week could confirm the candle - or not. We can count a five-wave-move, up, at several degrees of trend as we have exhaustively covered in the prior posts and charts. So, this could be the end of the wave. But the market today refused to rule out an (admittedly lower probability) hourly expanding diagonal option which is another way to make a more definitive high.

So, it is simple. The candle is either confirmed with a significantly lower confirming candle next week - or it is not - and it is invalidated with a higher high candle. Elliott analysts know how to handle both.

Have an excellent start to the weekend,

TraderJoe

Thin

It's getting thin up here in the SPY (cash) ETF contract. Volume is seriously declining as prices are rising. Sure, there could be a couple more days up. The question is, "is it worth the risk?"

SPY (Cash) ETF - Daily - Versus Volume

At least some bulls are apparently thinking, "maybe not". And what do the bears think? Try to find one to ask one.

Have an excellent rest of the evening,

TraderJoe

Continuation of Channel Count

The ES 2-hourly chart is below, continuing the count that was shown on the weekend. The count is both very mature and it is full of risk.

This count provides alternation between wave ii and wave iv. Elements of risk include 1) there was not yet a new higher high today, 2) today broke a closing only line on the ES 4-hr chart, and made a back-test of it (interested readers should verify this), 3) multiple RSI divergences are shown on this timeframe, 4) a wave structure this steep in so few days could wind up in a final diagonal, a final triangle or even a count failure, and 5) we have noted the current news risk several times already.

So, for now, a wave-counting-stop (WCS) has been placed below today's low.

Have an excellent start to the evening,

TraderJoe

There is No Emergency; Stay Calm

Unlike others trying to sell subscriptions, newsletters and trading services that try to get your emotions going so you will buy their products & services, we have always just urged calm and an educated approach to try to count waves in the best spirit of the wave principle as aligned with the rules. If you would have listened to every time a major EW service 'screamed from the top' with suggestions to go 'double-short', 'or max short', the market would have proved them wrong and your account would be the worse for it. Part of staying calm is to actually take the time to review the information at hand. There just aren't that many pieces of available data on which to make a judgement, but one should not throw away the key ones by forgetting to consider them. The chart below is an example.

Daily Put-Call Ratio Five & Twenty Day Moving Averages

This chart shows the 5-day (blue) and 20-day (red) moving average of the equity only put-to-call ratio (symbol $CPCE on Stockcharts.com). And one can see that the 5-day (blue) made a new yearly low during April. OK. But now the 20-day (red) has not only made a new yearly low, it has also made a new three-year low. That means for about a month of trading days options players have been aggressively purchasing more calls than puts. And more so than in the past three years. So, it is becoming clear there are more players on one-side of the boat (as they say).

Keep in mind this is a market-related measure. It is timely, and it is not subject to the wave counting techniques of an individual or company. It simply is what it is.

Am I urging you to do anything with this information? Well, nothing more than put this information arrow in your information quiver as you make decisions.

It is much like the fact that the daily ES (and the weekly) are bumping up their upper daily and weekly Bollinger Bands - like in the daily chart below. More arrows for your quiver. 

ES Futures - Daily - Bollinger Band ~95% of the Time

The chart is only telling you that the odds of closing outside of the band are about, roughly, nearly only 5% of the time. This is a statistically based approximation founded on the standard-deviations from a moving average, adjusting for market volatility. It's not exact. Nassim Nicholas Taleb, author of The Black Swan, would argue with the loose statistics involved and blow them out of the water as not properly accounting for the market's tendency to make 'fat-tailed distributions'. OK. I get that, too. But when used as a 'rule-of-thumb' the algorithm does a good job of containing the market 95% of the time or more. The algorithm doesn't regard the market as an 'emergency'. You shouldn't either. And if you combine it with knowledge of what Ira Epstein determines as "the strongest market technical signal", that of the embedded daily slow stochastic - also shown above - you might avoid some pre-mature market signals, too.

If you want to be a trader that FOMO's in and out of the market, then listen to the subscription services and the financial news networks for recommendations (as opposed to just for information) and let them make up your mind for you. You'll be like a weathervane snapping back & forth in the wind.

But if you want to make more confident decisions, then learn to do the work for yourself. Learn to count. Review the few indicators the market has of sentiment, and of momentum-strength and make your observations in an organized and documented manner. Practice counting. Maybe put some of your counts out in public to get feedback on them (from a counting viewpoint).

Or don't. The only difference between traders and investors is their timeframe. Maybe investing is better for you. Maybe some of both. But I thought an investor was supposed to "buy low & sell high". The market is making all-time highs, not recognized bear-market lows.

Have an excellent rest of the day.

TraderJoe

For the First Time

Long-term readers of this blog know that for about the last five years the favored wave count proposed has been the Contracting Ending Diagonal (CED) to end Cycle V of Supercycle Wave [III]. We have posted; we have showed chart after chart. But, this week, for the first time you can actually see on the monthly log chart all of the Minor waves that may be involved in the Intermediate waves to make up the Primary waves. That is because this current wave, if it is correct, would be the Minor C wave in the count.

I don't know about you, but it is gratifying to me to see it. It is much better than repeatedly calling for tops that don't occur. So, here it is. On the chart. And Intermediate wave (5) is currently shorter - in log format - than is Intermediate wave (3) so the count has some merit. The invalidation of the Minor B wave did not occur, so this marker will be removed from the chart.

The next marker is the invalidation level of the pattern which is above 8,513. At that price wave (5) would become log longer than wave (3). And that would simply break the 'rules' for a contracting diagonal.

The price action this week actually feels like a throw-over. It's been gappy, non-stop, and very, very news related. Further, price is nearing both the upper daily and weekly Bollinger Bands, where the Smart Players often take some profits off the table.  The technical indication on the monthly chart is that the PPO is diverging as the market is making new highs. The technical indication on the two-weekly chart is that the Elliott Wave Oscillator (EWO or AO) is diverging at these new higher highs after having signaled the fourth Intermediate wave (4) by dropping below the zero line with the requisite 160 candles on the chart. (Interested readers of this blog should verify this finding on the two-weekly chart).

So, this count is on track at present. But it could invalidate. It hasn't yet. But if it does, then the Elliott analyst just moves on to the next most likely pattern. As we have covered before this would be the expanding ending diagonal. But, right now, the subdivisions of those waves just don't add up in this pattern. Maybe they will at some point. They just don't now.

So, we are faced with this staring at this chart and wondering, "Hmmm?". It isn't yet a great idea to act on this uncertainty. The first confirmatory indications would be 1) significant reversal candles, 2) filling of up gaps, and 3) price closing below the 18-day SMA. Maybe this would be accompanied by a covering news story. Maybe not.

For now, it is enough to see the picture and to wonder, "just how in the world did this get here"?

Have an excellent start to the evening,

TraderJoe

A Key Item

Here's a simple thing to watch tonight and tomorrow. Does the daily chart of the ES futures wind up losing the embedded slow stochastic or not? Already, it is wobbly and below 79.

ES Futures - Daily - %D less than 79

One key is tomorrow's close. If the %K, the red line of the lower indicator above, remains below 79 then it is possible a quick trip back to the 18-day SMA might occur. And recall broker Ira Epstein's caution that IFF the embedded reading is lost on the close tomorrow, Tuesday, the only way to get the reading back is if both numbers are over 80, again, on Wednesday, the next day after losing the reading. Otherwise, the slow stochastic would have to go through the whole three-day process of embedding again (assuming the market does not move substantially lower and prohibit that).

Tonight & tomorrow to gauge progress on that front one might also watch The Intraday Wave-Counting-Screen, shown below, which was created to be a more responsive guide on the ES 30-min chart.

Right now, things are sideways below the intraday 18-period. So, the short term is fighting with the long term a bit.

We addressed the EW count in the comments for the prior post. While a fourth wave became a little less likely with the down movement this morning, it was not ruled out. And a fourth wave triangle is still a possibility as we only counted three waves down. Trading above the R1 level tomorrow might indicate a triangle pattern is kicking in. But we are also keenly watching for downward overlap as we showed in the comments. So far, that hasn't happened yet.

And once again we are in a newsy market. So, give it the caution it deserves to help avoid being whiplashed.

Have an excellent rest of the evening,

TraderJoe

A 'Possible' Leading Indicator

I'll just post the daily chart of SPY (cash) versus HYG - the Corporate High Yield Bond fund, and pretty much let it speak for itself.

The recent data is one of the larger divergences we've seen in a while, and one can note how it 'generally' has been tracking the index. So maybe what we are getting now is a 'leading' indicator of the risk appetite of the smartest money - and we'll see this week whether the huge divergence gets repaired (and HYG rises), or whether it is acting as a valid warning for SPY to begin at least a retrace sometime this week to react to account for the potential mood change among the whales.

Market technical oscillators (such as MACD, slow stochastic, etc.) tend to be a bit lagging. This is a search to find a slightly better true 'leading' signal; meaning that - to be useful - its turn should come slightly before that of the equity market without being too premature.

Have an excellent rest of the weekend.

TraderJoe

Friday of Distrust

Unlike so many Fridays before - when the market was saying it was supremely confident - and the machines would literally jam the market to a Friday closing high - this Friday was different. The market was confident enough to make a new intraday high of 7,300 on the ES futures, primarily from the 'first-of-the-month' passive inflows, as we had clearly suggested, but it could not hold on to that level. And when word got around that a new truce proposal was advanced to the U.S., but was disliked, price actually sold off into the close. What? Price actually sold off on some mild profit-taking on a Friday?! Well, kiss my grits. The daily chart of the SPY cash index is below, reflecting the close.

As shown in the prior day's comments, we think we are counting a fourth wave very high up in the wave count until proven differently. Clearly, there is no outside reversal bar, yet, nor is there a lower low confirming candle yet. We outlined the options from The Fourth Wave Conundrum and cited that after only three-waves down there were a lot of options. But then the news broke making the upside less tenable than the downside.

So, in the chart above there is a trend line of interest that should be watched closely to provide more information. Are higher highs possible? They are. Can the price structure fall apart if some really adverse news is announced? It can.

Once again, I am taking things very gingerly. As of about 4:30 pm the ES futures are still well-above the 18-day SMA with an embedded daily slow stochastic. So, the price bias is still up along with one of the strongest technical market signals, the embedded slow stochastic. Until these situations change one must respect where the market is, but clearly with a skeptical eye.

I may have some further information on EW counting options later in the weekend.

Have an excellent start to the evening.

TraderJoe

Count So Far - 2

Phasers on Stun! The whippy after-hours trading caused by galactically stellar earnings beats & misses appears to have created a sub-wave as follows on the 4 Hr chart of the ES/SPY (CFD) below.

On the prior post I didn't draw the parallel in for nothing. This count was possible by reducing the degree of the diagonal by one degree and suggesting that it might be a leading diagonal. Notice that ii is smaller than (iv) in price and time, so the degree labeling still works.

We don't 'know' that this parallel is the case yet but a clear invalidation level for the count exists. Remember, tomorrow is the last day of the month which often, not always, sees end-of-the-month window dressing before the potential first-of-the-month passive inflows from the usual sources.

Have an excellent rest of the evening. Be cautious, patient, calm and flexible this evening as traders around the world - in all time zones - give Chairman Powell his Intermezzo Curtain Call.

TraderJoe

Count So Far

The ES/SPY (CFD) futures have declined in the overnight sufficiently to overlap the first wave, i, in a diagonal sequence. Therefore, the appearance is that the diagonal five waves in the futures resulted in five waves in the cash market. The diagonal is shown below in the ES/SPY (CFD) 2-hr chart below.

In the diagonal wave v < iii < i, and wave iv is shorter than ii, with wave iv overlapping wave i. Cash can be counted without overlap.

Now the only questions are 1) the degree of the waves, and 2) is the diagonal leading or ending? With regard to the second question first, it seems atrocious to suggest a leading diagonal this high in the wave count, but the simple fact is that major earnings are still due this week, along with a FOMC meeting. So, I am just keeping an open - but skeptical - mind. Further, there is no announced complete resolution to what is occurring in the middle east.

With regard to the degree of the waves, the question is whether this is a minute degree wave, minute ⓘ, or whether the whole wave constitutes the alternate Minor C which is shown in red. The only way to tell would be if certain levels were exceeded, including the start of the entire wave on 31 March 2026.

Have an excellent start of the day,

TraderJoe

fire danger? !

When you see this sign in the woods, it's not a good idea to light new campfires. A similar situation exists now on the ES 4-hr futures. Yesterday we suggested counting upwards, and we did that today. The market went a bit higher and hit ES 7,200. But our equivalent count on this contract indicates that with 110 candles on the chart, The Eight-Fold-Path Method suggests a five-count is best on this wave largely in a channel.

The wave includes a completely acceptable fourth wave retrace in this timeframe that we called the end of.

Yes, there can be more upside. The (v)th up wave could become as long as wave (iii) since the first wave is the extended wave in the sequence. Maybe the wave goes on into Monday or Tuesday, pending news. But when the wave turns down, there could be a steep correction, and possibly, but not certainly, a complete retrace depending on whether the degree labels are the correct size. In other words, this wave could be all of Minor C, or it could just be minute ⓘ of Minor C. It's a very difficult call, but I've gone with the most conservative view until we know more. Either way the risks are pretty high.

Just thought I'd share the count. Have an excellent start to the evening and the weekend.

TraderJoe

Possible Set Up for v of (c).

Today's wave structure was difficult unless you were possibly expecting a crazy (meaning multiple segment) fourth wave. These can sometimes happen in the market. Those of you that followed the market intraday know that a bout of selling hit that drove the market to a small outside reversal day down. Readers of this blog should confirm that on the ES daily chart. The SPY cash market got to within -0.03 of a new high, shown below, but couldn't do it today. At 712.35 the SPY could not get over the prior high of 712.38 and then headed lower in five waves. So, the ivth wave looks to be a compound flat. That's fine, nothing wrong with it at these length dimensions. The reason we think it's a Flat is that the highs are well within the 90% level of the prior highs required by the 'rule' for a flat wave.

Then, after the decline on the SPY 10-min chart, there was a quick retrace followed by sideways action as shown above. So, until we know more, this can be a setup for a vth wave higher in the minuet (c) wave of Minute ⓘ. I would watch something like the parallel shown - which should be adjusted when the second wave, ②, is known. Then a third wave of v might take us over the prior high.

As far as I can tell, today's low should hold or the downward wave would likely overlap and cause complications to have to deal with. So far, it hasn't but it is marked as invalidation for that reason.

If the vth wave can hold its length dimensions, then it might be possible to call minuet (c) and minute ⓘ done and over. If not, we'll look to the alternate impulse count of Minor C, not the diagonal count.

The trading is whippy and choppy and still calling for much patience and flexibility. For example, anyone that thought we were going directly over the high today had a big surprise handed to them until about 14:00 hrs. That shouldn't be us. We know the character of fourth waves to be 1) complicated, 2) mis-leading, and 3) do everything but overlap their prior first waves. It certainly feels like that is the wave personality we are dealing with. So, take it slow & comfortable. The market will let you know.

Have an excellent rest of the evening.

TraderJoe

Bias Still Up

Today in the ES futures was another inside day, still with the price bias up and the close over the 18-day SMA. The day opened on a gap up, chopped around for much of the day, tried to head higher towards the futures close but could not yet break out of the prior range. The daily chart is below.

ES Futures - Daily - Bias Up

The daily slow stochastic is still embedded over the 80 level, and until its red line closes back under 79 it remains embedded.

The wave count remains intact, so far - as per the prior post. One can see that the nearby up (green) fractal might be the first to break higher. One can also see just how far back the market has placed the prior down (red) fractal - all the way back at the 200-day SMA.

The market feels somewhat shredded by or similarly ruled by the news cycle but so be it. Those are the market conditions at the moment, and they are what they are.

Have a good start to the evening,

TraderJoe

Still No Overlaps

Here is the ES futures 4-hr channel count & the alternate count (in red) to follow The Principle of Equivalence. There are still no good overlaps to play off of. There are, as yet, no sizeable downward waves, and there are not really very good signal bars at the high, yet. The count does its best to follow degree labeling definitions. It may be there was extreme alternation in ii vs iv, with iv being a triangle in wave (a)/(i) instead of a diagonal.

ES Futures - 4 Hr - Price in a Channel

I lean towards the blue count as equality has not necessarily yet been reached in the up wave. Further, the $NYAD (NYSE Advance/Decline Line) made another new high today. That needs to be different if any bear market is to begin. I did not fight that signal in the last wave, and I'm not fighting it now. Price is still in a channel, so the up wave looks corrective at this time. That could change, but it hasn't yet.

While the bull/bear survey sentiment data has not gone wildly higher, the Equity Put-Call Options ($CPCE) indicator dropped to 0.41, the lowest for the year and tying the lowest for several years. The five-day moving average is also at a new low for the year. So, this indicator is definitely in the Speculative Zone as a contrary indicator.

Weekly and daily, the ES has hit the upper Bollinger Bands. This is a place where Ira's trading guidance suggests the Smart Money may take at least some profits off the table. So, some stiff pull-backs might be expected soon. Further, the news background remains volatile until more information is obtained. The presence of an inordinate number of gaps in this wave up on the cash charts also give rise to caution and the need for patience and flexibility.

Have an excellent rest of the weekend,

TraderJoe

Reminder: The Principle of Equivalence

This is just a reminder that The Principle of Equivalence suggests that there are two common forms of wave shape that a Minor C wave could take, as diagrammed below. First, Minor C could be a contracting diagonal unto itself as shown on the left.

Minor C Wave - Two Forms

Second, is an impulse C wave with a fifth wave diagonal - as shown on the right. Either of these would work, although the first one might have better alternation with the Minor A wave overall which appeared to be a non-overlapping impulse.

There is, of course, a third much more rare form of an overall expanding diagonal for this wave. But, as of this time there just isn't much evidence for that count. And - because it is more rare - it will be dealt with later, if needed.

With that in mind, The Principle of Equivalence also says that - without any current overlaps to work with - we must also consider these two counts on the four-hour chart on the way up.

Again, we have no overlaps to work off of, yet, and I am following degree labeling here as best as possible.

Have an excellent rest of the day.

TraderJoe

'Everybody' Does It !

Why violate degree-labeling definitions when you don't have to? A lot of people that have read this blog are starting to catch on to the idea of what the degree definitions really mean. But a lot of people, either have not, are skeptical, or just don't care a whit enough. So here is a real-life example of violating and not violating degree labeling definitions. And rather than examining your work, I will criticize the work of someone else that was freely published online. This example in the ORCL daily chart comes from Trader's Classroom - which is sponsored by none other than Elliott Wave International (EWI). Here is their chart, clipped from the video.

ORCL - Daily - EWI Awful Example

The first thing that should tip you off that the chart is incorrect that that brown wave (c) in the upper left, which is claimed to be a smaller degree wave, is actually larger than brown Minor 2 which is claimed to be the larger degree wave. This is what is meant by a violation of degree definitions. Note that, overall, the chart has a 'five-count' down. Now review at the following chart.

Now look at this chart starting in the upper left to the lower right. Still a five-count in which we have included the number of candles. But look at the difference in the upper left. Clearly those are very small degree (and actually small) choppy waves that make up a leading contracting diagonal as minute ⓘ. They look-like three-wave sequences, and I actually measured wave (iii) to make sure it was shorter than wave (i). It is - just - but the measurement is shown. Did they measure? I rather doubt it. Did they measure 'any' of the waves in the starting sequence. Again, I rather doubt it.

Now, look at the difference where the Minor labels 1 through 5 are placed. They have Minor 1 way up in the upper left looking very disproportional to the rest of the wave.  What evidence for that do they present? None. Absolutely none.

Now look at The Eight-Fold-Path Method. What evidence do I present for the position of Minor 1? Well, it is the first divergence in the Elliott Wave Oscillator (AO or EWO), after the first major trough.  It is an impulse of the Extended First-Wave variety, x1.

And what evidence do they present for the location of Minor 2? None. Absolutely none. But The Eight-Fold-Path Method presents the evidence of the first near-return to the zero line for the EWO (black circle on the left). So, the third wave - Minor 3 - occurs on the next trough of The Eight-Fold-Path-Method. And - look'ee there - wave 4 occurs with the EWO crossing slightly back up over the zero line without an overlap in price and all within 145 candles which is well within the recommendation of 120 - 160 candles for The Method. And now note that all of the degree labels are in the correct order from smallest to largest.

Do you see how much easier and more objective wave counting can become if the degree definitions are adhered to? Not only is the overall chart easier to label, but it is much clearer, less confusing, and provides more actual meaning to the count. What is the meaning? The meaning is that "the wave had an extended first wave". This can become critical to later portions of the count - like such a wave is often just the A wave of a further correction.

Well, kids, everyone seems to be doing this. But I am actually getting tired of seeing it. If you want to watch the Trader's Classroom episode for yourself, I'll still do EWI a solid and post it at this LINK because it was they that first taught me to count any waves at all. But why anyone would want to follow their methods with these incredibly obvious errors is beyond me. I have written to them over & over again. They have repeatedly ignored this guidance. They don't care. They are making money on subscriptions. I am not and don't wish to. I may write them a last time, but TBD. I have also warned them that such errors are likely to be encoded in their EWaves software if they don't take particular care to avoid it.

This is the second weekend post, and if you have not read the first one yet, you may wish to.

Have an excellent rest of the weekend.

TraderJoe

Interestingly Enough ...

Here are just a couple of facts to be aware of. Both the Dow Jones Transports on a weekly basis and the Semiconductor ETF on a weekly basis have just broken out to new highs as in the two-block chart below.

And even though this is the case, it is possible from an EW perspective that they count differently due to internal overlaps and prior wave structures. It is possible the semi's better represent the monthly diagonal we are likely in. The transports may be finishing a fifth wave of some type.

And while neither of the wave structures may be exactly finished yet, it is worth watching their developments from here, especially as it relates to the formation of the major averages going forward.

It is especially interesting in light of Dow Theory that the transports have made a new higher monthly high without the Dow Industrials yet.  It is also interesting that the NYSE Advance/Decline line has not yet made a new high, either.

Have an excellent rest of the weekend,

TraderJoe