fire danger? !

When you see this sign in the woods, it's not a good idea to light new campfires. A similar situation exists now on the ES 4-hr futures. Yesterday we suggested counting upwards, and we did that today. The market went a bit higher and hit ES 7,200. But our equivalent count on this contract indicates that with 110 candles on the chart, The Eight-Fold-Path Method suggests a five-count is best on this wave largely in a channel.

The wave includes a completely acceptable fourth wave retrace in this timeframe that we called the end of.

Yes, there can be more upside. The (v)th up wave could become as long as wave (iii) since the first wave is the extended wave in the sequence. Maybe the wave goes on into Monday or Tuesday, pending news. But when the wave turns down, there could be a steep correction, and possibly, but not certainly, a complete retrace depending on whether the degree labels are the correct size. In other words, this wave could be all of Minor C, or it could just be minute ⓘ of Minor C. It's a very difficult call, but I've gone with the most conservative view until we know more. Either way the risks are pretty high.

Just thought I'd share the count. Have an excellent start to the evening and the weekend.

TraderJoe

Possible Set Up for v of (c).

Today's wave structure was difficult unless you were possibly expecting a crazy (meaning multiple segment) fourth wave. These can sometimes happen in the market. Those of you that followed the market intraday know that a bout of selling hit that drove the market to a small outside reversal day down. Readers of this blog should confirm that on the ES daily chart. The SPY cash market got to within -0.03 of a new high, shown below, but couldn't do it today. At 712.35 the SPY could not get over the prior high of 712.38 and then headed lower in five waves. So, the ivth wave looks to be a compound flat. That's fine, nothing wrong with it at these length dimensions. The reason we think it's a Flat is that the highs are well within the 90% level of the prior highs required by the 'rule' for a flat wave.

Then, after the decline on the SPY 10-min chart, there was a quick retrace followed by sideways action as shown above. So, until we know more, this can be a setup for a vth wave higher in the minuet (c) wave of Minute ⓘ. I would watch something like the parallel shown - which should be adjusted when the second wave, ②, is known. Then a third wave of v might take us over the prior high.

As far as I can tell, today's low should hold or the downward wave would likely overlap and cause complications to have to deal with. So far, it hasn't but it is marked as invalidation for that reason.

If the vth wave can hold its length dimensions, then it might be possible to call minuet (c) and minute ⓘ done and over. If not, we'll look to the alternate impulse count of Minor C, not the diagonal count.

The trading is whippy and choppy and still calling for much patience and flexibility. For example, anyone that thought we were going directly over the high today had a big surprise handed to them until about 14:00 hrs. That shouldn't be us. We know the character of fourth waves to be 1) complicated, 2) mis-leading, and 3) do everything but overlap their prior first waves. It certainly feels like that is the wave personality we are dealing with. So, take it slow & comfortable. The market will let you know.

Have an excellent rest of the evening.

TraderJoe

Bias Still Up

Today in the ES futures was another inside day, still with the price bias up and the close over the 18-day SMA. The day opened on a gap up, chopped around for much of the day, tried to head higher towards the futures close but could not yet break out of the prior range. The daily chart is below.

ES Futures - Daily - Bias Up

The daily slow stochastic is still embedded over the 80 level, and until its red line closes back under 79 it remains embedded.

The wave count remains intact, so far - as per the prior post. One can see that the nearby up (green) fractal might be the first to break higher. One can also see just how far back the market has placed the prior down (red) fractal - all the way back at the 200-day SMA.

The market feels somewhat shredded by or similarly ruled by the news cycle but so be it. Those are the market conditions at the moment, and they are what they are.

Have a good start to the evening,

TraderJoe

Still No Overlaps

Here is the ES futures 4-hr channel count & the alternate count (in red) to follow The Principle of Equivalence. There are still no good overlaps to play off of. There are, as yet, no sizeable downward waves, and there are not really very good signal bars at the high, yet. The count does its best to follow degree labeling definitions. It may be there was extreme alternation in ii vs iv, with iv being a triangle in wave (a)/(i) instead of a diagonal.

ES Futures - 4 Hr - Price in a Channel

I lean towards the blue count as equality has not necessarily yet been reached in the up wave. Further, the $NYAD (NYSE Advance/Decline Line) made another new high today. That needs to be different if any bear market is to begin. I did not fight that signal in the last wave, and I'm not fighting it now. Price is still in a channel, so the up wave looks corrective at this time. That could change, but it hasn't yet.

While the bull/bear survey sentiment data has not gone wildly higher, the Equity Put-Call Options ($CPCE) indicator dropped to 0.41, the lowest for the year and tying the lowest for several years. The five-day moving average is also at a new low for the year. So, this indicator is definitely in the Speculative Zone as a contrary indicator.

Weekly and daily, the ES has hit the upper Bollinger Bands. This is a place where Ira's trading guidance suggests the Smart Money may take at least some profits off the table. So, some stiff pull-backs might be expected soon. Further, the news background remains volatile until more information is obtained. The presence of an inordinate number of gaps in this wave up on the cash charts also give rise to caution and the need for patience and flexibility.

Have an excellent rest of the weekend,

TraderJoe

Reminder: The Principle of Equivalence

This is just a reminder that The Principle of Equivalence suggests that there are two common forms of wave shape that a Minor C wave could take, as diagrammed below. First, Minor C could be a contracting diagonal unto itself as shown on the left.

Minor C Wave - Two Forms

Second, is an impulse C wave with a fifth wave diagonal - as shown on the right. Either of these would work, although the first one might have better alternation with the Minor A wave overall which appeared to be a non-overlapping impulse.

There is, of course, a third much more rare form of an overall expanding diagonal for this wave. But, as of this time there just isn't much evidence for that count. And - because it is more rare - it will be dealt with later, if needed.

With that in mind, The Principle of Equivalence also says that - without any current overlaps to work with - we must also consider these two counts on the four-hour chart on the way up.

Again, we have no overlaps to work off of, yet, and I am following degree labeling here as best as possible.

Have an excellent rest of the day.

TraderJoe

'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