Three Years in a Channel

First, here is an update of the monthly count in the S&P500 Index. I am just reposting this from the prior comments in case some did not check them. In short, nothing has changed yet, except we can show the level that would have to be reached to invalidate the Minor B wave down. Price is nowhere near close. So, the five-plus year contracting diagonal remains intact to this date. Let's see if it continues.

But a chart I really wanted to show was this one of HYG (High-Yield Debt) on the 2-week time frame which shows prices in a three-year (+plus) "best-fit" channel that has not broken out to the upside.

It certainly looks as if prices have a failure at the mid-channel line, and as if the MACD has crossed lower, though it is not under the zero line just yet. The count would be a contracting leading diagonal for Intermediate wave (A), Flat for Intermediate (B), followed by an Impulse for Intermediate (C) which would show excellent alternation in a corrective wave. This suggests a path for high-yield-debt is lower, and possibly to retreat to the prior low, or more.

Note that HYG has a multiple divergence on a long-term chart with the S&P500's recent all-time high. This is because the HYG all-time-high was back in 2013 at the level of 96.

Have an excellent rest of the weekend.

TraderJoe

A Long Slog ..

The daily SPY cash chart now has about 108 candles since the Minor A wave top. It's been a very, very long slog but there are enough waves to claim that the Minor B wave formed as an expanding triangle, currently meeting all wave rules and guidelines.

SPY Cash - Daily - Expanding Triangle option for Minor B

Can this current wave go lower? It can. It has not yet reached the 150% length given as a 'rule' for each of the waves of the expanding triangle.

Just a couple of quick notes. Each wave of the triangle is longer-in-time than its prior wave in the same direction. The up waves never exceeded 150% of their prior waves, following the 'rules' for an expanding triangle.

Neely says he has never seen an expanding triangle for a fourth wave. Well, this one would be a B wave, concurring with his observations.

Further, we can only state that it is possible for the same waves that make up an expanding triangle to make up an expanded flat if price pressure really gives way.  But, so far, it hasn't so we need to see what upward retraces there are, and how far they go.

Lastly, this structure took place on the daily chart which carries some overall weight. It's not like this is a five-minute, or hourly chart. It's made up of lot & lots of individual and collective votes from around the world. So, if this structure holds up, it may play its part as occurring before the last wave in the sequence. In fact, Neely indicates that often the final wave after an expanded triangle fails to make a new high. This will likely be a good test of that observation.

Have an excellent start to the evening,

TraderJoe

Odds Get a Little Better

Today's seeming failure wave, and outside candle lower, increases the odds a bit for the completion of either the daily expanding triangle lower or the daily expanded flat lower. The ES daily chart (roll-over contract) is below.

IFF the diagonal that we sketched out in the overnight waves completed a c wave, up, of the minuet (b) wave, up, then the count, should it break the low, might go back down to complete the minute ⓔ wave of the Minor B wave lower. So far, the price structure keeps failing at the 18-day SMA, so this increases the odds as well.

Again, the prior daily low must be exceeded lower as must the 25 Nov 2025 low be exceeded lower for a valid expanding triangle to be claimed. And, if price keeps heading lower than certain levels, it is possible the expanded flat version of the wave will take over. We will sketch that out in days ahead, if it is needed.

As with all outside days lower (ODL), the high of the ODL should not be exceeded higher in the next two trading sessions or it might form a trap for the bears.

Have an excellent start to the evening,

TraderJoe

Back in the Bands

After a lower open overnight in the March 2026 ES futures contract, price turned around and tried to head for the high of the prior daily bar, as in the ES daily chart below (for the March contract). The lower open continued the swing-line downtrend, but that could change with a higher high bar.

ES Futures - Daily - Close Back in the Band

As we noted, Friday's close was the second consecutive close below the daily Bollinger Band. This diminished the odds of the next close being below the band, and today price did close back inside the band resetting the number of consecutive closes. But the day's action is a good illustration of why one should not (according to my paraphrase of Ira Epstein's trading guidelines) take new naked short positions in futures against the lower band. That is because price only stays outside of the band only about 5% of the time, and the Smart Money is likely at least taking profits on some previously established short positions at or below the bands.

Note, too, that the daily slow stochastic is only down in over-sold territory which often does not yet attract a lot of new money on the short side. It is not embedded. Also, the two most recent fractal locations have moved down to the bars shown.

We have in mind a count that could allow price to get back near/above the prior up (green) fractal. And we also have one that allows one to go lower and exceeded the prior down (red) fractal.

From an Elliott Wave perspective, we counted one way to get a 'five-up' today. We'll simply have to see if a retrace wave hold off of the lows or not, or whether that five wave continues into the overnight to make a larger wave.

Have an excellent rest of the evening,

TraderJoe

Friday was Fast

...but Tuesday through Friday overall was slow and overlapping in a channel. Therefore, it appears with the waves we have there is most or all of an a, b, c down. It may be a corrective wave with the basic form shown in the ES hourly chart, below. And, if it is a corrective wave, the structure would be diagonal for a, then impulse for c - which would be good alternation in a corrective wave.

But I caution, this is definitely not the only way to read the chart. The current b wave could be only part of a larger corrective flat, before making a larger wave down. Still, we'll count what is before us and, if the market says differently, we'll accept it and fit it into the larger picture. Remember - at minimum - on the daily chart we are still looking for a minute ⓔ wave that breaks the prior minute ⓒ wave low, for the expanding triangle, and maybe more if the expanded flat is to occur for the Minor B wave.

Interestingly, this count started out with a diagonal for the (A) wave, down, of wave ①, and it is a good illustration of a fractal-in-a-fractal, or a smaller degree wave being self-similar to the larger degree wave a which was also a diagonal, overall. And, wave-counters-beware, while it is tempting to count everything including Ⓑ down as part of the diagonal, there is a Flat in the futures (which makes a lower low) that prevents such a count as wave four in a diagonal cannot be a flat wave.

So, that's what we have at present. Could the wave go down to 90% of the prior up wave and make the larger b wave of a larger flat since 8th March? It could. Could the wave break the low again? It certainly could. Again, nothing to the downside will surprise us. If anything is surprising us at present it is the lack of upside. Even though short-term wave patterns like a double zigzag are being invalidated, the daily bias is still to the downside, and, as of Friday, the intraday bias is still to the downside as well.

Still, daily prices have made two consecutive closes below the lower daily Bollinger Band, dropping the odds to about 5 - 7% of the next close being lower than the band (not impossible - just lower odds). And the daily slow stochastic is in over-sold territory and not embedded. So, one should tread cautiously and patiently in the interim.

Have an excellent rest of the weekend.

TraderJoe

Watching for Activation

According to the daily ES chart, below, the wave count has been proceeding pretty much as anticipated given all the number of diagonals to fit into the picture and to figure out how they alternate.

ES Futures - Daily - Watching Prior Low

The wave degrees are noted in the chart. We are watching to see if either the expanding triangle or the expanded flat gets activated by prices moving below the low of the prior minute ⓒ wave this week or next. If it does, then the pattern becomes a matter of the length of the wave down because so far - from a time standpoint - this down wave has already consumed more time than the prior ⓒ wave which is what is classically expected in an expanding triangle.

We will note that tonight price filled the up gap in the futures from 25 Nov 2025 if you look back to the left. Still, there is a gap down tonight, and a gap down from 27 Feb 2026.

The daily MACD is currently headed lower, and the 200-day simple moving average in the futures has been tagged or broken, depending on whether one is using the lead-month contract or the roll-over contract. Further, price has broken the lower daily Bollinger Band for the second day and tagged the weekly one.

So, one might look for signs of the Smart Money to take profits on shorts near the bands, maybe letting some ride, and this may create some whippy action in this area.

P.S. I would put a wave-counting-stop (brown w.c.s) above the wave labeled (b)/(ii) as an indication that a different count is playing out.

Have an excellent start to the evening,

TraderJoe

Hourly Parallels

The whip in the ES futures is on in full force. Here are a couple of hourly parallels for your consideration. 

ES Futures - Hourly - Parallels

The wave structure up was a three-wave sequence. The wave structure down is in a parallel and might also be a three-wave structure or a complex in the futures. This makes prediction of the wave structure very tenuous. While it does feel like we might be in the minuet (b) wave, further confirmation of the form is required.

Today price finished in the middle of the range but still well below the daily 18-per SMA. So, the bias remains down at least temporarily. It can't be said often enough - calm, patience and flexibility are key requirements for this period of time.

Have an excellent start to the evening,

TraderJoe