Saturday, November 30, 2019

The Daily Count

Close analysis of the following factors suggests the count in the chart, below, is applicable, yet, still within the Intermediate (B) wave, upward.
  1. Length of the waves in price
  2. Length of the waves in time
  3. Position of initial diagonal
  4. Position of largest triangle in time
  5. Alternation regarding potential diagonals
  6. Fibonacci retracement levels
  7. Channeling
  8. Support and Resistance

ES Futures - Daily - Probable Up Count

The current (b) wave which appears as a potential diagonal would not alternate well in this position as a fifth wave or a (c) wave. Therefore, it is likely one of those (b) waves that is really a triple zigzag, and it follows a three-wave (a) wave down which is too short in time to really correct the up waves. 

If this current down wave breaks the mid-line of the channel (shown as the dotted line) then it might be assumed that the minuet (c) wave of the minute ((b)) wave would be underway to possibly make a 0.382 x ((a)) wave, with a minute ((c)) wave up to follow. Then, price would likely find support at prior highs, and possibly take a stab at making new all-time-highs with potential divergences with indicators like the advance-decline line, etc.

There are other ways this could happen, but for right now, this count seems to fit with the W-X-Y scenario from last December's low. The count might also generate a lot of bearishness on the break of the channel lower, yet the minute ((c)) wave need not trade all that much significantly higher than present levels.

Have a great rest of the weekend.
TraderJoe

Wednesday, November 27, 2019

Degree Problem

U.S. Debt Clock: $23.08 Trillion; prev $23.07
ES Daily Candle: Higher High, Higher Low, Higher Close: Trend Day
Market Posture: Negative
Daily Swing Line: Higher
Daily Bias: Up (Settle Above 18-day SMA)

Today the ES daily futures closed above the upper daily Bollinger Band for the second consecutive time, as the daily slow stochastic is just still in over-bought territory (not embedded).

ES Futures - Daily - Second Close Over Band

This second close tends to lower the odds of remaining over the band to about (very roughly) 3%. Any close within the bands would now be a typical expectation. Five-to-seven closes over the band would be an exceptionally rare event. With this in mind, my market posture changes from neutral-to-negative to plain negative.

As readers get frustrated with the very short term intraday turn-arounds and seeming lack of downside in holiday-light volume,  we just recognize it for what it is - a holiday market. I remain patient, flexible, calm and observant. Nothing about my view has changed from the Intermediate (B) wave up. (B) waves are notoriously difficult to count. That is their nature. That is how they trap weak hands into remaining long in a market about to reverse.

One of the observations that paying attention to 'wave degree' causes us to make is that this up wave yesterday and today has taken too much time.

ES Futures - 1 Hr - Too Much Time

The up wave from the point marked ((2)) is more bars than the prior impulse from the point marked b to the point marked ((1)).

Therefore, some how these up waves can not be a larger b wave of an impulse, as b should not be larger in price or time than iii, if one was counting as i, ii, iii upward. This now leaves the possibility of a diagonal as (v) of minute ((c)) of (B). Therefore, somehow these waves must be of the same degree. I do not know the diagonal is over. It could easily have another down wave and another up wave. Hence the alt: ((3)).

Regardless, the pattern is complete enough to warrant the change in posture. The count also helps explain the lack of downside follow-through this morning. 

I'll try to publish more over the weekend. Sentiment measures are getting stretched - the most important of which is that people are getting testy with me again in comments. I love it when that happens.

Have a good start to the holiday.
TraderJoe

Tuesday, November 26, 2019

Typical Holiday Market - So Far

U.S. Debt Clock: $23.07 Trillion; prev $23.06
ES Daily Candle: Higher High, Higher Low, Higher Close: Trend Day
Market Posture: Neutral-to-negative and Probing
Daily Swing Line: Higher
Daily Bias: Up (Settle Above 18-day SMA)

In a fairly typical pre-holiday market lots of big players make their exits to be with friends and family or on vacation and prices are more free to float higher. Such was seen at the end of the session today. The price bias has been over the 18-day SMA since October 11th. The swing line is now up again, and price has closed up over the daily upper Bollinger band.

ES Futures - Daily - Close Over the Upper Band

There is only roughly a 5% probability of prices closing over the upper band, by random chance, on any given day. Of course, we know this is not purely 'random chance'. Three-to-five consecutive days over the band starts to get very, very low probability - in the 1 - 2% range. Like it or not, the Smart Money plays the odds. The slow stochastic is still just in the over-bought category. And, the daily gap in the futures, themselves, has been highlighted.

From a shorter-term wave count perspective, the chart shown yesterday is updated again, below. Today's afternoon rise could be yet another bubble-licious ((B)) wave. A ((B)) wave in a (B) wave?

ES Futures - 45 Minutes - Expanded Flat

If higher prices are made tonight in the after-hours, that might well fit with the ((B)) wave of an expanded flat. Reliable quotes show the ES 10/22 ((B)) wave was not higher than wave i. Therefore, a higher high wave in wave iv might provide reasonable alternation, especially if price makes a lower low than ((A)) - which it did not in wave ii.  The alternate would have to be that the low of wave ((A)) is wave iv in a wedge count, but the EWO did not drop below the zero line. So, we still need to be patient and flexible. Nothing rules out higher highs for ((B)) or for v. There are 130 candles on the 45-minute chart, we may switch to an hourly chart, yet, before this wave is done. 

The parallel channel is clearly shown. Price has not come close to the lower channel boundary, yet. My suspicion is they're going to make any ((C)) wave down difficult to catch - possibly occurring in the after-hours, and likely on some news story out of China or about poor U.S. retail sales over the holiday weekend. At any rate, price is over the 18-day SMA, and the price bias and swing line are up. Right? 

I hope you enjoy the holidays, and as I will be, too, there may be less frequent interactions with the site for the next couple of days.

Now is a time to be grateful for what we have, and share it with those who would like to or need to.
TraderJoe


Overnight Rally and Fade

Over the weekend we cautioned several times that there could be a larger (iv)th wave in play. Prices moved higher on Monday. Over-night there was a substantial rally as the Asian markets and Europe got a chance to react. The up move to 1.618 says the chart should be viewed with odds slightly in favor of a third wave rather than a c wave.

ES Futures - 45 Min - A 1.618 Wave

Now might be an excellent time to pay attention to the local up fractal, at iii, and the overnight down fractal that tagged the EMA-34. Wave iv did already tag 38% x wave iii. If it hits the lower channel in a zigzag it would be a 50% retrace. Nothing prevents it from forming a larger-in-time triangle.

Have an excellent remainder of the day and week.
TraderJoe

Saturday, November 23, 2019

FED and the RED

This may seem like a technicality to some. While I think we are still in the Intermediate (B) wave, up, I have been wondering if we ever did see a triangle, at all. The chart below of price versus the FED's activity shows why I have a question.

S&P500 Cash Index - Daily - Ending Diagonal?

We all know by now that the FED's rate increases up to 2.50% (maximums used) into December, 2018 caused or correlated with the 20% decline in the market to that point. And, then we know the FED went into it's "patient" and "flexible" mode after the first of the year, expressing in a news conference with Ben Bernanke and Janet Yellen a willingness to be "flexible" on having the balance sheet roll-off be on the previous mode of "auto-pilot". Then, in February they actually reduced the balance sheet run off to only $50 billion per month, with an ending date to occur in September.

But, here's the key point. Have a look at the ISM Manufacturing numbers plotted, especially the first four of them. They are all above 50%, but declining from the April report.

55.3 > 52.8 > 52.1 > 51.7

Four months in-a-row of declining data. Even the FED would find a trend in that data. The FED decides now to lower rates to a 2.25% maximum - at what could have been the top of Intermediate (B) in the first count. The next report comes out at 51.2, and they quickly drop of bomb of ending balance sheet reduction immediately in August instead of even waiting until September. And I am wondering if that halted the decline from the top in a (c) wave of Minor B. Remember, commercials in the market were very heavily short at that time. In other words, the down wave ceased for a specific and definable reason at that location. Ending the balance sheet reduction allows the large players to change course and expand risk without worry.

Since that time the FED has lowered rates two more times as the ISM has gone quite heavily and consistently into the RED. Is the FED aware of the Elliott Wave count? Are they actively trying to thwart it? Good questions if you are asking them. And, those that have been paying attention know that since the overnight interest rate market has gone into spasms, the FED has had various announcements of increasing it's balance sheet by the purchase of T-Bills.

All of this has made me wonder if the pattern since the ending of balance sheet roll-off since isn't specifically an expanding pattern - an expanding ending diagonal. Why wonder? The expanding pattern would fit with the FED's current monetary expansion. The difference is that the expanding diagonal makes a clear prediction: If the diagonal breaks, then the start of the diagonal should be exceeded in less time than the diagonal took to build. We may not be done with the up wave, yet, but it has all of the right measurements.

So, why not the triangle? Well, if the triangle was, in fact, a running triangle, then the up wave in September should have ended around 78%, not around 99.9%. Triangles should not be that asymmetric.

Have a good rest of the weekend.
TraderJoe

P.S. This is the second report this weekend, and you may wish to read the first one, as well, if you haven't already.

Friday, November 22, 2019

Length of Time

U.S. Debt Clock: $23.06 Trillion; prev $23.06
ES Daily Candle: Lower High, Higher Low, Higher Close: Inside Day
Market Posture: Neutral-to-negative and Probing
Daily Swing Line: Mixed
Daily Bias: Up (Settle Above 18-day SMA)

From the ES hourly chart, below, the length of time of the up wave, today became longer than the length of time of the entire down wave. That likely means that the two waves are of the "same degree" and may create the situation where another triangle can form.

ES Futures - 1 Hr - Up Wave Longer in Time

The count is very choppy in both directions, and next week we will likely be in low volume holiday markets.

If we do get a triangle, it would likely be a fourth wave prior to a fifth wave up for the Minor A, B, C alternate for Intermediate (B).

Have a good start to the weekend.
TraderJoe

Thursday, November 21, 2019

Loss of Embedded Stochastic

U.S. Debt Clock: $23.06 Trillion; prev $23.06
ES Daily Candle: Lower High, Higher Low, Lower Close: Inside Day
Market Posture: Neutral-to-negative and Probing
Daily Swing Line: Mixed
Daily Bias: Up (Settle Above 18-day SMA)

ES futures prices traded somewhat lower overnight, then higher, and then and somewhat lower during the day and the regular market session. Comments were included on yesterday's post as to what the local count might be.

ES Futures - Daily - Loss of Embedded Status

So far, on the the daily chart, the slow stochastic has lost its embedded status. The only way it can get it back is to close above 80 tomorrow and tomorrow only. If it does not get it back and remains un-embedded, then it is 'likely' price and the 18-day SMA will come together.

From the local count, it is very possible - even likely - to get a gap up tomorrow. If that happens, the question is how far does it carry, and does that measurement better fit with a downward expanding diagonal or a larger triangle that could point upward? So, we will have patience. (The local count from the end of the day can be found at this LINK.)

If, instead, there is a large gap down tomorrow, it might represent a significant failure move. And so, in addition to patience we need to be flexible, calm and attentive to the overnight markets for perhaps several sessions yet.

Have a good start to your evening.
TraderJoe