Until it No Longer Works

The best on-line estimate is that there are approximately 198,000 - 200,000 people employed in New York City's securities industry. And, world-wide there are approximately 1.09 million people employed in the financial empires. They are essentially paid to buy stocks, bonds, mortgage securities, etc. You get the idea. And, as you can see from this "end-of-day" one-minute chart, they were doing that at the end of the day and even past the cash close. They 'must have' more stock (or futures in this case).

ES SEP Futures - 1 min - Until They Can't

Think of it. This is what they are paid to do. They wait until the end of the day, and then they buy and they buy and they buy. Clearly, they are Smart enough to count to five, and to measure to 2.618, and they are going to do this every day - every single day. Why? Because their bosses tell them to. Their employers are Smarter than them (clearly), and they are well-connected with people with gobs of money who benefit when stocks go Up. They don't benefit so much when stocks go (shush, gulp) down.

Today was 'mostly' a down day in the equities indexes. The daily ES futures - at one point - hit its lower daily Bollinger Band, before some of this rebounding took place.

My question is this: What will these minions do IF or when stock prices do decide to head for a steep decline? Are they going to continue the rabid buying into the close because they're told too - even, again, if it should turn into a down market? Why would they do that? They are Smart, aren't they? Although I am not claiming the market is acting like a perpetual motion machine (which really only applies to a closed system), there comes such a time as people remember this is largely a confidence game, and at some point confidence gets stretched to the point of incredulity before it unravels.

It becomes apparent how the machines are being used to make this happen, and how - at some point - there is a sense of diminishing returns. Oh yea, that's right, today was a down day. But, they were buying hands-and-fists into that close. And they are going to do that until their employers realize that it just isn't working any more. Sometimes, they are a bit slow on the uptake - if you get my drift.

The point is - in a true bear market - they 'sell' into the close because they figure it is likely the next day's prices will be worse than today's prices.

For the ES, the Elliott Wave count has not changed. This can still be the (e) wave down of the triangle but - as stated previously - it certainly doesn't have to be. The lower this wave goes, the lower is the likelihood of that count holding.

Have an excellent start to the evening,

TraderJoe

Stubborn Refusal - 3

The triangle count in the ES daily futures hung on by a thread, as in the daily futures chart, below. This is the lead month contract only. The roll-over contract can count the same.

ES Futures - Daily - Triangle Continuation

Price closed back above the 18-day SMA, switching the daily bias back to 'up'. The daily slow stochastic is not yet over-sold. There is already upward overlap on the downward (e) wave, if that's what it is. The exact equal bottoms in the (e) wave - at 7,473.00 - are a real feat of financial engineering by someone.

If the down wave was not the (e) wave, it is possible for it to be another x wave of the (d) wave. But, by the rules, it would be the last potential x wave in the (d) wave series. Then the (d) wave could head for the highs again.

Stay calm flexible and patient while this resolves. Have an excellent start to the evening.

TraderJoe

Stubborn Refusal - 2

Today was an inside day in the daily ES futures, as shown in the chart below. It did little to clarify the EW count.

The swing-line indicator, currently has a higher high before the lower low, so a full trend is not in force yet. But, there are two closes below the 18-day SMA, and that keeps the current daily price bias down. With the inside day, though, it would be relatively easy to turn the swing line lower.

I need to emphasize, the count shown in the chart above only comes into play if and only if the triangle scenario busts. It hasn't yet. We fully expected price to get down to this level, the level of the prior x wave of the (d) wave in the triangle count - even if the triangle remained in control. It has gotten darn close.

But, price length downward or upward is what matters now, so we need to take it slowly, cautiously and with a whale of a lot of flexibility until we see which direction that length points.

Have an excellent start to the evening,

TraderJoe

Stubborn Refusal

Many analysts have not fully acknowledged that both the ES and the NQ futures made new all-time highs (NQ on 16 Jun) if their roll-over contracts are considered (again, those are the contracts where the prior contract month's prices and the new contract month's prices are just stitched together - with no adjustment - on the volume roll over date given by the exchange, often the CME). That fact confuses Elliott Wave analysis a bit because one can ask, "is it a new high or isn't it?". Well, it can be but it doesn't have to be. Similarly, I have stubbornly refused to analyze the NQ futures until something at least reasonably clear became apparent. Why? Because there was no point. Now, we can at least look at a chart and suggest some plausible options. The NQ daily chart (roll-over contract) is below.

NQ Futures Roll-over Contract - Daily - Ambiguous

So, there are two counts here. One way the ambiguity in the roll-over and lead-month's contracts can be resolved is if the the marginal new high is just a blue (b) wave shown above. That can make the diagonal down a blue (c) wave, and price could imaginarily or actually go over the high again. 

The other way to resolve the ambiguity is if the minor higher high is actually a black minuet (v)th wave of the minute ⓥth wave in the Minor C wave count that ends the move. Then, price would not go over the high again.

What makes the pattern ambiguous is that a diagonal, itself, is often ambiguous. We know it can be either leading or ending in certain circumstances. I contend it is one of the market's very survival mechanisms. Otherwise, traders would be too sure of what the count was. And this pattern would be the 3-3-3-3-3 variety which is allowed to be either. If it were the 5-3-5-3-5 pattern it would decrease the ambiguity - because that pattern is thought to be 'leading only'.

None-the-less, there are two factors of wave counting which are much, much less ambiguous. Those are, 1) the extent of price travel, and 2) the time taken to travel. (As an aside, sometimes trend lines are less ambiguous, too, but which trend line then becomes the key.) But back to the analysis.

There is no question that this down wave in the NQ has taken more time than any of the down waves since the Minor B low. As regular readers of this blog know, that may change the degree. The last lone option is likely the (c) wave of a Flat, because fourth waves can take more time, and even travel slightly more than their second waves.

In terms of price extent, we know that the 9th Jun low has not been exceeded yet. We are leaving room above that it could be. That might introduce some motive character into the down wave. But, it could still be just the (c) wave of a flat.

Still, at some point, the time factor, and the degree change will over-rule the price extent and likely point lower. We could be nearing that point now. But bear in mind that even a diagonal likely needs a retrace wave, and that could be quite a stiff one and near the highs again. (It certainly does not have to, but it can).

That is why I always say when counting a downward diagonal, "we have a diagonal, watch the high". I am saying that here, too. If a new high is not made, it is possible for the green 1 ? on the lower right to prevail.

Keep in mind with the different indexes that they simply have different stocks in them, so they can top at slightly different times.

Have an excellent rest of the weekend,

TraderJoe

Cobbler - 3

If the ES daily pattern is the barrier triangle, it might look like this overall. The (d) wave looks to be the complex leg of the triangle.

After the higher high in the after-hours, price traveled down to the S2 daily support pivot and bounced strongly into the close. Price did not close back below the 18-day SMA, so the daily bias is still up. And the regular calculation of the daily slow stochastic shows four closes over the 80 level, meaning it is currently embedded, until/unless it comes back under the 79 level.

It's summer whippy and difficult trading.

Have an excellent start to the evening,

TraderJoe

Cobbler - 2

The Principle of Equivalence says that within the potential barrier triangle we need to consider at least two close-in local scenarios with today's price movement lower that went essential nowhere. The first one is that the minuet (d) wave is completed as shown in the ES 4 Hr chart, below.

That would make today's expanding diagonal downward the lower degree "A" wave of the minuet (e) wave of the triangle. And, again, that (e) wave can take out the prior X wave lower.

The second scenario is that the expanding diagonal today ended the lower degree (C) wave of an expanded flat of a Ⓑ wave - since it went nowhere important - and the (d) wave requires a higher high Ⓒ wave up, to finish the Y wave, now, as in the chart below.

I have no preference which occurs. I have no dog in the fight. On the daily chart, price is still above the 18-day SMA. The rationale for the second count is that often in a barrier triangle prices quickly go over the prior high, then settle back under it on the close using the timeframe of interest (ES 8 Hr or daily here). That hasn't happened yet. It could.

Note, the MACD is curled over on the 4-Hr. There is a 'way' we could have topped. But price extension lower isn't showing it yet. Maybe it will. It just hasn't yet. I'll be keeping my eyes open.

Have an excellent start to the evening,

TraderJoe

Cobbler

Like the shoe repairman that tries to save a worn-out pair with new soles, or even more like one of your favorite Savannah, GA peach deserts, I have tried to cobble together the count from what was lying around and available for use - segments we counted earlier. Using the ES 8-hr roll-over contract - the one that is most actively traded - provides this possible view of a barrier triangle. At least it does at this time.

ES Futures (Roll-over contract) - 8 Hr - Possible Barrier Triangle

Friday's up wave is so close to nicking the high that we must allow that it might. If it does, then, it might be a second zigzag upward of the double zigzag w-x-y count to the minuet (d) wave of the triangle. And, this wave may be allowed to go over the top, again, within certain limits.

From this high, it is perhaps possible to make the (e) wave of the triangle, which probably (not certainly) would take out the prior x wave lower. Notice the (c) wave, lower, only retraced a little over 62%, so something similar should be expected for the (e) wave. From there, the minute ⓥ wave top should occur as an impulse or as a diagonal to end the Minor C wave, up.

Now, notice the pattern on the Elliott Wave Oscillator (EWO or AO). You can see the contracting lines across the peaks and valleys and fairly tight hugging of the zero line overall that typically signal a contracting triangle.

If the triangle validates, with a higher high after the (e) wave, it might signal "the last wave dead-ahead" for this index. And, often, not always, the thrust out of a barrier triangle is sub-par. It might not travel the typical technical analysis target of "widest-width-of-the-triangle-added-to-the-breakout-point". It might. But it might not.

We have been looking for a formation that might signal the end of the monthly contracting diagonal, and this might be the start of it. Time will tell. And, yes, the current position shown of the C wave is just a placeholder. It is possible that Goldman & Co will try to drive the market to their 8,000+ target, which would be a Fibonacci number of 8 x 1000. But it might not get there, either.

So, why the barrier triangle? The compression of the triangle is trying to shorten up the minuet (e) wave, and thus all of the minute fourth wave triangle to be more equal in price to the minute second wave which was a fairly small wave. Remember triangles are always measured, pricewise, to their (e) waves. And yet the triangle would show huge alternation in time with its second wave, as shown in the daily chart, below.

ES Futures (Roll-over Contract) - Daily - Barrier Triangle

Again, right now we don't have any overlapping waves (in terms of minute ⓘ) to play off of. So, it still follows the 'rules' to call this a fourth wave overall. There are alternates from here. We could have topped but the odds of that grow lower with the higher highs. And it is possible a final upward contracting diagonal is being constructed to drag this thing out into oblivion. But we'll deal with these possibilities if and when they seem to take over the count.

For now, have an excellent rest of the weekend,

TraderJoe