Candle Confirmation

Friday's "spinning top" or "doji" candle was given a candle confirmation today as shown by the daily chart of the SPY cash ETF, below. In the process, the latest "three-touch" trend line was broken to the downside.

This could mean that the 'c' wave of an expanded flat correction since 18 Nov is complete, but the evidence is only preliminary in the fact that Friday's higher high occurred on a divergence with the EWO as shown. Also, the swing line has a lower low but is still above the 18-day SMA, so the two cancel each other out. Again, price is still above the 18-day SMA, and the daily slow stochastic is still embedded. As a brief reminder, we showed the expanded flat potential in the post at this LINK.

So, IF the expanded flat count is correct, the market should start down in a really substantial way over the next couple of days. And, if it is not correct, the alternate count is that an expanding diagonal ended at the low on 21 Nov.

There should be lots of news to ponder over in the course of the next week, including an FOMC decision and press conference on Wednesday. Because of the conflict in the local technicals (they are all not in gear) calm, patience, and a high degree of flexibility are still required - both in wave counting and in trading.

Have an excellent start to the evening,

TraderJoe

Spinning Top Candle - Of Course, Requires Confirmation

U.S. equity prices early on as measured by the ES daily futures made a higher high day and then faded somewhat by the close. We are showing the OHLC version of the chart below, but the bar translates into a weak spinning-top candle formation as the body would still be green.

The swing-line indicator indicates there is a higher high after a lower low above the 18-day SMA and the daily slow stochastic obtained embedded status for a second day. So, the bias is up until prices again close below the 'line-in-the-sand'.

Today's higher high exceeded the second up (green) fractal back from 12 Nov. And although we have shown a way to count a completed wave, candle confirmation is needed in the form of a substantial closing-lower candle. Absent that, there is not much on the chart yet.

The wave action is whippy intraday (as shown by today's 30-min candles) and this is interesting given a $VIX which is down in the 15 - 16 level. We should note today that the $VIX closed a cash gap from way back on 26 SEP 2025. Interesting, but nothing dispositive yet.

There are lots of ways to see that a minimum of a pullback is due, even just considering the waves since the late November low. And, although nothing to the downside will surprise us, we must be patient until the market decides the time is right. As we all know, next week is an FOMC meeting week. Perhaps the market will decide that time is the right time.

Have an excellent start to the weekend.

TraderJoe

Grinding, Stalling & Swinging

The wave counts are really getting strained. One almost has to look at the structures with one eye closed and the other one squinting to see what the machines are doing to the market - grinding for hours and swinging leisurely at other times to make waves that waste a lot of time and make little progress. For our part, it looks like we called the internal structure properly in the prior post.

We had no idea that such a lengthy diagonal would form in the wave structure. But, it apparently has. I say apparently for three reasons, 1) we don't know upward movement is over yet, though the odds are getting better and better, 2) we do not have diagonal confirmation yet, in the form the of the start of the diagonal being exceeded lower in less time, and 3) one could put the label iii at the high close on Friday 28 Dec, and label all but today's breakout as a triangle. I have no qualms with doing that. It would be in line with The Principle of Equivalence. However, because wave iii was not on the exterior of the parallel it would not have been as predictive as this original labeling. 

Further, we said the diagonal could still extend until or unless 6,812 were exceeded lower. It hasn't been yet. That statement is still operative, and it explains the timing of some of the retracement waves. There was not much interesting in the wave structure until about 3 pm today when a very, very modest decline began. However, we do now have the SPY cash and the ES futures making new highs on the same day - today. That was not the case yesterday.

Should the market start downward in earnest (which it is not obliged to do, given the internal machinery) the next questions for a wave count are 1) whether either of the cash gaps fills, and/or 2) whether a low under the start of wave i is made or not.

Have an excellent rest of the evening,

TraderJoe

Internal Structure

As best I can tell at the moment, a retrace of wave iii in the ES 1-hr futures would be very shallow and most of it would have occurred during holiday trading hours. So, a deeper fourth wave might be allowed to form until or unless there is downward overlap.

The overlap level in the futures is shown. Since in this configuration wave i is the longest wave, or the extended wave in the sequence, then wave v should remain shorter than wave iii.

Have an excellent rest of the evening,

TraderJoe

Outage - Back Up

Right. The CME Group would like you to forget about this little item. One or more of their data centers went down with no 'back-up' or 'fail-over' response for hours as this chart of the ES futures (SPY/CFD) 5-min time frame shows.

According to a news source:

>>

Commodities futures and options trading on CME Group’s popular platform was halted on Friday due to a technical issue at data centers, the world’s largest exchange operator said in a social media post.

“Due to a cooling issue at CyrusOne data centers, our markets are currently halted,” CME Group said in a statement posted on X. The company said it was working to fix the issue in the near-term.

Dallas-based CyrusOne operates more than 55 data centers in the U.S., Europe and Japan.

A host of commodities and agricultural goods contracts appeared to be disrupted by the outage. Futures prices for equity indices, including the S&P 500 and Nasdaq 100, also appeared to be impacted.

The outage contributed to already slow trading volumes across the globe following the U.S. Thanksgiving holiday on Thursday.

>>

Didn't they learn anything from the NYSE's fail-over response after the 9/11 attacks (putting additional data centers in New Jersey, etc.)? Prechter said in the internet age, issues like this would increasingly disrupt markets. And this one seems pretty tame. From what I can see, they are back up and running. What might we expect next?

TJ

Bias Flip

After contacting the lower daily Bollinger Band and making a new lower low - without having the slow stochastic embed - prices headed higher as might be expected from a retracing wave. In the process, price today closed above the 18-day SMA again, and the swing line has turned to up. So, there is now a lower low and a higher high with a close over 'the line in the sand'.

The retrace, so far is 62%, The prior green (up) fractal has been exceeded higher, but there is nothing to say that upward price movement has ended. The daily slow stochastic is headed higher and is not over-bought yet. 

The best suggestion is to follow the local intraday technical analysis and be cautious in the very high volatility waves, using small positions. Of course, another option is to sit on the sidelines for the holidays.

There are several ways to interpret the current wave count, but they depend on whether or not a new all- time high is made. For example, one could place Minor B at the low, or (c) of minute ((iv)) of the Minor A wave still. But another way to interpret the low is a lower degree ((w)) wave, with a new minor ((x)) wave high possible in a larger compound flat, still for the Minor B wave. It's a truly messy wave situation. There may be other answers to the puzzle, as well. And it's another good reason to just use the local technicals until the situation clears up a bit.

Have a good rest of the evening,

TraderJoe

Gator Flips

If you've ever been down south in the US (deep down south like the Bayou), you may have seen or heard the expression Gator Bites and Boudin Balls. If you haven't, here's a LINK to what it means. Well, with apologies to the phrase, this week the gator took a bite. I'm, of course, referring to Master Trader Bill Williams indicator called the Alligator. As you can see from the daily ES futures chart, below, the Gator rolled over and closed its mouth, taking a bite on prices.

In the process, note that three down (red) fractals have been exceeded lower fully beneath the alligator indicator. We're glad to have caught an instance of this for you, especially prior to a holiday. Why? It is because many people tend to have opinions about the holidays. Some of these run like, "if the bears have Thanksgiving, then the bulls will have Christmas dinner", etc. Or like, "the period leading up to a holiday is bullish, then a sell-off after the holiday".

Yet Bill Williams was a great proponent of having no opinions on the market and thought it was best to just "want what the market wanted". He was especially fond of avoiding the news. Granted Bill was very well capitalized, had deep pockets, and other market strategies, but if having no opinions was good enough for him, why isn't it good enough for the rest? After all, who knows when the politicians will deliver some surprising refrain like "tariff rebates", or "reduced tariffs", or whatever the latest fad is.

An 'opinion' might cause you to miss a gap down on Sunday-to-Monday. Or it might cloud your judgement to the effect that, yes, we did have a correction Friday which was more than adequate for Thursday's decline, but complex corrections are possible. No, clear the head, let the market try to tell you what is coming next.

And so, there comes a time to try just to monitor local technical analysis and see if the gator fractal breaks just recorded will amount to anything. One of the things I like about this methodology is that is says there is nothing bullish on the chart until price exceeds a fractal above the gator. As you can tell, this marries very well with Ira's strategy of there being nothing bullish on the chart until price has closed above the 18-day SMA again.

Another thing to like about this method is that it does not require wave labels - even though these can be useful. So, for example, are we in a Minor B wave, or a minute ((iv))th wave of Minor A still? There can be good arguments for either.

So anyway, unless you're having Boudin Balls for the Thanksgiving Dinner, don't let the Alligator bite your Turkey. I, for one, will be taking some time off, and updates will be a bit less frequent.

Have an excellent rest of the weekend,

TraderJoe