Six Days in August

First, the long-term count consideration: regular readers of this blog have seen me repeatedly write that I have not "ruled out" the expanding diagonal interpretation of a Cycle Vth wave. That remains true: I have not ruled it out. What is new with this week in August is that such a count can now be specifically "ruled in". That does not mean it is the operative count. That means, specifically, that there is now evidence for it, as in the ES monthly chart below.

ES Futures - Monthly - Log Longer Wave Up

Notice that wave (3) on the exponential form of the chart is now "log longer" than wave (1) as shown by the Fibonacci ruler at high. This is the evidence that makes the expanding diagonal count now possible, according to the 'rules'. That is why we labeled the prior high with an alternate red (3) in Tuesday's post. Further, we don't 'know' a top is in. So, the expanding diagonal is a valid interpretation on the log scale chart. And, the question is whether the up waves better count as 'fives' or as 'threes'. According to degree labeling we get better counts with 'threes', but we can't argue with the logic that there was, indeed, a significant higher high, after wave (1) - which possibly makes it, wave one, a 'five'. We just couldn't find anything like a long-in-time fourth wave in that wave to count it as such. Readers can also verify that within red wave (3) that red wave A and red wave C are now about the same length, a truly interesting detail but not proof-positive.

Now for the local count of the six days. As shown in the S&P500 cash index below, there appears to be an impulse lower that kicks off with the third wave breaking the 'base channel' lower from the Kennedy Channeling Technique (KCT).

S&P500 Cash Index - 30 min - KCT

We showed this count before in the comments for a prior post, caught the bottom to within the half-hour, and price has since rebounded to the upper parallel channel line. Notice that wave ④ came back to the underside of the KCT which is an expectation of the technique. And wave ④ now offers also a retrace to an approximate 62% Fib level. Wave ③ occurs on a low of MACD, and wave ⑤ occurs on a divergence with MACD. So, this appears to be a textbook impulse wave. And that means it's high is very important. So far, we think there will at least be a lower low after it. But, the caveat is it is just not that long, overall, and it did not overlap anything important downward. Maybe a subsequent wave will. It just hasn't yet.

But, readers should question, why did this hourly down wave follow the KCT, but the monthly up wave does not? The market is fractal, right? Shouldn't an upward impulse follow the KCT, too? But, clearly the upward monthly wave does not. This might be a clue why the upward wave is not an impulse but a diagonal. Its grinding character might be another clue.

Two channels are shown on the monthly chart, above. The smaller blue channel are for those who might expect a grinding wave upward. The lower, larger, gray channel is for the possibility that maybe the expanding diagonal does play out. It might allow red wave (4) to overlap with red wave (1).

And what about the contracting diagonal, for the indexes? Nothing has ruled that 'out' yet. It is still a perfectly valid count. It might have some more grinding to do, but we'll have to watch it's length. As a reminder, here is that count.

ES Futures - Monthly - Contracting Diagonal

While this is the currently operative count, there are some factors that tend to rule it out. They are the higher highs in the MACD, and price exceeding 78% in the current up wave. Then, there is always the pesky fact that the S&P500  did not downwardly overlap in 2025 like the Dow and the NQ did.

But the only thing that rules it out definitively is a price high above 8,508.50 as the fifth wave in a contracting diagonal can not exceed the third wave.

So, we have learned a lot in this month of August, and we will learn more if the prior all-time high should be exceeded. That is the spot to watch.

Have an excellent rest of the weekend,

TraderJoe

Retreat towards 18-SMA

The ES daily futures lost their embedded status and price has concomitantly retreated down towards the 18-day Simple Moving Average (SMA), as per the ES futures daily chart, below.

ES Futures - Daily - Loss of Embedded Status

So far, the swing-line indicator only has a higher high and a lower low. For a trend, one would want to see lower highs and lower lows below the 18-day SMA. So, a retrace upward certainly could be expected. For this reason, and the fact, that we can count five waves down on the SPY (cash) 15-min according to The Eight-Fold-Path Method, as in the comments for the prior post, one should place a wave-counting-stop (WCS) above the prior high.

Have an excellent start to the evening,

TJ

Current Count and Alt

Here's the current situation on the SPX500 (CFD) 4-hr chart. The black diagonal count reflects the fact that there is no good divergence yet with the NYSE A/D line.

The wave up from blue (b) to blue (c) or red 4 to red 5 is an impulse in either count. This is another good illustration of how The Principle of Equivalence plays out in practice: some impulse segments can be parts of two counts.

Three key factors in either count are: 1) the current down wave has traded below the Ⓐ wave of the prior triangle, at micro degree, 2) the current down wave is longer in price than wave ii of the prior impulse, as shown, 3) while a Flat for blue wave iv is still technically possible, it looks to be much lower odds at this point because it's up wave would be longer-in-time than the prior wave iii, the previous higher degree wave in the same direction, and this would seem to be a violation of degree definitions. So watch the high of this down wave.

Have an excellent rest of the day.

TraderJoe

Werds

Some people can take up so much of your time with their shameless self-promotion, subscription fees, videos that contain advertising, or channels that provide them with clicks or likes. We decided long ago this was unacceptable. So, we'll provide the effort-saving chart, below.

It would be nice to see a few more of the items to be in evidence. That's all. Simple.

Have an excellent rest of the weekend.

TraderJoe 

Wedgie

The currently wedging and overlapping SPY (5-min) has filled its opening gap up, and filled its prior gap in the down direction, as in the chart below.

SPY (Cash) - 5 min - Wedging

The pattern needs to be watched to see if it breaks upward or downward with conviction.

Have an excellent start to the day.

TraderJoe

Threatening - But Not Yet Imminent

When looking over the Dow daily chart, there are several examples seen in the prior high on Jul 6th where one can potentially count a diagonal. However, none of those diagonals came to pass - they were not fully retraced in less 'time' than the diagonal took to form - and, in fact, there has been a higher high since. This usually happens when the potential diagonal is part of a sickening "b" wave upward. Regardless, we now know they were not diagonals. So what does this mean? Well, I think it helps to back off and look at the Dow futures daily chart, as below.

Dow Futures (YM) - Daily Close - Parallel

As the chart shows, the wave up from the April 2025 low parallels extremely well. This is supposed to mean the move is corrective, unless the price gets substantially over the upper parallel. As of this time price has not even reached the parallel. And, as the saying goes from the Elliott Wave Principle by Frost & Prechter, "A line drawn from the start of A to the end of B, with a parallel copy placed on the end of the A wave often shows the end of the C wave."

Now clearly that does not work every time. That is, in part, what the Kennedy Channeling Technique (KCT) is about: when a wave bursts through that upper parallel, that is when a third wave can often be identified.

But, here again, this is only a tendency of the KCT, too, because sometimes a C wave is 1.27 x A, or even 1.618 x A, depending on the circumstances, and then prices peek up out of the channel and then revert.

Nothing works all the time, and again, this is almost always a situation with odds. Last night I was playing tile rummy, and the first thing you do is draw tiles numbered with integers from a pool of 100 tiles. You draw twelve tiles. So, that means roughly from the pool of integers, one should expect six even and six odd tiles from a well-mixed set of tiles - which they were. What did I draw? Fully 11 odd tiles and only 1 even tile! Can you imagine the odds of that? Yet, the low odds event did occur - sure as I'm writing this.

So, even though the Dow looks like it might want to lead down first after some further potential upside - just like it did in 2000 - that does not mean it's a 'lock'. As of yet, the only alternation in the chart above can be stated as "long A, short C". One might have hoped for "Impulse A, and Diagonal C", but that is not on the board yet. It could be. So, I retain that option if things drag on & on.

In the meanwhile, just like a view of the weather radar, one has to say the potential severe storm that is several states away is "threatening, but not yet imminent". It could get rough, soon. So far, it hasn't.

Have an excellent rest of the weekend.

TraderJoe

CoD

This is a Friday morning Chart-of-the-Day (CoD), the SPX500 (CFD) 30-min intraday wave counting screen (IWCS). After a pop up on the dismal Payroll Report, with traders hoping for a rate cut, the up wave could not sustain the fourth wave of an impulse and instead lost the embedded reading of the intraday slow stochastic (black circle).

SPX500 (CFD) - 30 min - IWCS

When that occurred, price returned to the intraday 18-SMA and also overlapped the prior wave downward, with a longer wave in price than the prior down wave. Since then, price has popped again in whippy volatile trade. This seems to suggest that price will either make a triangle or a fifth wave expanding diagonal upward.

Comments for this blog remain on moderation. Have an excellent rest of the day.

TraderJoe