Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were lower; DJTrans, RUT futures higher
SPX Candle: Lower High, Lower Low, Lower Close - Hanging Man Candle
FED Posture: Quantitative Tightening (QT)
Most U.S. Equity Indexes (except the DJ Transports) made daily lower low candles, and then retraced much of their initial losses. The market as measured by the cash S&P 500 Index had closed yesterday at 2,751. With the futures lower overnight, the market gapped six points lower to open at 2,745 and continued trading lower down to 2,736 by the first half-hour of trading. With the all-time high (ATH), so far, at 2759, this was down -23 points from that level. The market then rebounded in three-waves 2,747 - 2,741 - 2751 to a 62% retracement, before beginning to fall off again slightly to 2,743, and then trading up to close at 2,747.
All-in-all, there is not too much to get excited about, yet. The ES futures really only just spent their first full day back inside the Bollinger Band, but the daily slow stochastic is still fully embedded. If the market gaps lower tomorrow, it might start a more countable downward sequence. If not, revisiting the highs is well within the realm of probability.
So far, the only larger waves we have are 2,759 (ATH) - 2,736 - 2,751 - ??
So we remain patient, and flexible until further clarity appears. Have a very good start to your evening.
TraderJoe
Wednesday, January 10, 2018
Tuesday, January 9, 2018
Russell Done?
Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were higher; RUT, NQ (futures) DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
It's not for sure yet. There still is some room. But, if the Russell 2000 were making a diagonal instead of a triangle, then it 'can' be counted as completed.
Remember, in such a count, wave (v) must remain shorter than wave (iii). In the above count, the b wave of (i) is a flat, but the a,b,c within (i) would be a zigzag. The other waves seem like pretty clear zigzags. In the above count each of the waves (i), (iii), and (v) does make a higher high than it's predecessor - showing their motive character.
With regard to the S&P500, today's gap up wave becomes very important. We were able to count a five wave impulse upward today that could finish the wave, but downside price movement was not enough to create an outside reversal day down. So, while price movement could continue lower tomorrow, the failure to close the gap today leaves a possibility of a higher high, yet. More on that one later.
Tonight, the ES futures settled above their upper Bollinger Band for the fifth consecutive day in a row The odds of this happening (assuming stock prices are distributed normally) are exceptionally low - about 1%. Of course, we almost all know stock prices are not distributed normally, and instead have "fat-tailed" distributions. The large prices movements - both positive and negative ones - happen more frequently than the normal distribution would predict. This is why an occurrence of this type, with only about 1% odds of happening by random chance, can happen right in front of your eyes.
Tonight might be another one of those good nights to check in on the futures a couple of times to see if anything invalidates in the after hours.
Have a very good start to your evening.
TraderJoe
Market Indexes: Major U.S. Equity Indexes were higher; RUT, NQ (futures) DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
It's not for sure yet. There still is some room. But, if the Russell 2000 were making a diagonal instead of a triangle, then it 'can' be counted as completed.
 |
| Russell 2000 Futures - Daily - Completed or Nearly Completed Diagonal |
Remember, in such a count, wave (v) must remain shorter than wave (iii). In the above count, the b wave of (i) is a flat, but the a,b,c within (i) would be a zigzag. The other waves seem like pretty clear zigzags. In the above count each of the waves (i), (iii), and (v) does make a higher high than it's predecessor - showing their motive character.
With regard to the S&P500, today's gap up wave becomes very important. We were able to count a five wave impulse upward today that could finish the wave, but downside price movement was not enough to create an outside reversal day down. So, while price movement could continue lower tomorrow, the failure to close the gap today leaves a possibility of a higher high, yet. More on that one later.
Tonight, the ES futures settled above their upper Bollinger Band for the fifth consecutive day in a row The odds of this happening (assuming stock prices are distributed normally) are exceptionally low - about 1%. Of course, we almost all know stock prices are not distributed normally, and instead have "fat-tailed" distributions. The large prices movements - both positive and negative ones - happen more frequently than the normal distribution would predict. This is why an occurrence of this type, with only about 1% odds of happening by random chance, can happen right in front of your eyes.
Tonight might be another one of those good nights to check in on the futures a couple of times to see if anything invalidates in the after hours.
Have a very good start to your evening.
TraderJoe
Monday, January 8, 2018
Geometry Test - Answer
Although one person tried valiantly, and came up pretty darn close to the correct answer, below is the actual answer to the test wave count published over the weekend. The count overall has not changed. My intent was to check your reasoning in an Elliott Wave format. Few people decided to stake a stab at it. I will explain the answer after the chart.
First, the supposed "Leading Diagonal" wave a was not a leading diagonal at all. That is because it could not be counted as zigzags (the tell is that there was no smaller a-b-c within (i)). Secondly, a real leading diagonal most probably would have had some type of deeper retrace. None seen. So, this suggests that wave iv is actually a "running flat". Now, while a running flat is relatively rare, the very purpose of the running flat was to equalize the net distance traveled between the real wave ii, and wave iv. Notice how the distance from iii to iv's end, is now almost identical to wave ii.
There also was no deep pull-back after wave ii where it was shown. That was the last (e) wave of the triangle shown. This is a common problem wave counters have - deciding where the last wave ended to begin the new count.
.
Now, the alternate for this count remains a-b-c equals a larger i, ii, iii upon exit from the triangle. But the 23.6% pullback seems to suggest that is less likely. Still, I want to give a big shout-out to Kaviraj Chopra, in yesterday's comments, who made a real good attempt to answer the challenge question.
Now, the bulls have to answer the question of why, in real time in the live chat room today,, we were able to count "five waves up" which included yet another, but smaller, triangle as follows.
Notice how within this wave there was another triangle that not only did we call in real time - before price exited it - but how we were able to project an exact price target from the triangle. That target was hit rather exactly. But, beyond that, in the last five waves up on the chart, (-i to -v) we were also specifically able to outline the alternation within this last wave as a sharp for -ii but a FLAT for -iv. We also noted that wave -iv had a 38% retrace, without overlapping wave -i. Further, so far, wave -v is having a tough time cracking the mid-line of the channel, showing a loss of momentum.
The point is with a pretty clear five-waves up of this type, we should expect at least a three wave down sequence now. Maybe more, but let's see if how this goes.
Yes, patience and flexibility are still required. Have a great start to your evening.
TraderJoe
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| ES E-Mini S&P500 Index - Futures - Correct Test Answer |
First, the supposed "Leading Diagonal" wave a was not a leading diagonal at all. That is because it could not be counted as zigzags (the tell is that there was no smaller a-b-c within (i)). Secondly, a real leading diagonal most probably would have had some type of deeper retrace. None seen. So, this suggests that wave iv is actually a "running flat". Now, while a running flat is relatively rare, the very purpose of the running flat was to equalize the net distance traveled between the real wave ii, and wave iv. Notice how the distance from iii to iv's end, is now almost identical to wave ii.
There also was no deep pull-back after wave ii where it was shown. That was the last (e) wave of the triangle shown. This is a common problem wave counters have - deciding where the last wave ended to begin the new count.
.
Now, the alternate for this count remains a-b-c equals a larger i, ii, iii upon exit from the triangle. But the 23.6% pullback seems to suggest that is less likely. Still, I want to give a big shout-out to Kaviraj Chopra, in yesterday's comments, who made a real good attempt to answer the challenge question.
Now, the bulls have to answer the question of why, in real time in the live chat room today,, we were able to count "five waves up" which included yet another, but smaller, triangle as follows.
 |
| S&P500 Cash Index - Impulse Wave Counted |
Notice how within this wave there was another triangle that not only did we call in real time - before price exited it - but how we were able to project an exact price target from the triangle. That target was hit rather exactly. But, beyond that, in the last five waves up on the chart, (-i to -v) we were also specifically able to outline the alternation within this last wave as a sharp for -ii but a FLAT for -iv. We also noted that wave -iv had a 38% retrace, without overlapping wave -i. Further, so far, wave -v is having a tough time cracking the mid-line of the channel, showing a loss of momentum.
The point is with a pretty clear five-waves up of this type, we should expect at least a three wave down sequence now. Maybe more, but let's see if how this goes.
Yes, patience and flexibility are still required. Have a great start to your evening.
TraderJoe
Saturday, January 6, 2018
Geometry
The only purpose behind this weekend post is to show some geometry on a chart. Then we might be able to ask some questions.
A few questions one might ask are these: 1) why are the waves in a fairly exact channel? 2) why is there a FLAT wave (.a, .b, .c) after the apparent diagonal wave a shown? 3) why does the downward wave after wave a retrace only, and actually slightly less than, 23.6%?, 4) how would a 23.6% wave be a second wave at that location? 5) if wave ii of a makes a deep pull-back, why doesn't the wave after b have any sign of a such a deep pull-back?, and 6) are leading diagonals more often a waves or are they 1 waves?
Often times, not always, it is C waves that have little retracement in them at all, and 'take off like a rocket'. The alternate remains i, ii, iii. One can not count waves that are not on the chart, yet.
Have a good weekend, and remain patient and flexible. Let's see if anyone is awake out there in Elliott land. Take care.
TraderJoe
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| ES E-Mini S&P 500 Index - Daily - Geometry |
A few questions one might ask are these: 1) why are the waves in a fairly exact channel? 2) why is there a FLAT wave (.a, .b, .c) after the apparent diagonal wave a shown? 3) why does the downward wave after wave a retrace only, and actually slightly less than, 23.6%?, 4) how would a 23.6% wave be a second wave at that location? 5) if wave ii of a makes a deep pull-back, why doesn't the wave after b have any sign of a such a deep pull-back?, and 6) are leading diagonals more often a waves or are they 1 waves?
Often times, not always, it is C waves that have little retracement in them at all, and 'take off like a rocket'. The alternate remains i, ii, iii. One can not count waves that are not on the chart, yet.
Have a good weekend, and remain patient and flexible. Let's see if anyone is awake out there in Elliott land. Take care.
TraderJoe
Thursday, January 4, 2018
Target Reached and then Some
Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
We noted in the weekend video that the next target for Primary [5] was (5) = 0.618 x net [ (1) through (3) ] at 2,717. That target level was met today, and exceeded slightly, as per the monthly chart below.
Further we will note the presence of three monthly gaps in Intermediate (5). Usually, the "three-gap" sequence is first, an initiation gap, second, a continuation gap, and, third, and finally, an exhaustion gap. So, that pattern might make some sense here.
So, while this count is now 'plausible', it does not yet display the typical ending ending characteristics of either a large obvious triangle, or an ending diagonal. As I've said in yesterday's post, a contracting ending diagonal could be in progress. That did not change much today, except the relationship between potential c of (i), and a of (i) is now 0.618, and not 0.50 as it was yesterday. See the chart below.
Although prices softened a tad at the tail end of the day, there still is not a high probability sign of a turn. Today's daily candle is still a trend candle, and until lower daily lows begin to be made we must continue to count with the trend upward. Tomorrow is the Employment Report which helps set FED policy, so it might be worthwhile to tune in a few times tomorrow to check on progress.
Because of the strong green histogram on the Elliott Wave Oscillator, the alternate for the above count is an impulse where a = .i, and b = .ii, and c = .iii, and then a potential wave .iv could not overlap a = .i. Let me further clarify, since there is already a wave after it, the Leading Diagonal a wave, (i), (ii), (iii), (iv), (v) can be either of a or .i. I have no preference, and we'll see what the employment report brings tomorrow.
Other than that, have a very good start to your evening!
TraderJoe
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
We noted in the weekend video that the next target for Primary [5] was (5) = 0.618 x net [ (1) through (3) ] at 2,717. That target level was met today, and exceeded slightly, as per the monthly chart below.
 |
| S&P500 Cash Index - Monthly - Target Attained |
Further we will note the presence of three monthly gaps in Intermediate (5). Usually, the "three-gap" sequence is first, an initiation gap, second, a continuation gap, and, third, and finally, an exhaustion gap. So, that pattern might make some sense here.
So, while this count is now 'plausible', it does not yet display the typical ending ending characteristics of either a large obvious triangle, or an ending diagonal. As I've said in yesterday's post, a contracting ending diagonal could be in progress. That did not change much today, except the relationship between potential c of (i), and a of (i) is now 0.618, and not 0.50 as it was yesterday. See the chart below.
 |
| ES E-Mini S&P500 Index Futures - 4 Hr Chart - With c = 0.618 x a |
Although prices softened a tad at the tail end of the day, there still is not a high probability sign of a turn. Today's daily candle is still a trend candle, and until lower daily lows begin to be made we must continue to count with the trend upward. Tomorrow is the Employment Report which helps set FED policy, so it might be worthwhile to tune in a few times tomorrow to check on progress.
Because of the strong green histogram on the Elliott Wave Oscillator, the alternate for the above count is an impulse where a = .i, and b = .ii, and c = .iii, and then a potential wave .iv could not overlap a = .i. Let me further clarify, since there is already a wave after it, the Leading Diagonal a wave, (i), (ii), (iii), (iv), (v) can be either of a or .i. I have no preference, and we'll see what the employment report brings tomorrow.
Other than that, have a very good start to your evening!
TraderJoe
Wednesday, January 3, 2018
Weekend Video Follow-up - 2
Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Cash and futures made new highs today. This was not unexpected if an ending contracting diagonal is in progress. What I have done below is show that we may only have had wave (i) of such a diagonal, not wave (iii), yet. Here is why.
The primary concern is within the sequence a,b,c to (i). In the futures, but not cash, there is a higher high at .b which makes the wave a flat wave. Flats are not allowed as the second or fourth waves of diagonals. They must be zigzags. Even though cash does not have this problem, I prefer to give the wave sequence a lot of time to complete. Secondly, if you look at the Fibonacci ruler today, you can see that a c wave at this location would be 0.500 x a, dead on. It is hard to ignore the exact Fib.
Next from wave iv, it is entirely possible to count the a wave as a contracting Leading diagonal with (v) shorter than (iii), and (iii) shorter than (i), and (iv) shorter than (ii), with (iv) overlapping wave (i). And all of these sequences can be counted as three-wave zigzag sequences.
The trend lines are just tentative ones, but the help to show the contraction, so far. ES volume today was very light, at 1.07MM contracts. And, as you can see by the EWO, today's new high diverged with the EWO - at least from the waves we can see.
If the diagonal forms properly I would expect every larger diagonal wave (i), (ii), (iii), (iv), (v) to show form and balance by being located on opposite sides of the blue EMA-34.
Have a nice night!
TraderJoe
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Cash and futures made new highs today. This was not unexpected if an ending contracting diagonal is in progress. What I have done below is show that we may only have had wave (i) of such a diagonal, not wave (iii), yet. Here is why.
 |
| ES E-Mini S&P500 Index Futures - 4 Hr Chart |
The primary concern is within the sequence a,b,c to (i). In the futures, but not cash, there is a higher high at .b which makes the wave a flat wave. Flats are not allowed as the second or fourth waves of diagonals. They must be zigzags. Even though cash does not have this problem, I prefer to give the wave sequence a lot of time to complete. Secondly, if you look at the Fibonacci ruler today, you can see that a c wave at this location would be 0.500 x a, dead on. It is hard to ignore the exact Fib.
Next from wave iv, it is entirely possible to count the a wave as a contracting Leading diagonal with (v) shorter than (iii), and (iii) shorter than (i), and (iv) shorter than (ii), with (iv) overlapping wave (i). And all of these sequences can be counted as three-wave zigzag sequences.
The trend lines are just tentative ones, but the help to show the contraction, so far. ES volume today was very light, at 1.07MM contracts. And, as you can see by the EWO, today's new high diverged with the EWO - at least from the waves we can see.
If the diagonal forms properly I would expect every larger diagonal wave (i), (ii), (iii), (iv), (v) to show form and balance by being located on opposite sides of the blue EMA-34.
Have a nice night!
TraderJoe
Tuesday, January 2, 2018
Weekend Video Follow-Up
Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
In the weekend video, I noted how the S&P500 could easily form a larger triangle or even a diagonal wave higher if prices did not start down "quickly" from the Friday drop. As noted in previous posts, the first trading day of the month often brings the new money into the market from company pension plans, bonus payments, dividend reinvestment plans, and 401k's, etc. That occurred once again today.
The market as measured by the S&P500 Index closed Friday at 2,674. The futures were much higher over-night in preparation for the "new" money. They, the futures, even "gapped" higher which is a fairly rare occurrence, and the cash market opened at 2,683 - up +9 points. After trading up ten more points to 2,693 there was after the first hour a three-wave four-point reversal to 2,689, followed by more sideways to higher prices resulting in a new all time high for the S&P500 and a close at 2,696.
With the marginal new higher close, the count of the S&P500 Daily chart, and it's potentially larger diagonal, would look like this.
Given the overlapping wave sequences, the triangle locations which were called in real time, and the noted divergence, it is very difficult to count this wave sequence any differently at this time. Further, the DJIA did not make a new all-time-high today, nor did the ES futures by the settlement.
We must still be patient and flexible, and follow the technical indications, until price itself signals something different.
Have a good start to your evening, and to the New Year!
TraderJoe
Market Indexes: Major U.S. Equity Indexes were higher; DJ Util lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
In the weekend video, I noted how the S&P500 could easily form a larger triangle or even a diagonal wave higher if prices did not start down "quickly" from the Friday drop. As noted in previous posts, the first trading day of the month often brings the new money into the market from company pension plans, bonus payments, dividend reinvestment plans, and 401k's, etc. That occurred once again today.
The market as measured by the S&P500 Index closed Friday at 2,674. The futures were much higher over-night in preparation for the "new" money. They, the futures, even "gapped" higher which is a fairly rare occurrence, and the cash market opened at 2,683 - up +9 points. After trading up ten more points to 2,693 there was after the first hour a three-wave four-point reversal to 2,689, followed by more sideways to higher prices resulting in a new all time high for the S&P500 and a close at 2,696.
With the marginal new higher close, the count of the S&P500 Daily chart, and it's potentially larger diagonal, would look like this.
 |
| S&P500 Cash Index - Daily - Potentially Larger Diagonal |
Given the overlapping wave sequences, the triangle locations which were called in real time, and the noted divergence, it is very difficult to count this wave sequence any differently at this time. Further, the DJIA did not make a new all-time-high today, nor did the ES futures by the settlement.
We must still be patient and flexible, and follow the technical indications, until price itself signals something different.
Have a good start to your evening, and to the New Year!
TraderJoe
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