Friday, September 20, 2019

Razor's Edge

U.S. Debt Clock: $22.58 Trillion
ES Daily Candle: Lower High, Lower Low, Lower Close: Yin-Yang Candle
Market Posture: Neutral-to-negative and Probing Waves
Daily Swing Line: Neutral (Higher High, Lower Low)
Daily Bias: Up (Settle Over 18-day SMA)

Yesterday, the outlook changed to "neutral-to-negative". Today was a lower close day. We had suspected it would take another news item or tariff tweet to provide more clarity to a market count. Today that occurred when Chinese negotiators canceled a trip to the farm belt as the result of a tweet. What the day 'finally' provided was a way to legitimately count a potential triangle. Here is that potential triangle as a b wave on the ES Futures - 4 Hr chart.

ES Futures - 4 Hr - Triangle

The count reads as follows: from the second X wave of Intermediate (B), there are five-waves up in an expanding leading diagonal to a minute a wave. This is followed by a potential triangle minute b wave. IF the potential triangle is to play out, the triangle may not go lower than the ((C)) wave of the triangle. So far, it has not. However, what makes the triangle potentially legitimate is that its potential ((E)) wave has crossed back under the high of the a wave to make the triangle corrective to it.

If the triangle busts lower, then it suggests that a FLAT b wave is in the making instead, or that the market has topped. There is nothing wrong with such an alternate count. It just means a b wave wants more time. The DOW futures have, in fact, already broken this level of triangle which is what prompts an alternate (the DOW futures could still go on to make a slightly 'wider' triangle).

You'll note that some people are getting very rude about not calling every wave (as if that is even possible some times). Few have the patience for this work. Instead they say their view of a new high "must be correct" because 3,000 has held and been defended. And now? Prices closed at 2,989 today. Can they be correct (ahem 'within a range')? Sure. Still that does not at all detract from the value of wave counting. And you'll also note, they don't say "when" such a new high will occur. It certainly didn't occur today. And - anyone with just an opinion and no flexibility - might have had a nasty surprise today.

What a day like today gives the wave counter is a clear and unequivocal invalidation point for a specific pattern. That might be useful information if used properly. Still, the market is sitting on a razor's edge. It's likely that many market participants want to see the gap at the all-time-high cleaned up. So far, the market has refused to cooperate. Cool. 

So, this triangle with it's marginal new high ((D)) wave would be a "barrier" triangle. Notice that the ((D)) wave did not close above the high of the barrier. Typically, the barrier triangle has less of a 'pop' out of it than do regular triangles because the market would have spent much of its energy banging against the upper barrier. Well, that's the theory anyway. We'll see how well it works - or if we get a chance to test the theory at all.

Have a good start to the evening.
TraderJoe

Thursday, September 19, 2019

Poor Close

U.S. Debt Clock: $22.58 Trillion
ES Daily Candle: Higher High, Higher Low, Lower Close: Long Legged Doji
Market Posture: Neutral-to-negative and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

The ES futures were marginally higher overnight. We were able to count only three waves up in the futures from last night's 3 am ET low. When we started looking for the 'c' wave of a fourth wave down, the low approached 55%, of the third wave and we said that if prices went any lower it would not be good. They did go lower and unquestionably overlapped the initial wave up. By day's end, the market made a long-legged Doji after the FOMC interest rate cut, and settled for a lower close.

In the process, the S&P500 cash market did close the gap at 3,020.97, but not the one above that.

SP500 - Daily - Gap Closed

The next cash gap up is at 3,025.86, the close of the all-time-high candle. In the process, AAPL closed its downward gap, as well.  My wave-counting outlook has been changed from just "neutral" to "neutral-to-negative", as it does not appear we are impulsing up just yet (that can and might change tomorrow, but we won't predict) and nothing in my outlook is to be taken as trading or investment advice.

The Dow, cash, did not close its gap at 27,349.10 and it did not make a higher high over it's September high either today.

The short term count is muddled: there are ways to count portions of triangles, flats and or diagonals. A small further down wave here 'could be' a flat second wave, but not below yesterday's FOMC candle's low. And today "could" be counted as a Z wave failure, but again, there is insufficient downside price movement to draw that conclusion yet. The ES daily slow stochastic is still embedded as of the settlement, yet a new daily high was not made over prior September highs. That's where the neutrality comes from.

It might be that the market is waiting for Brexit, Tariff or Chinese-economic news to start something significant. As it is right now, daily closes are just riding the 5-day SMA. You might like to plot that one for yourself.

I thought it would be worthwhile to add that Microsoft announced yesterday a $40 billion stock repurchase plan (see at this LINK). That's not just change for ice-cream, Mr. Softee.

Have a good start to the evening.
TraderJoe

Wednesday, September 18, 2019

Droning On - 3

U.S. Debt Clock: $22.57 Trillion
ES Daily Candle: Higher High, Lower Low, Higher Close: Outside Day Up
Market Posture: Neutral and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

Today was FOMC day. The FED decided to cut by one-quarter point. The endless stream of "free" money (sic) continues. At one point the Dow was down -250 points. At that point we issued a comment showing the wave count downward as only (w)-(x)-(y): a complex wave - probably a minute ((b)) wave, as shown in the chart below. See yesterday's comments for more detail.

ES Futures - Hourly - Complex Minute ((b))

At that point, the market reversed, headed higher and made a very nice impulse wave upward. Here is the count on that wave on a one-minute chart.

ES Futures - 1 Minute - Impulse

Note the clear 1.618 extension within the wave, the alternation between waves two and four, with two being a zigzag and four being a flat, and, then, the near equality between wave ((5)) and wave ((1)). And this was on a (gulp) one minute chart.

The market should retrace for a second wave, and follow that through with a few further upward waves in what should the minute ((c)) wave of the Minor Z wave within Intermediate (B).

Even though the count was exactly correct at today's low, you will note how few people commented on the value of wave counting. Some want to simply show their ego and their bravado and their ability to express an opinion based on a few facts. Yippie for them.

Have a good start to your evening.
TraderJoe

Tuesday, September 17, 2019

Droning On - 2

U.S. Debt Clock: $22.57 Trillion
ES Daily Candle: Higher High, Higher Low, Higher Close: Trend Candle
Market Posture: Neutral and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

Yesterday, we had counted three waves down as c = 1.272 x a, and shown on the chart below, along with the associated overlap. Nothing has changed except the hourly chart is shown instead of the half-hourly one to be able to fit today's waves on it.

ES Futures - Hourly - Smaller Triangle (Green)

Today, we counted out in excruciating detail a smaller triangle shown as green (a) - (e), above. By the time of the futures settlement, the triangle was proven out to be correct as the green (b) wave of the smaller triangle was exceeded upward, and the c wave of an overall zigzag appears to be building.

So, now, as earlier in the day, the question we ask is, "Are we getting a larger pre-FED triangle?" Such a triangle could indeed carry into the announcement and the press conference. While we don't know, we can suspect such. Such a plausible triangle is shown starting with the larger brown (a), (b) in the chart above. Of course, such a triangle would have to form perfectly in every detail. Today's waves are part of the reason I was very conservative on yesterday's call of just a-b-c down. Could it be more? Yes, it could, but for that to occur then 2,980 must be exceeded lower, first. That's not quite the same level of where the c wave following the triangle invalidates. That would invalidate below the (e) wave of the green triangle.

It's very nice to get some clear invalidation points for a change, as it aids greatly in wave counting.

Again, the waves are very compressed. The charts are very messy. A pre-FED triangle in this location would be suggestive of another high to follow. First, let's see if such a triangle forms properly. Keep an eye on overnight developments. The FOMC announcement is tomorrow.

Have a very good start to your evening.
TraderJoe

Monday, September 16, 2019

Droning On

U.S. Debt Clock: $22.56 Trillion
ES Daily Candle: Lower High, Lower Low, Lower Close: Yin-Yang Candle
Market Posture: Neutral and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

On Friday, we said that there was a possible way to count a top, but there was insufficient length downward to do it. Today, with the price movement after the drone strike in oil territory, there was both more downward length, and an overlap as well. Here is the chart of the ES 30-minute futures.

ES Futures - 30 Minutes - Gap and Compression

As we have noted before, prices are very, very compressed. And there are waves and price highs in the futures that don't even show up in cash (invisible waves). So, we do the best we can under these circumstances. On Friday, we said we counted a diagonal down. We did. It was a "leading" diagonal and not an ending one.  At the moment, we are intentionally being conservative in wave counting, and saying that the overnight futures gap down and waves are only c = 1.272 x a. It is possible a pre-FED triangle or a downward diagonal is forming. It is also possible, this down wave is a "((b))" wave of the final Z leg of Intermediate (B), which means a "((c))" wave up could follow.

In case it was not clearly enough presented, this would be a LINK to the chart showing the triple zigzag as Intermediate (B).  Nothing says the Z wave is over yet.

Yes, it's really a messy count. That's what happens when the market is not clearly impulsing in defined  waves. We'll continue to do the best we can and remain flexible, calm and patient.

Have a good start to your evening and your week.
TraderJoe

Friday, September 13, 2019

Mama's Got a Squeeze Box

U.S. Debt Clock: $22.56 Trillion
ES Daily Candle: Higher High, Higher Low, Lower Close: Yin-Yang Candle
Market Posture: Neutral and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

The ES futures were slightly higher over-night, but did not make a new all-time high, and sold off before the open of trading, closing with a lower close. The daily slow stochastic is still embedded. In the cash market for the S&P and the Dow, the higher high was not (yet) seen. Imagine that: another invisible wave in cash. Here is the short term picture of the DOW cash on the 30-minute time-frame.

DJIA - 30 Minute - Triangle?

Clearly, the market was squeezed within a range today on the light volume. Therefore, we might expect a higher high on Monday. The Elliott Wave Oscillator is also nearing the zero line and may be indicating another fourth wave. The triangle may not be fully formed yet. There is room for some wiggle, but it is not required. Is it possible futures are making a diagonal while the cash makes only a triangle and a fifth wave? Plausible.

Below is chart showing the ES volume below price. This is what I mean by light volume. Compare today's volume bars to the previous two days.

ES Futures - 15 Minutes - With Volume

Light volume is often a sign of a triangle or diagonal until they breakout to the upside on a bevy of higher volume. Yes, there is a way to see the market as having topped today, however, there is both insufficient downside price, and insufficient downside speed to draw that conclusion. Further, a contracting diagonal in the futures was counted out live in yesterday's comment section, so it 'may' be an ending wave downward, and prior lows were not broken (see yesterday's comments if you have interest). Time will tell.

So, for now, keep in mind the FED meets next week, and have an excellent start to your evening and to your weekend.

TraderJoe

Thursday, September 12, 2019

Discount Double-Tweet

U.S. Debt Clock: $22.56 Trillion
ES Daily Candle: Higher High, Lower Low, Higher Close: Trend Candle
Market Posture: Neutral and Probing Waves
Daily Swing Line: Up (Higher Low, Higher High)
Daily Bias: Up (Settle Over 18-day SMA)

Yesterday, at the end of the day, we said we had run into "a monkey wrench" counting a fifth wave, and had our eyes on the ECB meeting results to be announced this morning. Draghi dumped a whole pile of cash into the system, with a lowering of the key rate further into negative territory, at -0.5%, and with re-implementation of QE to the tune of €20 billion per month as he retires.

U.S. stock index futures anticipated it over night, ran into the upper daily Bollinger Band, traded higher on fake tariff news, sold off on retraction of the tariff news, and then bounced around with some indexes making marginal new intraday highs - before closing off of the highs. At the end of the day, the slow stochastic of the daily ES chart (below) remained embedded. The 18-day SMA had a confirmed bull cross over the 100-day SMA.

ES Futures - Daily - Slow Stochastic Still Embedded

AAPL stock opened higher today and closed lower, after making at least part of a throw-over of it's potential diagonal trend line.

AAPL - Daily - Part of Throw-Over of Diagonal

Please remember that all potential diagonals can also be their triple zigzag counterparts (w-x-y-x-z) as three upward zigzags are clearly required in every diagonal, and, so, there is nothing that rules out AAPL as an Intermediate (B) wave higher. But, the chart is interesting, and for the diagonal (v) would need to remain shorter than (iii).

Neither the DOW nor the S&P closed their daily gaps from late July. The indexes are trying hard. For those of you who like such things, here is an exercise in Fibonacci, which I found interesting on the Dow half-hourly chart. So far, no one else I know of has mentioned it.

DJIA Cash Index - Half Hour - Two 1.618 Waves

In the chart, a wave ((v)) is very nearly 1.618 x ((iii)), and ((iii)) is almost exactly 1.618 x ((i)). And wave ((v)) is greater than wave ((iii)) which is greater than wave ((i)), and wave ((iv)) overlaps wave ((i)) and is longer than wave ((ii)) without traveling below the low of wave ((i)).

Predictable? Not so much. But, expanding is the mode the ECB went into today. Will the U.S. FED, which was the last to cut interest rates, follow suit next week? Time will tell.

Have a good start to the evening,
TraderJoe