It Took Some Noodlin'

Sometimes a wave count comes easily. Sometimes a count really takes some conjuring!

ES Futures - Hourly - Extended Wave x1

Even while I was counting during the heat of the battle I knew we were likely dealing with an extended first wave count x1. But, it was very, very hard to find.

The trick in this case was to think "b" wave. Yes, that failed flat for wave 2 had a very, very long minute ((b)) wave. Then, by the skin of it's teeth, wave 2 overlapped wave 1.

Yet at any of the wave 2 locations (like if you pick the minute ((a)) wave above the current location for 2), then wave 2 is less than a 38.2% retrace. And that means the third wave must be shorter than wave 1. I couldn't find it. I couldn't find it. And that's when the long minute ((b)) wave of 2 came to mind. That minute ((b)) wave is shorter in price and time than wave x1, so it is legal from a  degree labeling standpoint. 

Further, I was looking for a wave 2 that was longer in time than the prior wave minute ((iv)) triangle - so that minor 2 would raise its hand and say, "hi, uh, hello, I am a higher degree wave". This wave 2 location meets that need. Further we needed wave 3 to be entirely below a line from 0 - 2, and while there are several places on the chart that do this, this one fits the bill.

Third, if you plot the hourly Elliott Wave Oscillator - I will let you do this one - then you will find that the wave three maximum is down near than wave 3, and the EWO is coming back nicely for a fourth wave expanding triangle - which three of us found independently during real time. 

But, the wave 4 is quite large, and that most likely means it pairs with wave 2.

I believe the above chart shows that if the wave is to count as an impulse, it must make one more lower low. It turns out that wave 5 can make a new low and remain shorter than wave 3. If not an the invalidation level is back at any wave x1 overlap.

Have a great rest of the weekend,

TraderJoe

Take No Prisoners

The chart below was shown several times before. I do not have too much more to say about it at this time.

ES Futures - Monthly - Back Into Diagonal

What I will say is the down move is starting out like a diagonal retrace. If that continues remains to be seen. The shorter term hourly chart is below. Yesterday I said, quote, "It would be wise to see if the market can make a new bottom, and then cross the upper channel boundary as better confirmation that wave 2 is underway."

Crossing the upper channel boundary never did happen. Today, prices were confusing in both directions and literally sank into the close and into the after-hours. The reason they were confusing was that they contained failure waves (upward) - always difficult to deal with.

Overnight and this morning, blogger BBRider finished a count of a downward diagonal. During the day (in the heat of battle) I said that count could work, but I also said, unfortunately, a 1,2,i,ii lower could work.

ES Futures - Hourly - Below Base Channel

While I initially discounted the 1-2-i-ii for measurement reasons, again in the heat of battle, on review, this count has better proportions overall.

Please note there are fewer candles in the second ((ii)), than 2, and the net distance traveled is less. Further (b) of the second ((ii)) is shorter than ((v)) of 1. The charts are very, very messy with truncations and flat waves.

Again, let me say that upside counting will not resume until this hourly channel is breached to the upside.

Have a good start to your evening.
TraderJoe

A Mess near the Bottom So Far

Yesterday, we said that in a trending market it is not a good assumption to assume price movement (in this case, lower) was over. It certainly wasn't for the ES E-mini S&P futures which went on (in the after-hours last night) to break the low and break the 3,100 level with some conviction before rebounding a bit.

We also said, that we hadn't seen a wave with enough upside to indicate that a correction had started, upwards. By the open this morning, we saw such a wave. See the chart, below.

ES Futures - Hourly - Correction Begun?

Once we saw the structure of the three-wave move upwards - as a potential flat, we then waited until prices made another 90% approach to the low again. They did that in today's after-hours, as shown.

So, while there are never any guarantees, it is possible the market is making a larger more time-consuming flat (or other complex wave) as its full correction. Reaching the 90% level again makes a compound flat a legal wave by the rules of Elliott Wave analysis. We said, we have no need to break the rules as other sites might. We have no need to fudge. Every once in a while we WILL get a wave wrong, or a failure, or an unanticipated turn on a news story. But, we won't break the rules.

You'll note that the ((c)) wave of a-3 is larger in price than any prior wave, and so the degree of the waves should have turned upward. That does not mean that b-3 can not make a new low. It most certainly can, within limits.

But, the lower ((B)) wave of a-3 is telling. It is likely saying that the market is very weak and that - eventually - there is more downside to come. One tip-off was that the ((C)) wave of a-3 was only countable with a failure wave in it. And when that happened, we noted in the comments that today was going to be a mess and be weaker. However, one might begin to look for an eventual c-3 or c-5 wave upwards, the latter preferred to try to extend the correction in price.

It would be wise to see if the market can make a new bottom, and then cross the upper channel boundary as better confirmation that wave 2 is underway.

Until then, have an excellent start to your evening.

TraderJoe

Sixty-Plus Days of Trading Lost in Four

Today's additional price plunge has wiped out fully 60+ days of upward movement with just 4 days of downward movement. Prices overlapped the November 15th bar today. This is the definition of 'impulse'.

As far as I can tell, the wave is all-one-movement, and, due to the length of the wave is most probably Minor Wave 1, down, composed of five minute waves - as shown below.

ES Futures - Hourly - Minor 1

Gaps are most usually in the third wave, and that's where this one is shown.  Two of us were able independently to count out the larger minute ((iv)) triangle shown. It is a "running triangle", and that is to be respected for it's lower (b) wave. The collapse that occurred out of that triangle was able to be counted in five waves, with alternation.

We don't know that the down wave is over. That is always a bad assumption in a trending market. The market would have to show that by making a large enough wave to begin a correction. That wave is not entirely in evidence yet.

On the daily time-frame, price closed below both the lower daily Bollinger Band and below the 100-day SMA, so a couple of targets were both met and exceeded.

Note that the wave above does not form a perfect channel. Wave ((v)) is outside of the channel, and this would be expected in an impulse wave. Perfect channels are more a sign of zigzags or multiple zigzags.

This down wave is longer than any of the legs of the triangle, or quasi-triangle that occurred over the summer. That should mean that the degree of the wave has turned, and that's why the wave is labeled as Minor 1.

The primary item of interest to this wave counter is the nature of any retracement that should occur.

Have a good start to the evening.

TraderJoe

Now You Know Why

I turned negative on U.S. equities in mid-January when I recognized the market was no longer impulsing upward. It may have seemed a bit too early then. If you have any questions you can see the post at this LINK.

I certainly did take lots of heat from readers who were sure we couldn't be in an Intermediate (B) wave but we had to be in some kind of third wave. But now you know why. I was always trained to "not worry about the last couple of percent". Sorry, but that is my training.  I kept showing a chart that looks like the one, below.

In mid-January, we were near 3,330 and today the futures settled at 3,225 (or thereabouts). I kept showing a chart that looks like this one.

ES Futures - Daily - Diagonal Count

If the above count is correct, then wave minute ((b)) should be taken out in less time than the ending diagonal took to form. Today has a good start on it, but the only definitive resolution will be when a retrace wave does not exceed the all-time high.

For the DOW and the S&P500 there are two ways to make a longer term completed count. They are below.

ES Futures - Monthly - Ending Diagonal Count

The significance of the above chart is that wave 5 of (5) got nearly as long as 3 without exceeding the length of 3 - as should be the case in a diagonal. If there is a further higher high, it would put this count in some jeopardy. If that happens, I'll provide the invalidation point. This same count could apply to the Dow Jones Industrial Average. As far as I can tell, it can not apply to the NDX or NQ 100 Futures - because the last wave is too long. But, that's OK. The NDX is a much younger index with a different composition and different history than the S&P500 or the Dow.

The other count is the one to Intermediate (B) that we have shown many times, and is available at this LINK. It's nice that I can just show you these charts again, so you can confirm what was being thought of at the time.

As interesting as this all is, confirmation - as stated above - is still needed. If the Ending Diagonal should play out, it would sound a pretty tough message to hear because the wave shown above would be an extended Intermediate (5)th wave, of an extended Primary ((5))th wave, of an extended Cycle V wave.

So, as usual, let's keep our wits, our calm and our patience about us. After all, we're just counting waves.

Have a good start to the evening.
TraderJoe

Bumpy

We said it would be more convincing that we had started wave (iv) down if there was overlap on ES 3,335, and that occurred early this morning. As a result, there is a bumpy, scraggly, non-overlapping five waves down - with alternation - as shown on the ES 15-min chart below.

ES Futures - 15 Minute - Close Only

At 3:40 pm ET, because of this count, we said that the lowest low at 3,328 could be the end of the five-wave sequence, and to watch for an ES 30 minute outside-reversal candle as a sign the low might be in. By about 3:50 pm ET, that outside reversal bar, up, had occurred, and maintained until the close. As a result, that 3,328 level should be watched to see if it holds as a bottom in the overnight weekend session.

In this count, the alternation is with wave ((2)) being a flat, and wave ((4)) being a running triangle. Wave ((1)) is an impulse and wave ((5)) is a diagonal. As a result of the running triangle, it should be assumed that lower lows are eventually possible. If running triangles are bullish in bull markets, they should be somewhat bearish in corrections.

Keep in mind that the purpose of the running triangle is to "take up time - during the overnight in this case - move prices sideways, and to better equalize the net distance traveled with wave ((2))", which it does really effectively in this example.

Since, there appears to be a diagonal fifth wave - alternatively a larger flat in progress from (1) of ((5)) - then price 'should' make it up over wave ((4)) on order to prove out such a diagonal.

Doing so would likely start the b wave of (iv), upward - again if didn't already start as a larger flat wave, with ((1)) of ((5)) actually being ((5)). 

Have an excellent start to the weekend.

TraderJoe

Marginal Lower Low

If yesterday made a marginal higher high, last night finished the upward fifth wave - or upward .b wave of b that I had in mind - and today made a marginal lower low, then rebounded vigorously. There remain two good possibilities, depending on whether we go over the top tomorrow or back down through the lows.

ES Futures - 2 Hr - Lower Daily Low

Uncertainty is at its near highest here. If we continue lower it will likely be as a choppy diagonal downward. And if we go over the high marginally again, then it could be that the larger b wave downward has finished, and the upward move will be a new location for minuet (iii).

The Dow has made a downward overlap that could be for wave (iv). The ES futures and S&P500 have not. There are times of extreme chop like this when it makes most sense to let the market resolve the structure. The only observation I have is that a b wave here does provide more time to an a-b-c structure and is a bit more proportional, but a new marginal high would be needed to prove that case. I'd like to see a good overlap of 3,335 to indicate that wave (iv) was underway.

Have a good start to your evening.

TraderJoe