A Marginal New High, then a Zigzag Lower

Last night the futures made another marginal new high - which you can see on the hourly chart of the ES futures, below, in the position labeled (iii). Then, they fell off and made three-waves down - another a-b-c, this time lower. That is shown as the position labeled as (iv). Yesterday's chart showed the three waves down or a-b-c for wave (ii), and the beginning of the three-waves up for wave (iii).

ES Futures - Hourly - Marginal New High and Zigzag Lower

Last night's higher high occurred on a marked divergence with the Elliott Wave Oscillator. Then, on what appears to be wave (iv), the EWO went below the zero line. The EMA-34 crosses through each numbered wave for form and proportion.

Today was the end of the month and the end of the quarter. This is usually noted for both the usual "window-dressing" of stocks, but also for the usual quarterly re-balancing of some blended portfolios (i.e. 30%-bonds, 70% stocks).

Tomorrow is the first day of the new month. There might be some of the usual quarterly inflows from pension funds, 401k's, company bonus plans, etc. If another marginal new high is made on these inflows, and then prices fall off rapidly, it might be possible to conclude this is an ending diagonal for the minute ((c)) wave of Minor 4. 

Today in the comments (and shown again at this LINK), we showed another such diagonal on as small a time scale as the 1-minute scale. We said, "so far, nothing impulsive upwards yet at all". Notice the fifth wave failure in this tiny diagonal, and the pre-terminal triangle that signaled the end of the wave. Here, at this second LINK2, is how the count turned out. Note the impulse character of the wave with a very, very long fourth wave - as far as time goes. This whole impulse lower was the ((C)) wave of wave (iv) shown on the chart.

We suppose something like this might be occurring with the Minor 4th wave, but it remains to be proven.

So, have a very good start to your evening, and the new month.

TraderJoe

Chop in Both Directions - Not Glued to any Count

On an intraday basis, the chart of the ES Futures shows a high level of chop in both directions. The only solid impulse wave is the downward wave - labeled ((C)) - that continued this morning in the overnight session.

ES Futures - 15 Minutes - Choppy

Readers will also note there is divergence on today's slightly higher wave with the EWO. It should just be noted. It is not definitive.

The only way I can currently count the sequence, without degree violations is a-b-c down, and a-b-c, up. That could change if a convincing downward fourth wave can be made without overlapping the second ((A)) wave shown, the one on the right, at the Critical Overlap level.

Could the current sequence - as it is shown - start a diagonal downward? It could, but there is insufficient evidence for such at this time. Like triangles, diagonals can not be called until their five waves are in place - and, at best, this would be (i), down, and (ii) up, of such a diagonal. 

To even begin a downward wave, price must exceed the red down fractal (v) shown on the right. To begin an upward count, price must exceed the blue up fractal (^) shown on the left.

For this reason, I am not glued to any particular count at this time. The market must simply demonstrate by price lengths or overlaps which direction it wishes to proceed in. It'll be another good night to watch the overnight prices, and see what gaps or other clues are provided.

Have a good start to the evening.

TraderJoe

The Battle at the 18-Day

The U.S. Dollar was down today - nearly a full cent, as the FED pumps to try to turn the contraction around. GOLD was down. Crude Oil was down, and - even with this - stocks were down. Did I mention the U.S. Dollar was down?!

The daily chart of the ES Futures is below. Price initially waged a battle at the 18-day SMA, mostly in the after hours, and then price settled below that line - leaving the market with a negative bias.

ES Futures - Daily - Tag of 18-Day SMA

This increases the probability somewhat that a Minor 4th wave (non-overlapping) might be made as part of an impulse wave downward.

You'll also note that the upper daily Bollinger Band is about to cross under the 100-day SMA. If price should rebound at some point, that level would likely offer formidable resistance to further upward movement. We are not there, yet.

From the slow stochastic, we see that it became un-embedded from being under the 20 level for three or more days, and when that occurred, price and the 18-day SMA tried to come together. That was the expectation, and it has been met. You will also note that the slow stochastic is no longer in over-sold territory. It has effectively worked off the old-sold condition.

Wave 5, lower, if it occurs, may not be easy to figure out. It might be a diagonal, or it might be an impulse, or it might be an impulse with a diagonal in its fifth wave. So, we'll do our best as the wave progresses to monitor for a new low.

The stimulus bill was passed today, pretty much as expected. And yet, this is how the market reacted. Oh, and did I mention, the U.S. Dollar was lower.

Have a good start to the evening and the weekend.

TraderJoe

What's It All About?

I'm going to post a chart I posted earlier. Many of you will look at the count, shake your head, and ask "why is he posting an incorrect chart?" The chart is of the U.S. Dollar Index. When I posted the chart, I specifically stated, "The longer term analysis indicates the dollar should not go over the high." That's why the A-B-C clear alternate was posted on the chart. And I said so in the comments.

DX Futures - 2 Hr - A-B-C

Clearly, the chart had the makings of the fourth wave at the point market minute ((c)) of 4. It was a perfect 38% retrace. And the EWO was in reasonable territory. Did it hold? It did not. This is what it's all about. It is about the FED spending unlimited resources (literally) to bend the Elliott waves into less recognizable patterns, or at least ones that trap the greatest number of participants into leaving their profits in the market.

Did the minute ((b)) wave make a new high for a fifth wave? It did not. Is there a clear "third of a third" on the EWO? There is not. Are there a clear five waves down from 3 to minute ((a))? There are not. It looks more like a "three" than any wave I have seen. Are there are clear five waves up to minute ((b)), so it would be a fifth wave instead? There are not.

The FED knows the only way they can help is to "bend the yardstick"; it is to "change the ruler". This chart shows clearly how they have done that. They need to lower the Dollar, not see it increase. They need to make sure that wave counters have "the most difficult time possible". And, they do it by changing the yardstick - whenever they wish. They can add and drain resources to the market unseen to the retail trader, and force the "Smart Money" to make maneuvers based on what they, with better access, can glean from the treasury market and open market operations.

Does this mean that The Eight Fold Path Method for Counting an Impulse does not work? No, it means the opposite. The Eight Fold Path Method was developed for precisely this reason. As the methods states, "1-2-3 is the same as A-B-C until it is not."

So, what does it mean for U.S. stocks? It means that while a Minor fourth wave is not invalidated yet, the odds of it occurring correctly have dropped. The parameters are pushed out to the max, making it even-odds only, or less-than even-odds, as opposed to yesterday where the odds favored the fourth wave at the location in which that wave ended.

The key lesson is this. They are playing a game against you, and they are doing it with your tax dollars and the lack of interest that they pay to retirees in their savings accounts. They do not want five-waves-down in the U.S. equity market. They don't want it because they know it will signal to most people even a greater drop ahead. True fact: they have even announced to you that they are doing this - just minus the focus on the Elliott Wave. They say they are doing it to try to increase inflation, or increase employment, or improve the economy. Whatever the faux reason - they are doing it.

I can not fight a trillion dollars. I can only try to count the waves it makes or the waves it does not make. As I have often said, "I do not make markets; I can only try to count them."

ES Futures - Daily - Wave 4 at Risk

Have a great rest of the evening.
TraderJoe

'Minimum' Wave 4 Attained

With 144 candles on the ES 4-hr chart, price moved above the minute ((a)) wave, meeting the 'minimum' expectation for a flat fourth wave. As such, if the fourth wave holds, it would alternate really well with the sharp (or zigzag) second wave.

ES Futures - 4 Hr - Minute ((c)) above ((a))

The 4-hr candle at the cash close (the just one prior to the settlement candle) was a weak Gravestone Doji. It did not close exactly equal to its open, but close to it.  For this candle to indicate the end of the fourth wave, the high of the candle should hold, and there should be a confirming lower close candle below the EMA-34. 

If confirmation of the Gravestone Doji is not obtained, then it is still possible the upward wave is in a fourth wave triangle. In that case, it would be minuet (iv) of minute ((c)). However, from the minute ((b)) wave low, five-waves-up can be counted including a slight truncation at today's high. That truncation would be acceptable.

The Elliott Wave Oscillator is about as high as it should get on this trip above the zero line, so watch any further upward movement in price and the oscillator carefully. The EWO should try to hold 100 - 120 for the fourth wave.

If the Minor wave 5 begins in earnest, it should make a new low and not truncate before doing so. Trading below the EMA-34 and the mid-line of the channel shown would be mile posts along the way to a potential new low.

Have a good start to your evening,

TraderJoe

EWO Green & Above Zero

At the end of the day, with 140 candles on the 4-hr chart, the Elliott Wave Oscillator has just gone to the other side of the zero line.

ES Futures - 4 Hr - EWO is Above Zero

Using The Eight Fold Path Method, this most likely means prices are into the Minor 4th Wave as shown on the chart. Typically, this wave should retrace about 38% of Wave 3, and tends not to go much beyond 50% of Wave 3. So, there is not any clear evidence that wave minute ((c)) of Minor 4 is over. It may challenge the upper channel . It may try to fill the gap below minuet (a). 

However, the EWO should not go to beyond +40% of the trough reading. We'll address that situation only if it should occur before a Minor 5th wave low. Wave Minor 5 should make a new low. It should not truncate. It could become as long in price as Minor 1. But, if Minor 5 does make a new low, it should occur on a divergence with the lowest through on the Elliott Wave Oscillator.

It looks like Congress is working on the larger stimulus bill, but as of this writing, the work is expected to carry-over into Wednesday.

Have a good start to the evening.

TraderJoe

They Popped A Little, Then Dropped

Again, because of the price action today, this variant of the count, with roughly 130 candles on the chart, now appears to have the best chance for success. We have been attempting to count an impulse, if at all possible. We did give some brief consideration to an overall diagonal lower, but the upward waves today became too long in price and time, so the diagonal consideration is now in the background.

ES Futures - 4 Hr - Flat?

The singular problem with this count is the size of the minuet (a) wave of the minute ((iv)) triangle of Minor wave 3. However, recall we had this same issue counting to the upside in January and February, 2018, when we called for a Minor 4 triangle because the minute ((a)) wave would have been too long and created a degree conflict. If this same consideration is given, then wave Minor 3 occurs within points of the 1.618 x 1 extension, as shown by the Fibonacci ruler. The consideration is that the minute ((iv)) triangle resolves the degree conflict with the size of Minor 2. It results in minute ((iii)) of Minor 3, on the low of the Elliott Wave Oscillator, and Minor 3 on a divergence, as per The Eight Fold Path Method which is the featured post in this blog (see link on the upper right).

Subsequently, we'd have three waves up, yesterday and today, to minute ((a)), up, and we already know we had a near 100% downward wave to a near-equal low. This could be the minute ((b)) wave of Minor 4 - or part of it. The EMA-34 finally contacted what could be part of the fourth wave.

But, so far, while the EWO is close to the zero line, price is not up near the upper channel line. So, again, a significant difficulty in a trending market is assuming it will reverse. It hasn't really yet, and we are not assuming it will. The market must show us that.

Minute ((b)) could go down to between 1.382 or 1.618 x wave minute ((a)), up. A flat wave for Minor 4 would alternate well with Minor 2 and the alternation would finally be in the expected sequence for an impulse (a zigzag or sharp for Minor 2, and a flat or sideways for Minor 4).

Congress has not yet agreed to the larger stimulus package for the economy. It would be great if they did so, soon.

Have a great start to the weekend.
TraderJoe