The Main Event

Like some fake prize-fight, which may be fixed or not, this is the Elliott Wave count on the ES/SPY (CFD) on the 8-hr timeframe whether I like it or not.

ES/SPY (CFD) - 8 hr - Minor C Wave Count

It's a count with an extended first wave. The RSI is diverging at each new peak. Wave ii up does not come close to a 38% retrace, and that is one key to an extended first wave count, as this is. Further, waves ii and iv show good alternation on the way up. The timing of this first down wave a/i was perfect such that a fifth wave up, v, did not exceed the length of the third wave up, iii, as it is shorter than the first wave. Why would that happen if this wasn't the local count?

The test will come either this week or next as to whether we make a new low or not. It depends on how much time the b/ii wave wants to take.

There is lots of thin structure that can be retraced below the market (free-fall zone?).

The reason the first down wave is currently labeled as a/i is that it is always possible for a wave-set lower to start out with a diagonal, either as an overlapping 5-3-5-3-5 or 3-3-3-3-3 or as an impulse, and the market will have to be watched for clues.

I honestly think if there was a good local alternate, there would be something wrong with the lengths of the waves at the moment, and I just don't see it. The count does have a clear invalidation, and that would be if there is a new all-time high in this index or the ES futures.

Given the above, this makes the distance between b/ii and the all-time-high a clearly definable "risk zone" when the phrase risk-reward is thought of with the reward possibly down to the B wave low.

Well, if there isn't a good close-in alternate, is there a longer-term alternate? The answer to that is "yes". We can suggest two possibilities if Primary ③ becomes longer than Primary ① in the chart, below.

ES Futures (Roll-Over Contract) - Monthly - Alternates

They would take the form of the impulse or the expanding diagonal. But we will deal with these more in upcoming days if needed.

For now, enjoy the rest of the weekend, and get some rest.

TraderJoe

Borrrr....roar...oarrrr...ing!!

My blog is boring (and you thought the market was boring). People might be asking themselves, "why don't you follow the NASDAQ to count your Elliott Waves?", or "what's wrong with the Russell 2000?", or "why don't you follow some hot stocks to show what people are thinking?" Well, here are some cold facts just for you to consider in the form of a three-block chart of daily volume. The top chart is SPY, the middle chart is QQQ, and the IWM is the bottom chart. 

SPY, QQQ, IWM - Daily - Volume Peak & Average

I'm not sure how well you can read the chart (please expand to fill the monitor if you can), so I'll provide the salient facts below.

Tradeable                   Peak Volume              Avg Volume

SPY                            164.16 MM                  53.78 MM

QQQ                           116.27 MM                  48.24 MM

IWM                             99.62 MM                   29.68 MM

Clearly, in terms of volume, the SPY is hands down the winner with both greater average volume for the one-year period studied and greater peak volume. These are simple facts. Hopefully they are not up for dispute.

And Ralph Nelson Elliott suggested that the purpose of the Wave Principle was to help assess the overall level of mass psychology in the markets.

So, this suggests using the tradeable that has the widest following, the widest participation. And that is hands down the SPY and its counterpart the ES futures at the moment to best gauge overall technical sentiment regarding equities. 

Please don't hear this wrong. It doesn't mean that the NASDAQ is not important or that the MAG10 didn't really create a significant price spike in the market. But what it does mean is that if one excludes the major tradeable from consideration, then one is losing 53 - 54 million votes per day. Why throw those away from your bullish or bearish read on things?

And let's say one was solely focused on the Russell and its ETF or futures for trading. OK. But then one is losing roughly 102 million votes per day, a number of votes far outweighing the constituents of the index being followed if one is trying to use wave theory. And with so many fewer votes, it means that a large trade in any one stock or by any one operator can have a more sizeable influence on the price level of that index.

Folks. Elliott was an accountant. How Borrrring!!!! is that. But he understood averages, and he understood weighted averages. And he used the averages to smooth out the spikes of emotion and ego that rule the trading world. For him, it provided an edge.

For us, it means that if we try to use Elliott on an individual stock, or a sub-market index, we need to be aware that we may be getting less than the full picture and probably are getting less than the full picture. 

Think of it like people voting with their money to buy something or not. And, oh, yes, it sure is sexy when the App crowd decides they're going to do a short squeeze on a certain stock. But how often do such individuals know 1) when to get in, 2) how far, and 3) when to get out. Sure, they may play it by ear and strike the big one. More power to them. Or they may not, and they may be one of those that got in later and got hung out to dry - either by price - or by the regulators for market manipulation. 

Either way, it's not Elliott. Elliott is boring.

Have an excellent rest of the evening,

TraderJoe

Time, Time, Time ...

...see what's become of me. With no apologies to Simon & Garfunkel - who certainly don't need mine - the purpose of this post is only to note the time relationships between the down wave and the up wave in the ES/SPY (CFD) 2-hr chart below.

As of right now, there are only roughly half the number of up bars as down bars. And strictly speaking that's ok, but slightly lower odds. Often times corrections take as much time or more as their motive wave counterparts. So, in the comments for the prior post, I outlined some ways that this correction - which certainly looks like a Flat - could extend in time as a multiple flat or a Flat-X-Zigzag.

Predicting such is horrible stuff, and the market could always decide that the downward pull of a third wave (C wave, or not) is simply too great for now and a next wave could break lower at nearly any point. Keep in mind, today's up wave was made on news and sometimes those form weaker waves because only the pros/bots/machines get to react other than retail stops being hit.

Nonetheless, I do think the presence of the Flat wave - whether it continues or not - with its lower "b" wave argues more for a follow-on wave lower than an immediate return to the high. This is all a game of odds, and the Flat tilts the odds a bit in favor of a continuation wave lower.

Looking at today's daily bar, it was an outside day up with a close still below the 18-day SMA. Also, it is the second bar after the outside day down on Tuesday, so a trap was not set for the bears. But being an outside day up, it's low should not be taken out within the next two sessions or it would constitute a trap for the bulls.

The daily slow stochastic is still over-sold.

Have an excellent start to the evening,

TraderJoe

Meanwhile ... back on earth

I realize everyone is focused on Friday and a certain IPO that is about to transpire. But, here - back on earth - the debt clock is about to register $40 Trillion.

And look whose logo is in the lower right. I could have sworn that when the debt was only $35T, a certain POTUS hired a certain CEO to get the debt down through reduced government spending. Gee, what happened, it 'mysteriously' seems to have gone up by roughly 12 - 14%?

So, let me get this straight, people are just gonna schlepp their money over to a huckster who was hired to correct a problem & didn't? OK. That shows truly great skill and demonstrates both acuity and integrity, right? Yeah, right (not). If I were applying for a CEO job, would that "previous employment" section show up on my resume? I'll bet he still got paid for it. You gotta think. Let me see, would I trust this guy to get me to Marz? Um ... since his A-I has been trained with all the earth data known to man and monkey there is no way I'd trust it on the Redd Planet.

So, what's up? It's pretty simple, the guy is just selling you something to make him rich(er). He doesn't care if its SpaceChex, Teslex, RobotEX, Cutex or Riddex. Just buy something, please! As long as it has an "x" in it. It's what every carnival huckster does, and it's completely legal.

Am I jealous of this guy? Well, a bit envious? Not quite. It's hard to be those things when you're just tired of being taken... and taken...and taken by a few with little concern for their peers. And you "are" his peers. You just won't say so. You'll just stand there gawk-eyed and not do a darn thing about it. Do what? Like enforce anti-trust laws and deconcentrate corporate wealth though business law and the tax code.

Ah, well. Not to worry. Why should one worry? Ask Ray Dalio who is trying to help people see what is coming. Search YouTube and watch one of his recent videos if you haven't already.

Meanwhile, back on earth...

Have a great start to the evening,

TraderJoe

Band on the Run

With due apologies to Macca, today we made a fifth wave down that pierced the lower daily Bollinger Band - and ran it a bit - but did not fill the futures gap as per the daily ES futures chart, below. While the futures are still trading as this is written, if the close remains near here, then there is an outside day down.

I had cautioned in the comments to be cognizant of that lower daily band as the Smart Money often like to take profits there. And there was a significant rebound back inside the band to near the open of the bar. So, with five-waves-down, according to the Principle of Equivalence, all we can claim is that there is an a/i at the low of the day.

Today's rebound is very short in time compared to the length of the down wave, so there is a way it can persist for a while. Further, the down wave has downwardly overlapped some additional up waves. It is possible price can go sideways inside the band for a while as the daily slow stochastic is now in over-sold territory.

Today being a weak outside-day-down be careful of the high of today's bar (ES 7,491) for the next two trading sessions as if it exceeded, it might set a trap for the bears.

Make no mistake, this down wave now measures too large to be a simple correction to the up wave. Probably there will be at least one more down wave to follow it, maybe more.

Have an excellent start to the evening,

TraderJoe

LL MC

Today was a lower low (LL) day for the ES futures, with a middlin' close (MC) as in the daily ES chart below. While the futures are still trading as this is written, we don't expect too much change before the end of their session.

Some interesting elements were 1) there was a lower low overnight in the futures which keeps the swing-line currently headed lower below the 18-day SMA, 2) there appeared to be at least initial rejection at the 18-day as price settled lower, 3) price did not reach either the lower daily Bollinger Band or the prior May 19th low which is still intact: it could, 4) the daily slow stochastic did not yet enter into over-sold territory, and 5) I showed one futures gap earlier from May 22nd that closed. I'm showing above another such close-to-open gap from May 4th which might be the next to close.

All-in-all today still feels like the fourth wave of a downward impulse until/unless that should change. But with price having two closes below the 18-day SMA for the first time in a while, the daily bias has flipped to lower for the present.

Have an excellent rest of the evening,

TraderJoe

Brother, Can You Spare ...?

...no, not a dime, but a few years? The depression question, of course, was "brother, can you spare a dime?" But this post refers to the fact that there is a "time" relationship in a potential ending diagonal and a 'prediction' that the chart below makes. The chart is of monthly log style in the S&P500 cash index using the Zigzag Indicator to get the price vertices correct. And it has a lot going for it including a rather nifty overall look.

S&P500 Cash Index - Monthly Log Scale - Degree Resolution

The degree labels seem to resolve really well. Inside of Primary ⑤, Intermediate (1) is log shorter than Primary ③ the previous higher degree wave in the same direction. Primary ② and ④ look well-coupled and, for alternation, whereas Primary ② is a "running flat", Primary ④ is an "expanded flat" with a more extended Intermediate (B) wave and a lower Intermediate (C) wave.

From the indicator, the peak of the RSI is on Minor 3 of Intermediate (5) of Primary ③, and the first divergence is on Minor 5 of that same wave. The RSI is diverging since.

The Prediction

So, the prediction from the wave structure is that since the low of the diagonal was in 2020, then the entire diagonal should be retraced down to its Primary ④ beginnings in less time than the diagonal took to form. With the current year being 2026, that means it has about six years to accomplish this. Often, though, in an aggressive down move it can take 50-75% of that time, there being no published "rule" to this effect - just a tendency.

We know that traders tend to be an impatient lot as a group. They want to see fireworks to kick this thing off. That could happen. We have yet to see a 1-to-10 or 1-to-12 down day on the NYSE Advance/Decline line. But those have happened before, so we'll be on the lookout (BOLO) for one fairly soon to start a breadth thrust to the downside. We're not going to assume this will happen. It simply won't surprise us if it does - and we wouldn't call it a 'capitulation' as the financial media will likely try to say. Rather, it probably would be a "kick-off" to any downward wave sequences.

Epic Fail

Could we go higher from here? I suppose it is possible, but I can't yet find another good count to do that with. We have already tried one alternate ending diagonal, published it on this site as an alternate, and the market simply wouldn't have it. That failure seems to be one more signal that the market is more intent on correcting at the moment, than in going higher. So, we'll monitor closely for other alternates up to a point, but not for long. In the interim we'll listen to the market and see what it's telling us.

Meanwhile, have an excellent rest of the weekend. This is the second post since Thursday and if you have not read the first one, you might want to check that one out, too.

TraderJoe