Probably Never Again on This Scale

In the Dow (YM) futures, we have been counting the expanding diagonal pattern upward. In this count, the internal waves would be 3-3-3-3-3 which are all zigzags. With 126 candles on the daily chart, the EWO has the perfect signature for the expanding pattern with wave (iv) deeper than wave (ii) and wave (iii) greater than wave (i). I do not know if I will ever get to see such a pattern on this scale in the rest of my life. It is truly amazing.

Prechter previously wrote that 'often' these patterns end before reaching the upper trend line. Sometimes they throw-over that line. We'll have to see what this one does but the pattern currently meets the rules for the expanding diagonal with (v) > (iii) > (i) and (iv) > (ii) with (iv) overlapping wave (i) without traveling beyond the end of (ii). And, as the pattern currently stands, within (v), c is only a little longer than equality with a.

Once the pattern ends - if it is a true diagonal - the start of the diagonal should be exceeded lower in less time than the diagonal took to form. This one took about six months to form. If we've got the structure correct that the pattern is a true 3-3-3-3-3 composition of zigzags, the rules state that it almost certainly is an ending diagonal. I may never see anything like the size of it again in my lifetime.

That said, can it go a bit higher? It can. I'm just wondering if the contracting waves at the end - with an overlap in the futures - are finishing the c wave.

Have an excellent rest of the evening,

TraderJoe

I Need More ..

Today was a down day. After the last few days of horrible grind into the upper daily Bollinger Band on the ES futures contract - shown below - a down day when everyone is going gaga for higher prices is to be expected. We got one. So what? Was it interesting to see? Sure. But, if one is going to be "calm, patient, and flexible" on the way up, then the same must apply to down days. So, what are the measurements?

As of the cash close, the futures had only made an "equal low" to yesterday's bar. I don't want to be greedy but for a good down sequence to start we need to see much more than that. As you can see from the chart, the bar was not even a full-on "outside reversal candle". It didn't have a higher high, nor a lower low, yet (the futures are still trading as this is written).

Further, price is not below the 18-day SMA, "the-line-in-the-sand" and the daily slow stochastic is now embedded (using the classic calculation). The swing-line indicator still has a higher high. Now I realize the NQ and YM futures did have a lower daily low. Okey-Dokey. But they too are still above their respective 18-day SMAs also. The YM & NQ futures at least overlapped their prior high - making certain wave counts less possible. But the ES has not yet. Further, the advance-decline statistics were only about "dead-even" today - nowhere near kick-off or even impulsive territory. So, don't blame me if we are forming a larger triangle or diagonal (more about those, if needed, in later posts).

For now, if the 18-day SMAs are lost, and/or the slow stochastic loses the embedded status, then things might get a bit more definitive. Until then, as I suggested yesterday, new highs are getting much less dependable - merely because of where we are in the wave counts - and the overhead positions of the daily Bollinger Bands.

Have an excellent start to your evening,

TraderJoe

Grind, Grind, Grind ..

This count in the SP500 2-hr cash close-only chart seems to provide alternation with a sharp second wave, shown as 2, and a very sideways fourth wave, shown as 4. (The wave degrees are relative and are just for illustration at this point.

Price is up against the daily Bollinger Band. Higher highs are possible but it's getting risky to depend on them. I want to see what the Equity Put-Call Ratio is tonight, and if there is a "turn on Tuesday".

Have an excellent start to the evening,

TraderJoe

Simple .. but Not Easy

Some traders say trading is "easy" but not simple. It's easy because all you do is press a buy or sell button. But the complexity in making a profit is knowing "when" and at "what price" to buy or sell. Hopefully, the Elliott Wave Principle helps one make those decisions. I'm showing some long-term charts today to show you that there is currently nothing wrong with the Elliott Wave, at least as I'm counting it. First, the yearly chart of the Dow.

DJIA Cash - Yearly - Close Only

The wave is nicely in a parallel, with the "running second wave" the omen of the great upward strength that followed. (Not recognizing this by-the-way may be the single largest mistake Elliott counters have made). The RSI diverges on this Vth wave, and as long as wave III is greater than wave I, then "by the rules" wave V can be "any length". Any top will likely be SuperCycle [III]. Now on to the Monthly.

DJIA Cash - Monthly Close - In a Channel

Again, nothing too wrong here. The wave is nicely in a channel, and it has not left the channel to the downside yet. Primary ④ "might be" a triangle, but it might also just be a Flat. The Flat is shown. IFF wave ④ was a triangle then wave ⑤ "might be" over already. But, again, with higher prices there is just nothing to make that conclusive and there are other options. So, as long as prices are higher, we continue to explore other options. In this wave since Primary ④ we note there is not currently a confirmed triangle or diagonal. And we note that since wave ③ is longer than wave ①, then wave ⑤ "by-the-rules" can be any length. You'll note the RSI divergence has busted above.

So, we began the counting of Primary ⑤ looking potentially for a contracting ending diagonal wave. In that wave, wave Intermediate (3) simply must be shorter than wave Intermediate (1). So far, it is, so we don't want to get off track. That remains the current count - especially in the Dow. 

Now, we know that the NDX has 'exceeded' its length of Intermediate (1). What if the ES/SPX does that too? Students of Elliott Wave likely know that the options are few - making life somewhat simpler than guessing at random: here are two of them.

ES Futures - Monthly Continuous Close - Two Patterns

IFF wave Intermediate (3) becomes longer than Intermediate (1), then one case can be made for the non-overlapping impulse upward. In that case, wave (3) might tend towards 1.27 or 1.62 x wave (1). It has not done so yet. There is no requirement that wave Primary ⑤ contain a diagonal, but given the extent of the rise it certainly is likely. So, what I am saying is this wave could end with an impulse. In this case, maybe wave (4) would be a triangle or wave (5) would be a diagonal - still within the larger impulse on the left. All of that is completely possible.

But the other - more ugly - case is simply for the expanding diagonal.  This case would become more likely the more overheated sentiment and upward price targets get as we head into the election. And it is starting to get there already. It would still be a way to end Cycle V with a diagonal! Note that the Dow is showing some signs of an expanding diagonal already, but at a lower degree. And also note that daily Bollinger Bands are not too far overhead. Further, either of these two patterns would explain why Intermediate (3) is now longer-in-time than Intermediate (1).

The thing is that patience is needed. And a stopping point (or terminal) of this upward wave and reversal is needed for any decision-making at all. So, we are keen on the lookout for the latter and urging with all intensity the former. Let's not lose sight of the basic measurements, the parallels, the basic patterns and the rules.

Have an excellent rest of the weekend,

TraderJoe

Three Measurements - And then some..

The ES (continuous futures) contract have 120 candles on the two-weekly timeframe shown below. The three measurements we'd like to refer to are below the chart.

The three measurements are these:

1. Price is beyond the 1.618 external retrace of (2)/(B) on the left.
2. Price is beyond 78.6% of (1)/(A) in the middle and may be nearing equality.
3. The EWO made a higher high of 711 in this wave compared to 695 previously.

Therefore, price is beginning to lose the measurements of both a contracting diagonal and a (B) wave in this cycle. Nothing is impossible. They both could still occur, but the odds are getting lower and lower with each passing marginal new high. The "and then some" is that the up wave since Oct 2022 is also longer in time than the wave up to the Jan 2022 high.

Therefore, The Principle of Equivalence takes over, and the wave labels for the three-wave sequence are now (1)/(A), (2)/(B) and (3)/(C). Yes, it is possible an even larger diagonal fifth wave will form from this mess, but there would likely be a 62% or greater retrace of these waves if that were to occur. But, for now, we are working on the channel count until we can not.

Once again, nothing to the downside will surprise us, but the grind continues until it doesn't. There is a lot of room for pullbacks but, at the moment, there is no daily or weekly signal candle. So, we'll continue count following the rules and The Eight-Fold-Path-Method until there is some downward length to work with.

Have an excellent start to the evening and the weekend,

TraderJoe

Larger Daily Wedge - No daily signal

Here is the larger daily wedge on the SPY cash index. There is no daily signal candle or confirmation at this time.

There is a also a very, very good chance that we are only in the third wave, ③, as well. These two counts should be considered equivalent until they are not. The alternate might allow the wedge to expand once more - which is something that has been occurring a lot lately.

Have a good start to the evening,

TraderJoe

It's the Fourth Wave Conundrum (at every degree of trend)

In the comments for the last two posts, we were discussing a smaller triangle, a larger triangle, and a potential expanding diagonal downward. The smaller triangle was already valid. The larger triangle potentially became valid today, as in the ES 4-hr chart, below. So, new higher highs would be needed to confirm these triangles.

ES Futures - 4 Hr - Potential Larger Triangle

The downward diagonal would be counted as below, but it needs to form a larger wave 5 than the current wave 3 shown on the ES 2-hr chart, below.

ES Futures - 2 Hr - Potential Expanding Diagonal

This is an illustration of The Fourth Wave Conundrum that does occur at every degree of trend. For example, even if there is an expanding diagonal, we don't know if it will be leading or ending (to end a larger fourth wave). So, caution, calm and patience are still very much needed.

Have an excellent rest of the day & evening,

TraderJoe