'Everybody' Does It !

Why violate degree-labeling definitions when you don't have to? A lot of people that have read this blog are starting to catch on to the idea of what the degree definitions really mean. But a lot of people, either have not, are skeptical, or just don't care a whit enough. So here is a real-life example of violating and not violating degree labeling definitions. And rather than examining your work, I will criticize the work of someone else that was freely published online. This example in the ORCL daily chart comes from Trader's Classroom - which is sponsored by none other than Elliott Wave International (EWI). Here is their chart, clipped from the video.

ORCL - Daily - EWI Awful Example

The first thing that should tip you off that the chart is incorrect that that brown wave (c) in the upper left, which is claimed to be a smaller degree wave, is actually larger than brown Minor 2 which is claimed to be the larger degree wave. This is what is meant by a violation of degree definitions. Note that, overall, the chart has a 'five-count' down. Now review at the following chart.

Now look at this chart starting in the upper left to the lower right. Still a five-count in which we have included the number of candles. But look at the difference in the upper left. Clearly those are very small degree (and actually small) choppy waves that make up a leading contracting diagonal as minute ⓘ. They look-like three-wave sequences, and I actually measured wave (iii) to make sure it was shorter than wave (i). It is - just - but the measurement is shown. Did they measure? I rather doubt it. Did they measure 'any' of the waves in the starting sequence. Again, I rather doubt it.

Now, look at the difference where the Minor labels 1 through 5 are placed. They have Minor 1 way up in the upper left looking very disproportional to the rest of the wave.  What evidence for that do they present? None. Absolutely none.

Now look at The Eight-Fold-Path Method. What evidence do I present for the position of Minor 1? Well, it is the first divergence in the Elliott Wave Oscillator (AO or EWO), after the first major trough.  It is an impulse of the Extended First-Wave variety, x1.

And what evidence do they present for the location of Minor 2? None. Absolutely none. But The Eight-Fold-Path Method presents the evidence of the first near-return to the zero line for the EWO (black circle on the left). So, the third wave - Minor 3 - occurs on the next trough of The Eight-Fold-Path-Method. And - look'ee there - wave 4 occurs with the EWO crossing slightly back up over the zero line without an overlap in price and all within 145 candles which is well within the recommendation of 120 - 160 candles for The Method. And now note that all of the degree labels are in the correct order from smallest to largest.

Do you see how much easier and more objective wave counting can become if the degree definitions are adhered to? Not only is the overall chart easier to label, but it is much clearer, less confusing, and provides more actual meaning to the count. What is the meaning? The meaning is that "the wave had an extended first wave". This can become critical to later portions of the count - like such a wave is often just the A wave of a further correction.

Well, kids, everyone seems to be doing this. But I am actually getting tired of seeing it. If you want to watch the Trader's Classroom episode for yourself, I'll still do EWI a solid and post it at this LINK because it was they that first taught me to count any waves at all. But why anyone would want to follow their methods with these incredibly obvious errors is beyond me. I have written to them over & over again. They have repeatedly ignored this guidance. They don't care. They are making money on subscriptions. I am not and don't wish to. I may write them a last time, but TBD. I have also warned them that such errors are likely to be encoded in their EWaves software if they don't take particular care to avoid it.

This is the second weekend post, and if you have not read the first one yet, you may wish to.

Have an excellent rest of the weekend.

TraderJoe

Interestingly Enough ...

Here are just a couple of facts to be aware of. Both the Dow Jones Transports on a weekly basis and the Semiconductor ETF on a weekly basis have just broken out to new highs as in the two-block chart below.

And even though this is the case, it is possible from an EW perspective that they count differently due to internal overlaps and prior wave structures. It is possible the semi's better represent the monthly diagonal we are likely in. The transports may be finishing a fifth wave of some type.

And while neither of the wave structures may be exactly finished yet, it is worth watching their developments from here, especially as it relates to the formation of the major averages going forward.

It is especially interesting in light of Dow Theory that the transports have made a new higher monthly high without the Dow Industrials yet.  It is also interesting that the NYSE Advance/Decline line has not yet made a new high, either.

Have an excellent rest of the weekend,

TraderJoe

To The Upper Band

On the daily chart, price on the ES futures contract went up to the upper daily Bollinger Band. We 'can' count five waves up, which may not exactly be done yet, but they could be. The daily chart of the ES futures is below. Note that this up wave exceeded a prior high in "less time" than the down wave took to form from the point shown (blue arrow to dashed line).

So, this could be minute-ⓘ of Minor C, or just minuet (i) of Minor C. Time will tell. The hourly chart is below.

It looks live five-up with an extended first wave, as we suspected. Of course, the upper band is just where Ira's method would expect profit-taking from the Smart Money.

Have an excellent start to the evening,

TraderJoe

Can It ?

In recent days, we proposed that it was possible a diagonal was forming on the daily chart, as bias had flipped to upwards, and there was a contracting sequence. That sequence is diagrammed below on the chart of the ES/SPY (CFD) in the 4-hr time frame.

Clearly, with tonight's "Pakistan Proposal Pop" entered before the 8 PM deadline, there is now a 5-3-5 sequence upward. Tonight price is still over the 18-day SMA with the bias still positive, although the daily slow stochastic has now entered the over-bought region. And this post is also being made before the 8 PM deadline.

Today in the comments for the prior post, we clearly stated to handle this up wave with care and posted an a-b-c with a strong, clear warning that the 'c' wave could morph into a wave iii given the news background. That happened and more.

Now the question is with the 5-3-5, up, will a non-overlapping fourth and fifth wave form to convert the diagonal into a full-on impulse. That, too, depends on the news, I guess. So, there is no need to get too fancy here. Again, let me be clear, depending on tonight's news, this up wave could fall apart without forming an impulse. But it could just as well add the -3-5 to make a 5-3-5-3-5 impulse.

And that's why one is patient, calm and flexible in the current environment. It is very difficult for retail to flip the switch and/or reverse as quickly as can the news-reading algorithms owned by the big players.

So, have a good evening. Let's see what happens from here.

TraderJoe

Bias Flip ?

Today the ES futures recorded a higher high, and a close over the 18-day SMA, as in the ES daily chart below. Therefore - at least temporarily - the bias has flipped to higher on the daily chart.

So, either the Minor B wave is over, or we are just getting a corrective up-leg to the diagonal-looking down trend. It is too early to tell, and the news could have a big impact on where things go. 

Price has not yet recaptured the 200-day SMA (brown rising curve) yet, but it could. I will also point out there is an open gap in the futures, shown, near the high. The daily slow stochastic has burned off its over-sold condition and is not yet in over-bought territory. The uptrend currently is sloppy, overlapping and difficult to count, but it might turn into a diagonal.

Therefore, once again, local technicals must be utilized until the count clears up a bit. However, any uptrend would invalidate below the March low, if a new all-time high is not made first. We are still patiently trying to count out the Minor B and Minor C waves of Intermediate (5) as a contracting diagonal. Nothing has ruled that out yet.

Have an excellent start to the evening,

TraderJoe

No Expectations

I have no expectations. I am open minded. In the ES (roll-over contract) 2-day line chart, below, there are other ways to draw this parallel. But this one is shown given the data available. Prices could always move lower first. I can even think of ways they can.

ES Futures (Roll Over Contract) - 2 Day - Parallel

Still, from Minor A, there is a clear three-waves down to minute ⓐ, three waves up to minute ⓑ, and arguably five waves down to minute ⓒ. And there is now upward overlap on minute ⓐ again. Further, the ⓒ wave reached a target of 1.618 x wave ⓐ, subtracted from wave ⓑ. This is shown by the Fibonacci ruler on the chart, and it is a very common flat target.

So, the instructions in The Elliott Wave Principle by Frost & Prechter are, "Draw a line from the start of A to the end of B, and place a parallel copy of the line on A to help find locations for the C wave." So that is what has been done, above.

Yes, this up movement could just be part of a second wave, but it is too early to draw that conclusion. It could also easily be a part of the Minor C wave up. Further, the decline so far has taken a Fibonacci five months (approximately from October to March, give-or-take).

So far, the B wave has only travelled 0.236 x the length of the Minor A wave. And this seems much too shallow for a true second wave. But this might fit the personality of a "B" wave in a "too-far, too fast diagonal". Look at how shallow the retraces were in the Minor A wave.

So, can new highs be made before new lows? They can. And can new lows be made before new highs? They can. Therefore, the local technicals rule until we know more. The wave counting is difficult. The trading is harder.

On the daily ES chart, price is not up over the 18-day SMA yet. So, for-the-moment, the daily bias remains down. But the daily slow stochastic is still in over-sold territory which is not supposed to attract a ton of new selling. And, as mentioned in the comments for the prior post, POTUS is speaking tonight so volatility is expected.

Further, Friday of this week, which is a holiday, the Non-Farm Payroll Report is scheduled to be released. Talk about a messy situation all the way around. Be careful. Be patient. Be flexible.

Have an excellent start to the evening,

TraderJoe

Second Close Under the Band

Overnight initially gapped lower, traded lower for a few hours, as we suspected, and then there was a gradual but steady rise into about 7 AM eastern time. This was in keeping with the guidance that initiating new naked short positions under the band is fraught with risk. The turn-around in this case was 120+ ES points. Then from 7 AM forward, after prices were back inside the band, prices declined all the way back down to the overnight low and exceeded it a bit, as shown on ES daily chart below.

ES Futures - Daily - 2nd Close Below the Lower Band

Thus, there is now a second close under the band, dropping the odds to about 4 - 6% of the next close being outside of the band (not impossible, just lower odds). The regular calculation of the daily slow stochastic is still over-sold only and not yet embedded.

From an Elliott Wave perspective today appears to be some or all of a fourth wave. I lean more towards some because of the brevity of the wave, so far. Fourth waves tend to be malingerers. This one isn't yet.

Have an excellent start to the evening,

TraderJoe