Clue

This morning in the wee hours, a lower low was made below the Prior Low (PL) of the previous post. As such, the upward variety of expanding diagonal invalidated in a bout of sheer whip. The SPX500 (CFD) 4-hr chart is below.

This now leaves the potential downward contracting diagonal as a way to end minute ((iv)). This count is subject to the usual rules for a contracting diagonal. First, we don't 'know' that wave iii is done, but it would have to remain shorter than i for a contracting diagonal. Then, too, when wave iii is done, wave iv would have to remain shorter than wave ii. And, of course, in this scenario wave iv can and would likely overlap wave i but not travel beyond the end of wave ii. If that succeeds, then wave v would have to remain shorter than wave iii.

This is also a reminder that wave v in an overall (c) wave of minute ((iv)) is allowed to 'fail' if it wants to in order to signify the end of a downward wave.

None of this is locked-in-stone. It is all contingent, but the lower low does provide a clue as to possible price direction. Again, nothing lower will surprise us. There is a way for price to have topped in this and in other indexes. But this is an effort to give the broader market a ending pattern at large degree. We'll see if that happens.

I will also note that some other Elliott Wave analysts were expecting a (ahem) [iii], up, here. I guess they got fooled by the new low, and we did not. But, I've been fooled before, too. Very few readers read the prior post, so, if you haven't, you may wish to review it now.

Have an excellent start to the day,

TraderJoe

Up For Grabs

Overnight, the market as measured by the ES futures has more than overlapped the prior possibility for a 1st wave up as shown below. But it has not taken out the prior low (PL) either. The chart below is of the SPX500 (CFD) 1-hr timeframe.

So, the primary way to make an 'A' wave up is with an expanding diagonal. But, if the 2nd wave marker is undercut, then there is no way to make an expanding diagonal, up and still follow the 'rules'. On the other hand, if the low is exceeded, then perhaps look for a diagonal downward to end the fourth wave, minute ((iv)). A contracting diagonal is the more likely downward, but we'd also have to look for the expanding possibility if the contracting variety should not be valid.

IF a diagonal is being made, in either case, then the internal waves could be quite whippy, instead of trending, and trading might be quite difficult. So, patience, calm and flexibility remain key tools to success.

Have an excellent start to the day,

TraderJoe

Full House

Think of it like a full-house hand in poker. You have three aces and a king & a queen. The question is what will be pulled from the deck.

We're just patient until the cards are dealt. The degrees are difficult to consider because the lengths are quite similar. Also, in the futures it is very hard to count that initial (a) wave up in the first diagram as it is very hard to count five-waves-up. And, if it has a truncation it may be the c wave in the second diagram making an overall (b) wave up in that diagram.

Have an excellent start to the evening,

TraderJoe

How Nasty ?

The wave counting has been ugly. The trading even worse. One question to ask is how nasty will this market be in the short run? Yes, price can still certainly go upward to finish a fifth wave of an (a) wave up on Monday. But the question has to be asked, "what if it doesn't?" What if price goes down before it goes up? Below is a very nasty alternate count in the hourly SPY cash contract.

The gist of the count is that it's possible for the minute fourth wave to extend a bit in time, break some upward trend lines in the process, and temporarily getting people more bearish. We do not know it will. We can only suggest this alternate might be in play IFF the overlap warning signal is fired off before a new high is made. In other words it is possible there is a (c) wave down to follow after what might be a failure flat (b) wave up.

It's something to watch. It was brought about by the Payroll Report wave being very deep and making one overlap, by the failure of the SPY to make a new high above the prior high, and the lack of a solid impulse to end the day today.

So keep an eye on it. Don't let it rule the roost unless the signals fire off. Meanwhile be flexible, patient and calm. The market will re-establish a trend direction at some point. Right now, price is fighting with the 18-day SMA, and the Smart Money needs to be sure things are good & confusing.

Have an excellent start to the evening and the long weekend if you are celebrating,

TraderJoe

Trend Lines Drawn by Cash

The market drew these trend lines in the cash S&P500 2-day chart. They are three-touch trend lines. I am just acknowledging them as best I can. Included is an overlap.

If the pattern plays out, confirmation will still be needed. At the moment, trading is awful. Every wave is throwing shade (meaning typical lengths are not being made). Perhaps that will right itself, eventually.

Have an excellent rest of the evening,

TraderJoe

Just a Caution

Just a cautionary note. The latest downward wave in the SPX500 (CFD) and in its cash equivalent, the SPY, does not show evidence of breaking a base channel (or Kennedy Channel Technique - KCT) lower yet. So far, the recent down wave has stayed away from the lower channel boundary.

There is a non-zero probability, and maybe a substantial one, this sequence counts as w-x-y, down, and might overall be a (b) wave of some degree, especially being against the lower daily Bollinger Band. The correction from 30 Aug to 1 Sep is at or less than 38%. But because there is no upward overlap yet, we can only look and wait to see if a lower low is made. If one is made, then the whole sequence might count as one impulse with an extended first wave in a wedge. That would be perfectly fine, but the down wave with a lower low must form first to conclude that.

Whereas if a lower low is not made, and the upper channel boundary breaks, first, then it is possible the structure is w-x-y as a larger (b) wave.

Have an excellent rest of the evening.

TraderJoe

Two-Faced Fed

Just a clip from JackAssSon Hole. They know it. They've known it all along. Peter Schiff has known it for decades. Milton Friedman knew it before then with his often quoted, "Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

Hit the full-screen icon [  ] in the lower right to enlarge the video. 

But more importantly, they've done everything they can to fuel it, including:

• Agreeing with the move to get the U.S. Dollar off of a Gold Standard (not fighting it).
• Tacitly agreeing with the move to end Glass-Stegal by not lobbying against it.
• Dropping interest rates to near zero at times.
• Poorly supervising the banks to allow pumping up of the housing market at times.
• Out-right buying of mortgage-backed-securities.
• Lying about 'not doing Q.E.' (Bernanke), and then doing it in spades.
• Out-right-buying Treasury Debt.
• Not lobbying for improved anti-trust enforcement to reduce business concentrations, or refusing to make loans to permit such.
• Allowing their banks to pay a non-market rate of interest for deposits (0.02% on savings!) when their banks get to make 6 - 10 % on a loan.
• Not lobbying against Corporate buy-backs using bank debt, etc., etc.

They know they are two-faced 'bad actors' that won't face up to the 'moral hazard' they have created. They will claim they are 'brave (spineless) public servants' just doing what congress wants. Then, they will literally 'beg' for bailouts of their banks, large financial institutions (think not only 2008-9, but Silicon Valley Bank recently), and big companies that get in trouble. 

The little guy? The little guy gets the shaft in the form of poorer conditions to do business in, higher interest rates for their small business loans, inflation eroding away the savings of those on a fixed income, threats to alter or eliminate social security because it 'can't be afforded'. Of course it can't be, not when you spend billions to bail out & reverse repo the banks instead. And excessive financial market volatility - both up and down.

It is two-faced. It is sickening. The rot in America - a condition I do not want to see - will continue until the situation is fixed, and I believe a very large part of this problem lies in the banking system and its supervisor, the Federal Reserve - and certainly with Congress.

Have an excellent start to the evening,

TraderJoe