The 'Exact' Number - 2

As readers of this blog know, the 18-day simple moving average (SMA) is something of a demarcation, a "line in the sand" between a daily closing positive bias and a daily closing negative bias. On Thursday and Friday the ES futures played around on both sides of that line, with Friday (in the extended hours) closing below it, or in the regular settlement, probably just about on it. But the ES 4-hr chart does have another exact point of division between two counts, as shown in the chart, below.

ES Futures - 4 Hr - Location of Expanding Diagonal Invalidation

That point is 7,563.50 and above it an expanding diagonal lower would be ruled out. Should it not be ruled out, and the expanding diagonal continue lower, then that would put a truncated top on July 15th, with the expanding diagonal lower as the first wave in a lower sequence. 

However, if the 7,563.50 point is taken out, higher, then The Principle of Equivalence, says "consider other options", and one such option is shown below. That being the case, we need to ask, "do we know literally anything about this wave sequence, or is it all guesswork?"

Well, were are as certain as one can be that there was an overlapping expanding diagonal downward that completed on Thursday, as shown in the chart below, numbered ➀ - ➄ from what is shown as wave b to c. And that small degree expanding diagonal lower was already exceeded higher in less time than it took to form - a true diagonal.

That would leave a very large running triangle as the middle structure, and cause the whole count to be a-b-c, down. And such a structure could still be a leg of a triangle that is eventually still pointing upward - as a larger (c) wave down. That is because, if the prior wave, the (b), up, of the triangle was the complex leg, then this leg down should be a simple zigzag - which it clearly can be formulated to be, even if it is ugly.

This is part of the essence of The Principle of Equivalence. A portion of it alludes to being very careful when only 'three-wave' sequences are involved. It helps stems the "fight or flight" instincts we are all prone to and urges some degree of caution, patience and flexibility until the wave count clears.

And, when you have a single point of departure between two counts, that patient wait becomes a bit more tolerable. Yes, the market knows you just want to make a profit. The ambiguity in the counts is one of the market's very survival mechanisms so that it can't be clearly read and it avoids having all traders on the same side of the trades.

IF we get only an a-b-c, down, is that necessarily the end of the down move? No. But it would likely mean that any further down move is happening by a larger diagonal. And, if the market hasn't been brutal enough, already, I don't personally relish even larger sized whippy waves, especially in three-wave sequences.

Well, it's simple. That's a large extent of what we have available now. There is some significant probability Monday will be an up day due to "the first-of-the-month-money", but I have seen it fail on rare occasion. So, unless you have some much better market metrics, you might want to wait just a bit to see what the next few days bring and/or tread ultra-lightly to see what the market might be saying.

Have an excellent rest of the weekend,

TraderJoe

Back-test of Line in the the Sand

In the SPX500 (CFD) Daily the up movement overnight and this morning is back-testing the 18-day SMA or "the line in the sand", as in the chart below.

Locally, the swing line could turn up, but needs a close above the 18-day SMA. The daily slow stochastic is curling up. One might watch the local fractals for clues. There are still both up counts and down counts. 

Have an excellent start to the day,

TraderJoe

Good Brakes

Yesterday, we pointed out three options for local price movement. The NQ futures made a new daily low today. The ES futures did not. I don't know if you had the money to stop the ES futures from declining through the lows today, but somebody did. Twice! The exceptional number of double-bottoms is getting very suspicious. The ES/SPY (CFD) 1-hr chart is below.

SPX500 (CFD) - 1 Hr - Double-Bottom?

With the higher local high around noon there is now the possibility, not the certainty, of sub-waves ① and ② of a third wave, iii, upward, as these waves are currently shorter in price & time than the larger degree waves i and ii, the prior higher degree waves in the same directions.

There is nothing definitive that rules out further down movement at this point, and it is still possible that the (e) wave could be a triangle itself.

Have an excellent start to the evening,

TraderJoe

Trois Choix

IF we were in France, it would mean three "choices" or three "options" for the local count. The ES 4-hr chart and the ES 1-hr chart with further explanation are below. On le menu are blue x, blue i or red (ii) of diagonal.

ES/SPY (CFD) - 4 Hr - Three Choices

Alot currently depends on whether we go through the low again. That can not be emphasized enough. The option of a i ?, up, depends on the entire up wave having been an expanding diagonal, as below. It does have the right measurements and internal structures.

ES/SPY (CFD) - 1 Hr - Whole Up Wave as Expanding Diagonal

The (e) wave of the triangle simply has not invalidated yet. So, all we're getting thus far, is volatility.

Have an excellent start to the evening,

TJ

Eerily Similar with 'The Right Look' - Not Confirmed

Here is a monthly chart of the NASDAQ 100 (NDX) Index. I have endeavored to count each market as a "five". I have tried to use "impulses" where they best seem to apply based on the rules and degree-labeling definitions. Notice how much green there is in the volume graph in 2025 & 2026.  Why didn't they like them so much in 2017 & 2018 when prices were much lower?!. They sure liked them more in 2025. As far as I can tell, one enormous difference between the NDX, SPX and DJIA is the presence of the "running wave" in the NDX in 2020. This would be an omen for "exceptional upward strength to follow". Note, too, wave (4) overlaps wave (1).

NASDAQ 100 (NDX) Index - Monthly - Five Up

And here is the boring ole' DJIA futures (YM).

Dow Industrials (YM) Futures - Monthly - Similar to NDX

The Dow, too, has the overlap. It is eerily similar to the NDX, with the exception of the absence of the running wave in 2020. Although I have tried to count impulses wherever practical, the grinding nature of the chart - especially in 2023 made it seemingly impossible without breaking 'rules' or the degree definitions. So, A-B-C or W-X-Y sequences result in the sub-waves. Keep in mind the A's and C's are still impulses or diagonals. But, there can be a "five-count", up, overall.

Again, neither of these counts are confirmed, and there IS a monthly alternate, yet - the expanding diagonal. And besides the longer term alternate, there is the local alternate of a triangle on the daily chart - as noted before - that could still point upward, but I'm not buying any hopium on that one. I'm just counting waves. Right now, all of the Minor degree waves are visible, and a partial downturn is also just showing up on the charts.

The confirmation process would only 'start' with 1) trading below the upper rising trend line, again, and 2) a break below the Minor B wave of Intermediate (5). Price is nowhere close yet. And, then, there are further confirmation steps after that.

I have intentionally tried not to rush 'any' count. I'll be as patient as the day is long. Right now these are the wave sequences that best seem to fit. That could change. But, I think it's important that readers be aware of the potential of these counts as they tend to indicate that any serious down movement could occur quite rapidly once it gets recognized and/or confirmed enough for the Smart Money to act on it.

This is the second post this weekend, and if you haven't read the first one yet, you might like to. Have an excellent rest of the weekend,

TraderJoe

The 'Exact' Number

As we were discussing on Friday, the market has not yet disproved the case for the (e) wave of a fourth wave triangle. I doubt few other analysts will tell you this, but I will provide you with the 'exact' number to disprove a different case. The ES 4-hr chart is below. 

ES Futures - 4 Hr - Exact Number

I'm showing you one upward Fibonacci ruler for a reason. But first, I want to speak about a different measurement - which readers of this blog should confirm for themselves - that's why I'm not showing it. That measurement is that the second down wave labeled, i, is just pips shorter than the first down wave labeled (i), So, by degree labeling, the second down wave could either be "c" of a-b-c down that we have showed before - because the two waves are similar in length - and this would make up the (e) wave of the triangle, Orrrrrr, the second down wave can be a sub-wave of a larger wave (iii), down, yet to follow.

What few others won't tell you - because they don't follow degree labeling to the extent they should - is that there is an exact measurement that likely voids the nested (i), (ii), i, ii down count. And very, very coincidentally, that number is ES 7,500.00 to the tee. The market stopped just short of there on Friday's up move. Why did it do that? Is it nesting for a third wave? Well, this is certainly plausible. It is not at all proven. The pattern needs downward length to activate it. It might get it. It might not. The odds in the absence of knowing what the weekend news will be are pretty close to neutral - maybe 45 : 55 upside to downside, and that slight tilt downward is largely because price is still below the 18-day SMA, with a downward swing-line indicator at the moment.

So, to make it clear, trading above 7,500.00 in the ES Sep futures likely voids the nested down count because wave ii would become longer than wave (ii) in price length and would likely run afoul of degree definitions. And, trading above 7,500 would likely put the (e) wave of the triangle back on the table at the lows.

So, with only a smaller degree a-b-c up that we labeled on Friday afternoon, how would we make a fifth wave up out the (e) wave of the triangle? It would likely have to start with a larger diagonal, and not take out the prior lows.

Alternatively, taking out the lows of Thursday/Friday in the overnight Sunday or Monday would be more indicative of the larger downward movement because that would rule out Friday's upward smaller degree a-b-c from becoming a larger diagonal.

The market is giving us some clues to work with - some crumbs to follow - as awful as the wave counting and trading currently is.

Have an excellent rest of the weekend,

TraderJoe

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