Too Many Waves!

I mean that in a kind way. Markets are allowed to have whatever waves work. Counting them is another issue. The DJIA having broken out to a new higher high forces us to count a little differently - still with an extended first wave xⓘ. That is because some of the recent down waves were longer than other ones, and by degree-labeling definitions, then, they should be larger degree waves. I won't belabor - the weekly chart and count are below.

DJIA (YM) Futures - Weekly - Diagonal, Possibly Leading

The problem is that the Nov 2025 down wave, ((ii)), circle-ii, or minute-ii, is too large for the wave at minuet (b), and for the previous wave at brown ii, so that means it is likely of higher degree. I think the only way that happens is if the entire Minor A wave is a diagonal with minute-ii, circle-ii, as the second wave of the diagonal. It is outlined with blue trend lines. Otherwise, there are too many waves for a motive sequence. The down waves are almost impossibly short waves to be in a typical impulse structure. We could clearly see the impulse sequence within wave minuet (a), and we have labeled those waves i -> v. But now the (c) wave of minute-i, xⓘ, looks like it is a diagonal too, with overlaps galore but always trending higher. It is outlined with brown trend lines.

We don't make this wave count lightly. First, we note that the $NYAD (NY Advance/Decline Line) is at yet a new higher high on Friday. Again, we don't think a major bear market starts while this line is making new highs.  Second, there is room yet for the ⓥth wave to continue higher. Recall, it can be almost as long as the third wave. Third, this count implies that if Minor A is a diagonal, then Minor C should be an impulse wave. Fourth, we have recently commented that the DJIA divergence with the transports was cured with all-time new highs in the transportation index. Lastly, we note that while many of the Mag-7 stocks are having difficulties, the FED's FOMC still has the spigots open - which might counter some decline, provide money for company buy-backs, etc.

So again, we are patient, calm and recognize how long a Primary-sized diagonal ⑤ could take. Meanwhile, we have not even seen a 38% retrace in these waves. Hopefully, such a wave, or larger, would be a Minor B wave. I realize that it is easy to make mistakes counting waves. If this labeling is a mistake, then it is the $NYAD which is providing the false signal. Time will tell. 

This is the second post since Thursday. Have an excellent rest of the weekend,

TraderJoe

Discount Double Triangles

On the ES daily chart, there is an outside day, up, with price tagging and over-shooting the 18-day SMA but eventually closing lower than it, as below.

ES Futures - Daily - Outside Day Up

From the truncation high, there is now a c = a, down, and potentially a c = a up. The problem is we don't know upward movement is over. It could be, and if so, great. If not, we'll continue the count upward since there are only three waves down.

ES/SPY (CFD) - 1 Hr - Three Waves Down

In the downward count, the parallel channel is pretty clear. The measurement of c = a downward is approximate, but pretty close. There are two triangles able to be located, the b wave one, and one for the ④th wave of c. Both would be in the correct place. We said the halting pace of the decline likely meant it could be a diagonal. Today, we were counting upward after the AMZN earnings drove the market lower in the after-market and then price swung around for the cash market session.

We understand other markets made new highs today. ES has not, yet. Today's upward count (in futures and CFD) can be counted like this.

ES/SPY (CFD) - 15 min - Three-waves Up

The wave starts out with a diagonal wave which converts to an impulse a wave, followed by a short in time b wave, followed by a potential c wave which starts when the cash market opens. The measurements are uncanny, at present, but again, we have no confirmation that the wave is over. It is suggested that the a wave, up, has to be overlapped to claim an end to the c wave.

It can be seen on this timescale that the MACD diverges, but this needs to be monitored. If a downtrend resumes, it will likely be in the form of a diagonal due to the degree of retrace.

We remain flexible. The only perplexing item at this time is the failure to make a new on Tues 03 Feb, as it seemed to indicate a truncation. We are keeping this in mind in the count. Perhaps we'll have more on the weekend.

Have a good start to the evening,

TraderJoe

Bearish Engulfer with A Lower Wick

There is nothing yet proven in the wave count. Today, the SPY cash index made a slight new daily lower low while the ES did not (yet). So, the main count is shown below on the SPY daily chart.

SPY Cash - Daily - Potential Diagonal

Note today that the local prior low (purple) was exceeded lower. And the daily alternate is shown below with red labels. 

SPY Cash - Daily - Alternate

Diagonals (or potential diagonals, better said) are always tricky. We will note, though, that the MACD is diverging and that is one sign to pay attention to. We want to give the potential diagonal all the time it wants, but we have certain limits. If the wave-counting stop is exceeded lower, that would be a serious wake-up call. The wave-counting stop is the same in both counts. Given the bizarre differences between cash and futures, we think, if today's low holds, then it would best count as a b wave.

There are currently no cash gaps above the market, but there are numerous ones below the market.

Have an excellent rest of the evening,

TraderJoe

GOLD - The Next Parallel

It has been stated several times in this blog that I am counting GOLD in parallels until that is no longer possible. This brings up two views on the question of the count. The first view is that price movement since the 2011 Cycle Wave III top is a very compressed triangle as Cycle Wave IV. That view is shown below on the log scale 3-monthly chart, below. It has been presented before. The measuring objective for this triangle "the widest width of the triangle added to the breakout point" has been met and exceeded, as shown. It is astonishing that GOLD has been up in nearly every quarter since October 2023 (still recognizing this quarter is only just started).

GOLD (GC Futures) - 3 Month - Log Scale Triangle Target

So, it is entirely plausible we had a top in the vicinity of the target. But is it the top? Well, two nagging problems abound. The first is that the internal ratios of this barrier triangle just seem "too compressed". While it is a 'legal' triangle under the rules, usually, not always, triangles have 62 - 78% legs. This triangle does not. One is free to ask, "why not?". The next problem is the "indicator problem". Most of the indicators - whether Elliott Wave Oscillator, MACD, or RSI, etc. - are still screaming "third wave!" if we can believe them. So, what then?

If we look at a slightly shorter-term chart, the one-monthly view, we can see a possible answer to this conundrum. 

GOLD (GC Futures) - Monthly Log Scale - Running Cycle IV

In order to find that next parallel, what IF Cycle Wave IV actually ended back in Jul-Aug 2018 as a "running fourth wave", instead of as a triangle? On a log chart that produces the potentially acceptable channel shown above and provides for reasonably sized Primary waves. Notice, the indicator problem in this chart: both indicators are at highs in 89 candles. Bear in mind Mr. Elliott would applaud you for using a parallel on a long-term log chart.

So, what does this mean? Given such a stellar advance, what if GOLD largely traded sideways or made a large properly shaped triangle for its Primary ④th wave? Notice the lower rising parallel trend line and EMA-34 are both now high enough to prevent overlap - especially if there is more sideways wave travel. If this count is not adopted, notice the otherwise difficult problem of trying to find the Primary waves within Cycle Wave V.

Could GOLD go over the high again in this scenario? It certainly could: the Intermediate (B) wave of a Flat, an expanded flat, or a "running triangle" for Primary ④ could certainly go over the high. From a trading perspective, "range traders" might find it ideal (not trading or investment advice), but so might the algos that revel in creating havoc in the volatility. So, the utmost caution and low position sizing would seem prudent for retail traders. And, lastly, the Weekly Chart below helps provide more information.

GOLD (GC Futures) - Weekly - Spinning Top Candle

Note that price is still over the 18-week SMA, so the bias is up, and the weekly slow stochastic is still embedded. Yes, there is a red "spinning top" candle here which is not confirmed on a weekly basis, and confirmation is always needed of a single candle pattern. But note also, price has not been back to the 18-week SMA since the beginning of 2025. And price has not been back to the lower weekly Bollinger Band since October 2023 (not shown but interested readers should look it up).

Further, notice how broker Ira Epstein's advice of "not buying new" over an upper Bollinger Band was quite savvy in this instance. Now he is largely talking about trend trading, but if one bought new positions at the high outside the Bollinger Band two weeks ago, then the close this week is lower. Yes, he might say (imitatingly), "sure you would have ridden the rocket perfectly, and gotten out at the top... um, not likely. I wouldn't have, only you would have." This is distinctly different advice than I heard Peter Schiff (Gold Dealer) give hours before the high on YouTube (paraphrase). "Buyers must buy the all-time-high. Because if they don't, then the all-time-high is only going to get higher." And that was right before the $926 excursion from high-to-low in the last two days of this week. Let's hear it for sentiment.

Please be careful out there. Be patient & flexible. If you don't know what a wave count is at the moment, that is a good time to 1) stop, 2) take measurements, and 3) use the Principle of Equivalence to determine what wave patterns best fit those measurements. I've done what I can do. Now, it's up to you.

Have an excellent rest of the weekend.

TraderJoe

Chuck Wood

How much wood would a woodchuck chuck if a woodchuck could chuck wood? Chair Powell did an awful lot of wood-chucking today - dispelling everyone's concerns about every conceivable thing. There was an awful lot of jaw-flapping for not changing interest rates at all. Inflation? Not a problem. Employment? Not a problem. Artificial-Intelligence? Not a problem. Energy prices? Not a problem. Gold & Silver and Asset prices? Not a problem, as GOLD reportedly goes up over $100 per day now.

Yea, well, he doesn't mention too pointedly how the enormous $34 Trillion in debt he helped create has destroyed some/much of our purchasing power. He doesn't mention that the $40 Billion each month he now just gives to the banksters is largely responsible for the great wealth inequality, while they laugh "tee-hee" in the Press Conference about how the wealthy are 'mostly' responsible for creating the economic growth. Yes folks, don't ask the hard questions. Don't be investigative reporters. Go along for the ride. Don't make it seem like there are real people out there who are really, seriously hurting. As for the next FED chair, I'd vote for Chuck Wood, PHD (Pile it Higher & Deeper).

For my part, today's chart is of the contracting ending diagonal I called in real time and documented in 2014/2015. I recreated this chart, below, that I recalled so well, so it might be instructive to you. I'll have a couple of notes below the chart.

SP500 Cash Index - Weekly - Contracting Diagonal

First & foremost, look at how long it took for this diagonal to form. It took forty weeks! A full eight months. Consider: would you have had the patience to sit through this thing? Next, note the retraces were not the 62%+ that would be indicated by the guidelines for a diagonal. That is exactly why they are guidelines and not rules. Third, note that interior to the larger diagonal (blue lines) is what looks like a diagonal, (itself shown with brown lines) except it is more properly a running 'b' wave. All these things serve to confuse and confound the wave count - which is why one must remain patient, flexible and calm.

Next note the declining MACD throughout the pattern and finally note that the start of the diagonal was eventually exceeded in less time than the diagonal took to form.

Will this happen again at this possible top, some 12-to-Fibonacci-13 years later? Will FED Chairs continue to say, "no problem" as they hand out cash to the bankers and corporations? Only time will tell.

Have an excellent rest of the evening,

TraderJoe

Bias Flip

Today was an outside day up, and a close over the 18-day SMA. So, the daily bias - at least temporarily - flipped to up, as the ES daily chart below shows. In the process, the prior downward gap in the SPY cash and ES futures was filled.

But the swing line now has a higher high after a lower low, and therefore a new trend is not in force yet. So "outside day up" guidelines are in place in which the low of an outside-day-up should not be taken out in the next two sessions or it constitutes a trap for the bulls. The daily slow stochastic is not embedded. Neither is it over-bought at this time.

IFF a new all-time high is made it would be possible to say that the contracting diagonal higher is still on the table. It would just be extending with the prior high as (i), and Wednesday's low as (ii). But this is yet to be seen.

We remain calm, patient and flexible.

Have an excellent start to the evening,

TraderJoe

Fives or Not ?

Are we trying to count by fives in the upward direction or not? That is the very basis of the Elliott Wave Principle. The Eight-Fold-Path-Method tries to better quantify a chaotic and non-linear wave form by always examining the time frame that looks for between 120 - 160 candles. (If you have questions, see the post in the upper right-hand-corner of the main blog page under the Purpose and Ground Rules). This chart has been shown several times in the past. The bar count is currently up to about 153 two-weekly candles.

The chart is of the S&P500 Cash Index using just the Zigzag indicator to provide accurate wave termination points and illustrate the overall form of the wave.  The RSI indicator and the Elliott Wave Oscillator (EWO or AO) are shown and are currently diverging. The distinctive fourth wave signature can clearly be seen with the EWO briefly dipping below zero before quickly rebounding.

Although it is possible to count a top here long-time readers of this blog will understand that one objection to doing that is the NY Advance/Decline line is at an all-time high this week and last. Few, if any, true bear markets have started in this condition - with the advance broadening out and little divergence seen.

Countering this, though, is the NASDAQ Advance/Decline line which is diverging.  And, remembering that it was the "A.I. trade" that largely built this wave segment, one could wonder if just a few high-tech stocks were largely responsible for the advance, what will happen if they seriously decline? And, we're not even entirely convinced every Mag-7 stock has topped for good.

With that in mind, the Principle of Equivalence says to be patient, be calm, and be flexible as the market overlaps in this area. As the red arrow towards the end of the price series, above, indicates we could easily see a deeper drop for a B wave, before a final C wave advance that provides more in the way of divergence.

The bottom line is 1) we are attempting to count-by-fives, 2) it is possible we are topping now, but we question only how likely that is at this time, and 3) therefore no amount of downside will provide a surprise to us as the risks continue to mount and mount.

Just remember, if we are attempting to count by fives, then this up wave, when over, would be (5) of ⑤ of V of [III] with [IV], ahead, and [V] after that. If you would like to see the difference between counting by fives, and not counting by fives, you should have a look at a fairly recent free NeoWave blog post at this LINK. I have learned a lot from Glenn Neely, but it's very hard to say Elliott would agree with his counting technique.

Have an excellent rest of the weekend,

TraderJoe