Down Day on Heavier Volume

While we had to observe the overnight action last night (see yesterday's blog post), somehow, almost as if it were ordained, futures prices held the high, punched through the 18-day SMA lower mid-day, and then made lower lows. In the process the possibility for an expanding leading diagonal lower was not invalidated in the overnight in the cash market.

First here is a look at the ES daily futures chart.

ES Daily Futures - Outside Reversal Candle Lower

The futures today had made an outside day down which actually took out the low of yesterday's outside day up. In the process, the daily futures today bent the lower Bollinger Band downward, and overlapped the high of the candle on May 16. They found some support there, and then retraced back to the lower Bollinger Band, closing just a whisker below it. In doing so, price closed below the 18-day SMA, and, therefore, has a negative bias again. It's possible the 100-day SMA (dotted green line) could be the next target.

In terms of the SP500 2-Hr Chart, the topping process was as confusing at it could get. There are two ways to count a top. There first way is with the triangle B wave count we showed you in the Thrust from Triangle Count we showed you at the post in this LINK. In this case, the B wave of the triangle has been exceeded lower, and  the A wave now clearly overlapped.

The second way is with the diagonal with the truncation, as below.

SP500 2-HR Chart - Diagonal with Failed wave ((v)) - Truncation

In this count, price was clearly turned back today by the lower up trend line shown, and this scenario may make more sense. Here the A wave has been overlapped, so far, but the B wave has not yet been exceeded lower which would help prove a diagonal. (The futures 'daily nearest' contract did take out the B wave low.)

In any event, we said some of the gaps lower could be filled, and today, in one day, yesterday's opening gap, now shown in black, was closed, as was the June 1, opening gap up, also now shown with a black circle.

There has, in all honestly been a lot of discussion in the live chat room as to whether to count the downward wave as an impulse or an expanding diagonal. That's fine. We are sure the situation will clear up quickly in a manner we can understand. While the diagonal may have held on the cash chart, it didn't in the futures. And, today's down move was so swift as to make one question the slower jerky moves inside a diagonal. This latter fact would more support an impulse lower.

Volume today on the futures was a bit heavier. So, not everyone left for vacation yet.  Since today was an outside reversal candle lower, then the high should not be exceeded within 48 hrs. or it would be considered a trap for the bears - just as, since yesterday's low of an outside day up was exceeded within 48 hrs., it constituted a trap for the bulls.

As for me, it's time to start thinking about family fun on the Fourth, anyway.

Hope you do, too!
TraderJoe

Have to Wait and Observe

By the close of cash trading, nothing had been done to invalidate the possibility of an expanding diagonal first wave lower. In such a diagonal, the fourth sub-wave is now both longer than the second sub-wave, and it takes more time than the second sub-wave. Both of those were as expected.

The reason for the concern comes from the futures market. The futures opened lower and put in an outside reversal candle, up. The futures likely made the lower low because of overseas trading, but it did not carry through to the cash market, and so at the open, the cash diagonal pattern, lower, was still holding. In fact, the futures behaved right until the close, and then moved higher after the settle. Here is the futures chart.

ES Daily Futures Outside Range Candle Up

The futures took out their Jun 9 low today (which may have been related to contract rollover), and have closed over the 18-day SMA. (Crude Oil and the NQ futures closed right on or just below their 18-day SMA's, as an aside). Cash, as of today, hasn't taken out those Jun 9 lows.

This leaves the chart with "no trend", as it has higher highs but lower lows. And the negative bias on the chart yesterday changed to a "positive bias" today, with price back over the 18-day SMA. We cautioned yesterday that "extreme care" should be taken in the down count because there were only three waves down. This is why. There would be more confidence in a downward count if price stopped below the 18-day SMA, but it did not.

For the time, this leaves us cautiously, observing the market. Just like the cash chart righted itself this morning, perhaps it will do it again tomorrow morning. But, there are no guarantees of that. This is light volume summer trading, and messy counts are very possible.

Take it slowly, let's see where the cash market opens tomorrow. After all, it's summer! Enjoy it.
TraderJoe

Correction Likely Begins

Yesterday we provided two very clear scenarios for how this up wave could end. The first scenario we showed you was the alternate count (until yesterday), and it was the (b) wave truncation count. The truncation occurred only in the last wave of a contracting ending diagonal, and only after that wave had retraced more than 78.6% of it's preceding wave - as we noted. We'll again show that chart in a minute.

The main count - which we said depended on a gap up today - was put on the scrap heap in the live chat room as the market opened with a gap lower today. In terms of wave counting - we counted with the main trend of the market until we could no longer. That's the way it's supposed to be done. After today's gap lower, the market retraced the gap completely, at noon, and then headed lower again. They loved 'em for lunch, but got heart burn with 'em by dinner!

Prices traded lower enough in two days to take out wave ((iv)) of the diagonal, lower, and, yet, the diagonal required almost a month of trading days to build! We have quite a lot of time left to prove out an ending diagonal. Remember, if a contracting diagonal is valid as an ending diagonal, then price should entirely retrace the diagonal - down to beyond the blue B wave in this case - in less time than it took the diagonal to build. Today saw more than a 61.8% retrace on that wave B already. We'll keep you updated on the status.

SP500 2-HR Chart : Diagonal with Truncation Ends the (b) Wave

We think this count is correct because of how many times price hit or closed on those diagonal trend lines, and the fact that the last wave ended as a three-wave sequence and took less-time than it's third wave, wave ((iii)). All of the time and price relationships are correct. Wave (v) is shorter than and took less time than wave ((iii)) which is shorter than and took less time than wave ((i)). Similarly, wave ((iv) is shorter than and took less time than wave ((ii)), and overlapped wave ((i)).

Again, we cautioned for days about the fact that downward gaps could fill. There are several prominent ones remaining - shown with red circles. Clearly, I am not neutral in price stance at the moment. I am counting waves to the down side with a target of the lower parallel trend line on the weekly charts. First target is 2317 (futures), and  the second target is 2262 (futures). In no way is this to be taken as trading or investment advice. There will be lots of backing and filling as any down trend progresses, and you and you alone are in charge of your investment decisions. I am only expressing my opinion of where I think the market is headed.

Whatever you do, please be very careful, as there are already ways to count the down move either as an impulse or as an expanding diagonal. One thing we know for sure from the live chat room is we do have three waves down at this point, and the third wave is slightly longer than 1.618 x the first. The exact count will depend on whether price gaps lower or higher tomorrow, and / or whether there is any eventual overlap on the first wave down. The first three waves down so far are 2437, 2443, 2419. We do not know that the third wave is over, but since 1.618 has been exceeded to some degree, this could signal there are more down waves ahead.

Have a very good evening. We hope we have been some help in identifying this very precocious apparent topping structure.
TraderJoe

Diagonal Proven - Invalidation Removed

SP500 prices gapped higher, again, as expected from our diagonal count. They traded as high as 2450. Then, they traded lower to fill the gap, and again made a 78.6% retracement wave, lower, before recovering to change up less than even one full point. No doubt, if people aren't scratching their heads at this point, they should be!

Meanwhile, we have continued to point out the lack of momentum in this up wave. It's frustrating for both bulls and bears, which is why I remain neutral and just counting waves at the moment.

That price traded up to the 2450 level is critical. That is the 78.6% retracement level on the prior down wave, or from ((iii)) to ((iv)) on the chart below, where a truncation may be claimed to occur (ala Glen Neely, from Mastering Elliott Wave). So today, we now remove the former labels showing Triangle / Diagonal Invalidation because it is now possible to state that a diagonal may have completed with proper form today. I want to clearly caution that this is the alternate count at the moment.

SP500 2-HR Chart : Possibly Completed Diagonal ALTERNATE Count

The main count still sees that in the last wave, which is now (c) of ((v)) of C, that today's up wave was just wave i of (c), as in the chart of the main count, below.

SP500 2-HR Chart : Diagonal As Yet Incomplete

So, if there is not a gap up tomorrow for wave iii of (c), as shown above, then one has to get concerned as to whether a turn-around is happening or not. I have shown two levels on the chart, that the reader may wish to note.

As you may know from dealing with contracting diagonals, wave ((v)) should not become longer than wave ((iii)). That means that the diagonal count would invalidate above 2466.50, and some other count would apply. (I can see one other possibility, but I will only show that count should it become applicable.). 

For now, the thing for me to look for is to see if we can get that sometimes characteristic "throw-over" of the upper trend line, and then a rapid price decline following it, which allows all to agree there was a diagonal wave. Time will tell.

For now, have an excellent start to your evening.
TraderJoe

Some Volume Divergence

Often in the past, at appropriate times, we have showed charts of the Dow Jones Industrial Average and / or the S&P500 Index, and compared them to the Chaikin Money Flow or to On Balance Volume.

Today, we will do the same, below, for the Dow.

Dow Jones Industrial Average Daily versus On-Balance Volume

The purpose of this chart is two-fold. First, the brown dotted line at the top of the price chart shows higher price highs in the Dow. Meanwhile, the brown dotted line in the bottom indicator panel shows how on-balance volume has not kept up with the price rise and diverges from it. There is also a recent break of the higher highs and higher lows pattern on this indicator.

A similar pattern exists on the S&P500 Index. And the Chaikin Money Flow (or CMF) indicator also currently diverges for both indexes. Apparently, this rise in price is not being well-supported by volume.

Second, the Fibonacci ruler shows - that on the Dow at least - a (b) wave in this location would be cresting very near the 1.382 exterior retracement of it's (a) wave. The weekly Dow candle pattern is that of a "spinning top", but a weekly lower close candle would be required to confirm it, and that is not in evidence yet.

For these reasons (that the Dow may have topped, and it and other indexes may yet swing upward next week), I currently have only a neutral opinion of the market, and am only counting waves until it appears that a 'top is in'. Remember, if we are making the (b) wave of a flat at this level, then the (b) wave itself was a flat wave because of the slightly lower low in April.

Nothing in this update is to be taken as trading or investment advice. Your decisions are your own.

Have an excellent weekend!
TraderJoe

Still in Line

In a bit of a testy session, the S&P500 opened slightly higher again, then traded lower, but did not make new daily lows beyond the prior (c) wave of ((iv)). Then, prices traded higher in a tricky five-wave impulse, then they traded lower in a three-wave decline. So we have given today's labels (a), up, and (b), down of the potential wave ((v)) of wave C.

SP500 2-Hr Chart Close on the Trend line

Today's erratic, low volume price movement closed right on the lower red-dotted trend line - as best we can draw it. So the market seems to know it is there. (And the ES daily futures again are settling right on the 18-day SMA).

First, here is a chart showing how this market was counted today in the real time chat room from the prior wave ((iv)), which is shown as 0 on this very short term three-minute chart.

SP500 Cash 3-Minute Chart

As best we could tell using the Elliott Wave Oscillator, and the Eight-Fold Path Method, there were five-waves up. Because of how sloppy and lazy they are, they could very well be that next (a) wave up. Then, there were three clear waves down to just short of the 78.6% Fibonacci retracement level. This is often (b) wave territory.

Then, there were five clear waves up to end the day before a slight pull-back. This could be wave i of (c). In order for this diagonal to hold, then this morning's lows should hold. And that raises the invalidation level to 2431 (in cash).

Next, we want to comment that the Dow has some downward overlaps. It also twice traded today below that 21,374 level which is the C = 1.618 x A extension level we have written about before and which appears in the prior YouTube video. Because the Dow now can be counted as having a small degree five wave down count, I do not know whether it will make a new high or not. It could, but it does not have to.

Once again, even wave (c) and wave ((v)) of C in the above S&P500 2-hr chart, are not obligated to make a new high. They could, but, remember, in dealing with a flaky (b) wave, truncation is possible!

Well. That's it for me today. Have a nice start to the weekend!
TraderJoe

One Chance

The S&P500 first had another small gap up this morning - which filled - traded slightly lower and then started making higher highs which were not matched by the Dow Jones Industrials. Then, in the mid-afternoon, when the President said he did not tape former FBI Director James Comey, and the text of the health bill in the Senate was released, the market started trading lower, and almost broke the current wave ((iv)) lows, but not quite.

SP500 2-Hr Chart - Higher then Lower Today

This 'can' be (a), up, and (b) down within ((v)) - as the primary count. But then the lows must hold, and they are at high risk of breaking.  The alternate would be that the current location of ((iv)) is just (a) of ((iv)), and today was (b) of ((iv)). If so, then in no case could a (c) wave of ((iv)), lower, break the 2425 level lower because wave ((iv)) of the diagonal would become longer than wave ((ii)) and that is not allowed in a contracting diagonal.

If 2025 is exceeded lower, the number of upward options begins to narrow dramatically, but I will only discuss that should it occur. Regardless, it should be clear that momentum is being literally sucked out of this market, and volumes are already running "summer light". There is uncertainty in whether the market has already topped (it would be in the thrust out of the triangle shown in earlier posts). Therefore, I remain neutral and just counting waves until we see what formation and measurements occur.

The NQ futures traded above their daily 18-day SMA or "line in the sand", but closed below that level. So, their bias is currently still down. And, the Dow Transports have still not confirmed the latest all time higher highs in the Industrial Average.

Cheers! And have a good evening.
TraderJoe

Overlap and Gap Fills

Over the last several days, I have been "neutral" and just counting waves. Today, a good example of why, opened with a tiny gap up that was quickly filled when the API petroleum report came out and Crude Oil sank again. After the opening gap filled, the downward waves were sufficient to fill the gaps shown with the black circles in the chart below. Crude Oil got as low at $42.05 before ticking up towards the end of the day.

SP500 2-Hr Chart Potential Diagonal

We had warned to start being on the look out for the gap fills. Today's downward wave slightly extended the length of wave ((iv)) of the diagonal, and clearly overlapped the prior wave (a) wave up, just like we indicated the futures had the previous day.

So, today, we slightly modified the trend line up from the lows, and it now intersects wave ((ii)) and wave ((iv)) very well. Wave ((iv)) played with this trend line all day, falsely breaking it lower, then recapturing it by the close.

If the diagonal is to complete properly, then we should see three clear waves up as (a), (b), (c)  to make wave ((v)) of C - possibly where (b) is a triangle. Since wave ((iv)) has a slight throw-under of the trend line, this often gives the fifth wave a sufficient sling-shot action to slightly get it over the upper trend line. But, again, we want to emphasize, that since this is overall a very flaky (b) wave, it is not even necessary to make a higher high. The fifth wave of an ending diagonal is allowed to fail. Just keep in mind it is 'more usual' for there to be a throw-over of the upper trend line on somewhat increased volume.

By way of invalidation, we have still indicated the prior B wave as that location. However, wave ((iv)), down, may not go below 2425 and maintain the contracting diagonal shape, and that is because wave ((iv)) would become longer than wave ((ii)) - which is not allowed, by rule, in a contracting diagonal. So, technically that is new invalidation for a diagonal pattern.

If a diagonal should not complete with good form, we would then have to suggest the pattern ended at the location shown as ((iii)) with a slightly modified count. We remain open and flexible at this point in time.

And we hope you have a good start to your evening.
TraderJoe

Downward Wave Began - And More

Per the S&P500 Cash Chart below, and yesterday's blog post, we were expecting a fourth wave down ((iv)) today. We got that, and a tad more. Here is the S&P500 Index 2-Hr cash chart with the triangle count. The same one we showed yesterday.

SP500 2-Hr Chart : Triangle Count

By a hair's whisker wave ((iv)) down today did not overlap wave ((i)) down in the cash market within this C wave upward. So, this count is still valid, and with some heavy lifting tomorrow, it is possible to complete a wave ((v)), upward either as a higher high, or as a truncated top.

But, the same is not true in the ES E-Mini S&P futures. Today, a wave ((iv)) did overlap a wave ((i)) up. So, whether we want to or not, that forces us to ask what might be going on. You'll notice that all along, we've been showing in bold brown letters Triangle / Diagonal Invalidation on the chart.

So, given that the futures have downward overlap in the last wave, already, while the cash does not, and given that we have two marginal higher highs, we must also consider our diagonal variety count of a top. It would look like this.

SP500 Cash 2-Hr Chart : Diagonal Alternate

Such a diagonal would really put a lid on things, and is a completely acceptable way to the end the (b) wave up. And we want to indicate, there was enough damage done to the market internals today that wave ((v)) in such a diagonal could easily truncate. But, as usual it does not have to.

This is once again a time for patience and flexibility, not ego or emotion. Let's let the market suggest what it is doing in the short term here. It seems to us that either way, the pattern is about to become very clear.

By, the way, within the triangle count, there is no way that a ((v)) = ((i)) wave will now get prices over the top. It would take a ((v)) = 0.618 x net of [((i)) through ((iii))].

In any event, we can see two sides to this same coin. Again, we are not bullish here - just neutral and counting waves until the situation clears.

I hope you have a good start to your evening.
TraderJoe

Thrust From Triangle

Based on the intraday counting I did in the live chat room today, today looks like the very typical thrust from a triangle.

SP500 2-Hr Chart : Thrust from Triangle

That was anticipated, and, today, I also added some of the more significant gaps (in red circles) that could fill should there be a turn-around. The count at the present time allows for a wave four ((iv)) and then a wave ((v)) higher. That would finish this (b) wave up in the S&P500 with a structure - a triangle - which is common before the last wave in a sequence. And, while wave ((v)) of C can certainly make a higher high, it does not have to. It could truncate.

Although today was a nice pop higher, I remain completely neutral and am primarily "counting waves" until a top is in. Folks, I know some people are already counting the end of the bull market. And while I do expect a significant correction shortly, what did we just have? We had a "running triangle", didn't we? With a higher ((b)) wave, right? The problem for the outright bears is that a "running triangle" usually points to higher prices overall in the market. And, given the recent highs in the advance-decline line, it is more likely pointing to the overall diagonal scenario we suggested in the YouTube video: there is higher to go, but it will be a fight for marginal highs.

Today, the ES touched the upper Bollinger Band, but on a divergence from the slow stochastic. It is possible that tomorrow will exceed the band higher, and lead to a "turn-around Tuesday".

Daily ES E-Mini S&P500 Futures Touch Upper Bollinger Band

No one can say for sure, but it certainly a good possibility given the count as we show it.

Have nice night!
TraderJoe

The U.S. Dollar Index

I wanted to take a few moments to review the Elliott Wave count on the U.S. Dollar Index, and, using The Eight Fold Path methodology show you where there may be a 'trap' that others may not suspect. First, I want to show you what 'timing' says might not be a correct count. What Elliottician shows you incorrect counts?!! Then, we'll review with you the why's and wherefore's.

Monthly U.S. Dollar Index Futures

Yes, like many Elliott analysts you will note that prices are in a channel, and the latest large upward wave numbered 1 - through - 5 has stopped precisely at the 1.618 Fibonacci level. But, if your Elliott analyst has labeled the U.S. Dollar Index in this way, there are a few things they may be missing.

First, notice that there are only 110 candles in this entire up wave. Next, notice that the Elliott Wave Oscillator is not yet even within +10% of the zero line - where it might be for a fourth wave. It's getting there, but it is not there yet. Now notice that the movement from 5, at the top, is still quite choppy. If wave 5 were the Intermediate (C) wave of an up movement that is now completed, shouldn't dollar prices be absolutely crashing quickly? But, in the choppiness, they haven't even gotten below minor 4, yet, in the span of several months.

Now here is a first critical point. Do you notice that wave 2 is a FLAT wave, with a higher ((b)) wave, and, as shown, this wave, wave 4 would also be a FLAT, because the first wave down is a three-wave sequence, and then there is at least a 90% retrace on the downward wave. There is no alternation in this impulse wave, as this wave is constructed.

Then, here is a second critical point. How long in time is wave 4 compared to wave 2? Why, it is shorter isn't it? Is that the usual situation in Elliott Wave work? No, usually, most-often, wave 4's are longer in time than their wave 2's. One of the biggest errors many beginning wave analysts make is not giving their wave four's enough time to complete.

________________________________________________________________________________

So, we don't know for sure, but what if wave 4 is just taking more time. Since, there hasn't been a complete crash of  the U.S. Dollar, yet, could the pundits calling for that crash be incorrect? Here is a chart, with wave 1 they way we called it for you on YouTube, as a leading contracting diagonal, and this makes even a longer wave 2, in time! Yikes!

Monthly U.S. Dollar Index with Better Alternation in the Impulse

At this point, a running triangle is the only way I could see to provide alternation for the flat second wave. A triangle in wave 4 always provides alternation for any wave 2 structure (and that's why wave 2 can never be a triangle in it's entirety). And, a triangle is the only way I can see to make wave 4 longer in time than wave 2. This might also provide the opportunity for the Elliott Wave Oscillator to bob and weave around the zero line a bit.

Of course, the larger significance of this is, if wave 5 is effectively able to break the 1.618 Fib ratio, then a full-on upward impulse in the Dollar might be possible. People opposed to this line of logic can have a point. There could just be from 2008, an (A), (B), (C) upward wave in which the (C) wave doesn't follow The Eight Fold Path Methodology - because, well, it is part of a corrective wave, and not part of an impulse wave.

To that line of thinking I would just add one item, although there are ways in the first chart to force a five count up for wave 5 - it does have a very "three-wave" look to it, and might still be part of a triangle. In any event, there still has been no downward overlap on the upward wave in 2009, and so we must be patient until the situation clarifies a bit. And clearly, this being a monthly chart, it could indeed take months.

But, along the same line, if the dollar bears don't quickly begin to see the downside they are expecting, they might just like to consider the line of reasoning above. Clearly, the Dollar had the ability to make big impulsive bars upward in 2008. Why not (so far) impulse downward in 2017?

And, we too, will also consider that any downward overlap for the U.S. Dollar Index on the 2009 levels would likely spell the end of the dollar boom.

Have a good weekend.
TraderJoe

No Change to Short Term

The S&P500 Index 2-Hr Chart below is unchanged from that we showed you yesterday. There is still a potential of a triangle to help finish the upward wave in this index. Remember: if a triangle forms it often precedes the last wave in a sequence.

SP500 Cash 2-Hr Chart Potential Triangle already Validated

In very slow and quiet trading, the S&P 500 Index closed up by 0.69 at the end of the day, and the Dow was up +24.38, almost to a new all-time high. It is possible to count the waves since ((e)) and B as a 1, up, 2, down. But, we simply will not be able to substantiate that until there is a higher high wave -- we don't quite have that yet. And neither has Thursday's gap filled either. Still, the now slower trading may be indicative of a triangle.

The ES daily futures again closed above their 18-day SMA, and still have a positive bias, although the daily slow stochastic again closed under the 80 mark. So, something is going on, and it may be a sign of internal weakness. The invalidation level remain the same.

The Dow still remains well within the parameters of an expanding ending diagonal, and, as we noted the fifth waves can get quite aggressive - hence the near new all-time-highs again today.

GOLD has closed for the second day now under the parallel trend channel, we showed in a previous post (LINK) and has two full daily candles sticks underneath that channel, with gaps on the way down. It may be more clearly defining the C wave down.

Well, that's enough for today. Have a good start to the weekend!
TraderJoe

GAP down then higher

The Dow and the S&P500 both gapped down strongly at the open, and then ground higher for the remainder of the day. Because of the level where the gap stopped, from a measurement perspective yesterday's potential ending diagonal for the S&P500 did not invalidate. That count is still on the table as a way to gracefully count the end of the (b) wave higher in that index.

But, also because of exactly where that measurement stopped, we were also able to validate that another alternate for the S&P500 Index is now this triangle - also shown on the SP500 2 Hr Chart which was also published in the live chat room.

SP500 2 Hr Chart - B Wave Triangle Alternate

Because the ((e)) wave down overlapped the A wave, the potential triangle has the right requirements to follow the rules for a running triangle. And, at the end of the day, price just barely latched back on to the lower channel boundary. Interesting, is it not?

Today's down gap was not filled, yet, on either the Dow or the S&P. If it is, it would lend more weight to a potential triangle, but, still the potential triangle must prove itself by getting up over the ((d)) wave - and that still leaves open the possibility of yesterday's contracting diagonal, as well. Just tilt the upper green dotted trend line higher instead of lower.

We don't know if a slight higher high will be made. We can just see the potential for how it could, in two different ways. We can also see the possibility of a truncation, where shown, but not the reality of it yet. The blue B wave would be where the green ((c)) wave is now in that case.

In terms of invalidation, any movement below wave ((a)) would invalidate both the triangle and diagonal possibilities. The third and last possibility would be that if the ((a)) wave is violated that somehow the blue B wave would become a flat wave to extend the correction on A in time. But, there is no evidence for that, yet. So, it is only worth noting at the present time.

Because of making the C = 1.618 x A Fibonacci ratio as we pointed out yesterday, I am not bullish. Right now I am neutral and just counting waves to see if this overall (b) wave, up, can come to a nice clean end. Maybe yes. Maybe no.

And since there is the potential of a triangle or a diagonal involved, and thus far, has been little follow through except from the NQ's (see daily chart below), the market must set the tone. Not me. I just try to count what I see according to the rules and guidelines as I understand them.

Daily NQ (NASDAQ 100) September Futures

Today, the NQ's hit the lower Bollinger Band, and then rebounded off it quite strongly. This tends to emphasize one of Ira Epstein's key guidelines for trading, that "one does not sell new against a lower Bollinger Band, because that is where the Smart Money is likely taking some profits on their short positions". And that is because the probability of being outside the bands on any one day - on the down side in this case - is only about 5% of the time. I only am again paraphrasing Ira's guidelines as I do not offer trading or investment advice.

The NQ price is still below the 18-day SMA so the bias is still down. That is not the case with the ES, so there is a bit of a mixed picture still at this juncture.

Bottom line is: (b), up, is done, or has just a bit farther to go. Have a nice evening.
TraderJoe

DOW New High - 2

Today, being FED day, the powers that be raised interest rates again, and began to tell us detailed plans for balance sheet run-off - all dependent on incoming economic data, of course. The Dow Jones Industrial Average made two new higher highs today and closed at 21,374. Where have you heard that number before? Well, it's the projection of C = 1.618 x A that appears in my February 26, 2017 YouTube video on a plausible Dow count that incorporates the fact that the NYSE advance / decline line was recently still at an all-time high. See the second chart below for an update.

Yesterday, we showed you a potential ending expanding diagonal on the Dow. The measurements there have already provided that an ending pattern is possible: the dreaded megaphone measures precisely in every detail following the standard rules and guidelines of Elliott Wave. Yesterday, we stated during live chat, "watch out here because these can get quite aggressive to the upside". And what do we have today? Higher highs on the Dow.

And, how about that S&P500 cash index? Whoops. The devil you say? No higher high today? Well, we showed you a possible ending pattern on the S&P500 2-hr chart, yesterday, and it appears to be getting better defined today. Here is the chart updated from yesterday.

SP500 2-Hr Chart : Potential Contracting Diagonal

Yes, price is still in the channel, but it is trading in the lower half of the channel. That is a signal that prices have currently lost some momentum, and a diagonal may be forming in this index.

Because the exact Fibonacci level has been hit today, it is important to show you the continuing count on the longer term Dow to this point in time, using the two-day chart.

DJIA 2-Day Chart with C = 1.618 x A

I know a lot of people are getting hyper about the length of the (b) wave in the S&P500 Index. One has to remember that index has a lot of representation from the once high-flying NASDAQ 100 stocks. (I say once because today the NQ could not even trade above it's 18-day SMA). Yet, the (b) wave absolutely does not look out of proportion on the Dow.

I reserve the right to say two things. First, the (b) wave up may not be over yet. We know that because there is nothing that says the Dow has already completed it's expanding diagonal. And there is nothing to say the S&P500 Index has completed a diagonal at all.

But, wherever this upward wave ends, I also reserve the right to say that Minor C of Intermediate (1) has ended here (as an alternate) in a wave that simply did not follow The Eight Fold Path Method upward. This would be exactly the same count as in the weekend video on YouTube.

But, it would be best if minute wave ((iv)), circle-iv, ended back on the lower channel line, in the area of prior minuet wave (iv) in terms of following The Eight Fold Path Method. So we will allow for that - especially since the waves would have a better look.

From the perspective of The Eight Fold Path, we have wave (iii) of minute ((iii)) on the peak of the Elliott Wave Oscillator, and wave (v) of minute ((iii)) on a divergence. We also have minuet wave (a) down on a wave in which the EWO goes below the zero line, and this would place wave minuet (b), up, on a divergence.

We'll see how this goes, and whether the Dow wishes to attain the lower channel line. Regardless, now is the time to remain alert and flexible. It is certainly possible that a gap up could help make the blue C wave shown on the S&P500 chart, and help make wave (3) have that higher high needed for a diagonal. Please note the labels on the S&P chart are for ease of illustration only. The Dow chart has the correct degree labels.

Have a good evening.
TraderJoe

DOW new High

In the Friday, June 9, post we wrote, "Therefore, it is likely that the top is in for the Dow, too, but, as good Elliott analysts, we must allow that if the Dow want to clean up the count a bit, it could make another marginal new high - as an alternate - and form a nicer looking expanding diagonal wave upward from the wave 4 indicated. It could do this but certainly doesn't have to, and this option is not available in the S&P500."

The Dow carried on to fulfill that new high today. Below is the chart of the Dow, as we posted it in the live chat room earlier today.

DJIA 15-Minute When Wave ((v)) became longer than wave ((iii)

Following all the rules and guidelines, the market seemed intent on completing the Expanding Diagonal.  It certainly looks better. We now have wave ((v)) longer than wave ((iii)), wave ((iii)) longer than wave ((i)) and wave ((iv)) longer than wave ((ii); with wave ((iv)) overlapping wave ((i)), but not traveling below the low of wave ((ii)). They can all be counted as three wave zigzags, and from a timing standpoint, wave ((iv)) is longer in time than wave ((ii)).

This is often a very serious pattern. It certainly increases the "risk" in the market because one can not simply assume the diagonal is an ending one until the low at wave 0 is exceeded lower. Further, there is no way to be certain that wave ((v)) is not actually a longer wave ((iii)), with the current wave ((iii)) just (a) of wave ((iii)) because of the steepness of it's rise and the short length of time of the wave.

If wave ((v)) is being made, it is wave 5 of C of the overall (b) wave we have shown for weeks now. Price is only slightly past that point.

On Friday, we said we had also ruled out and expanding diagonal for the S&P500 because it's wave had traveled below the invalidation point (same as the '0' level on the above chart'). But, in real time, we just wondered, if the S&P doesn't truncate, what else could it do to make a completed wave pattern?

The chart we developed this morning shows that possibility. It would be a contracting diagonal, not an expanding one.

SP500 2 Hr Chart - Contracting Diagonal Possibility

In this case, the S&P500 must make at least one more new high. At least wave (3) must close above wave (1). Wave (5) can sometimes truncate, but it is more usual for it to make a higher high, too. The above chart was done well before the close. The S&P500 did travel somewhat higher by the close. It too would still end the (b) wave we have been looking for - perhaps on the FED announcement or shortly thereafter. And, this is reasonable because the S&P500 has not even made a higher new all time high over wave (1), yet.

For those of you who may have been counting on the (b) wave at the location we showed over the weekend, this is precisely one of the reasons why Ira Epstein teaches there is no shorting unless price closes below the 18-day SMA (see my paraphrase of Ira Epstein's guidelines for trading located at this LINK.)

And, while the slow stochastic on the ES daily futures did break the 80 level, lower, Friday, it re-gained it today, although even the first loss of it is somewhat of a sign of weakness. Regardless, the FED meeting is tomorrow, so we simply have to observe the results while we continue to count - always following the rules and guidelines. You can see when we do that, we can make statements in the live chat room like we did today: "In order for there to be an expanding diagonal, wave ((v)) should become longer than wave ((iii))" ... and, when it did, we were able to validate the potential expanding diagonal - also known as the dreaded megaphone pattern.

The good news is it was clear from the weekend post, we were initially expecting up movement today. We got what we expected, and more.

We don't make the market, we can't force the market to do anything. We can only count, trying to follow the rules and guidelines as closely as we can.

Have a good evening.
TraderJoe

Gap Down, then Almost Gap Fill

The S&P500 gapped down at the open today, and traded lower to 2420. Unlike the NQ futures, which made a new daily low, neither the ES futures, nor the Dow cash, nor the S&P500 cash made a lower daily low today. Instead they went into a very choppy sideways movement until 1 PM ET, then drifted higher, and almost filled the opening gap at the close, but just didn't have the gas to do it. The S&P500 closed down -2.38, and futures volume picked up quite a bit as contracts began to roll over from June to the September contract.

It is possible the S&P500 is trying to extend a bear-flag correction, as in the chart below, with a double zigzag count.

SP500 5-Minute Bear Flat Extending

You'll note the down wave on Friday took 42 bars, and from a time perspective, we did not even reach 42 bars until mid-day today. So, if the correction finishes properly, it would make an outstanding wave for a second wave, because corrective waves should be longer in time than their impulses. Whether that wave will be 2, or B is undetermined at this time. We don't know if an impulse or a diagonal lower is forming just yet. Regardless, the point change was rather minimal.

We sort of anticipated that (being Monday), and so over the weekend, we prepared this monthly count on the London FTSE-100. We will present that now, and hope you enjoy it.

FTSE 100 Monthly

Because of the following three factors, if the London FTSE is also in Primary 5, it looks and counts much more like a diagonal than the US Indexes do (at this time). We have counted it this way for three critical reasons. They are below.

1. Overlaps
2. Length of wave (2), depth of Elliott Wave Oscillator (AO) at the point of wave (2) is deepest
3. The Elliott Wave Oscillator currently diverges at the highs

Again, we are just trying to use objective criteria to reduce guessing in the count. We hope you approve.

Thanks and have a good evening.
TraderJoe

Same Conclusion

When one looks across the markets and not just at the Dow, we see it is possible to reach the same conclusion among many of them, now. We know that the NQ futures had been rocketing higher and made an all time high on Friday before reversing. But, as the chart below shows, similar conclusions are possible for the SP500, the DOW and the Russell 2000 - all on the same day.

Major Markets Synchronize Their Highest Prices Ever

What was nice to see was the Russell 2000 also make that highest high because it, too, now qualifies for the (b) wave of an expanded flat fourth wave. It had previously make three waves down in May, and now does not show an impulse up because of the overlapping middle wave.

GOLD as well may be in an interesting position. We had called the Leading Diagonal A wave perfectly in real time on 4-hour charts. The Daily chart is below.

Daily GOLD (GC) - Having Trouble Holding a Channel

Next, we noted at wave (a), the upward move was having trouble peaking above the channel as a third wave should, and, in fact, prices broke below the lower channel boundary at (b), and then tried to "ride" the lower channel boundary upward, and did so, for nearly a month. But, with the new higher high earlier this month, there was no overt sign of strength. Each of the higher highs, in April and June diverged from the Elliott Wave Oscillator (EWO).

And now, after a marginal higher high, price finds itself back to close on the lower channel boundary. We also note at no point in time has price reached a level where a C wave would even equal and A wave in length. See the Fibonacci Ruler to see where the 100% mark is.

Further we note the first down move from Feb '17 to Mar '17 was shorter in time than the A wave. Further, the second down move from Apr '17 to May '17 was not only shorter in time than the A wave, it was shorter in time than the wave we have labeled as the (a) wave up. But this down move is also longer in price than the first down move - ruling out an overall diagonal pattern at this point in the analysis. It is also telling that there is no apparent alternation in these down moves, which should tell the alert analyst, we are not dealing with an overall impulse wave up.

So for ease of example, let's say - and we're not locked in on label degrees yet - we had minor A, up, as the Leading Diagonal in Mar '17. Then we could have had three waves down to minute ((a)) down, i.e. circle-a, down in Mar '17. Then, we could have had three clean waves up to minute ((b)), circle-b, up, in Jun '17, which would now also qualify for a flat wave sequence. The upward move from Mar '17 does have a very obvious three-wave look to it now.

If prices break below the channel and print full candles below the channel, then it could form a minute ((c)) wave lower to make an over all minor B wave, lower. Now, this B wave would be longer in time than the minor A wave, and prepare for the C wave up. If a Minor B wave lower successfully occurs, then we would redraw the channel accordingly.

Why, you might ask, would GOLD prices and equity prices both decline at the same time? Well, there are certain circumstances where forced liquidations in equities cause people to sell some of their gold in order to fund their equity account. It happens. We'll see if that occurs this time, too.

I hope this helps and I hope you have a nice weekend.
TraderJoe

End - Fibonacci - 5

In one sense the market did exactly what we expected today. The Dow went exactly to that 0.618 x net (1 through 3) level we have been showing you in previous posts. During live chat, I commented, "that I would be remiss if I didn't tell you that there are five closes at that 0.618 level, and the market knows it is there.". I even placed a tentative top at that level, which when the S&P 500 Index fell through it's invalidation level (that we also clearly showed you), meant, it was, in fact, most likely the top.

Here is the Dow's chart at the close of trading today. Everyone is going to hear stories now about the supposed flash crash on the FANG stocks. Gee, why did that happen exactly at the Dow level we've been pointing out for days? And, while just barely maintaining the divergence with the Elliott Wave Oscillator on the chart, below?

DJIA 15-Minute Chart with wave 5 at 0.618 times net (1 through 3)

Secondarily, the DOW also did something we were expecting, and that is a likely truncation at the top. But, the overnight futures did something on the British elections we were not sure how to interpret, so we started off the day, with questions about the diagonal count. At this point in time, a diagonal count has been ruled out for the S&P500 Index, because, today the S&P had an outside key reversal day down in the cash index and in the daily ES futures, as did the NQ futures. But, again, the cash S&P crossed below the wave 4, low.

Therefore, it is likely that the top is in for the Dow, too, but, as good Elliott analysts, we must allow that if the Dow want to clean up the count a bit, it could make another marginal new high - as an alternate - and form a nicer looking expanding diagonal wave upward from the wave 4 indicated. It could do this but certainly doesn't have to, and this option is not available in the S&P500. No, it is somewhat more likely the Dow has a diagonal down, and may only make a "deep retrace" of that diagonal before continuing lower. But, again, we'll be flexible as things clear up.

Further, with this fifth wave wrapped up or nearly wrapped up, we again indicate this is likely a (b) wave upward in the Dow, and a strong (c) wave down should follow. If you think we're kidding, here is what the NQ futures did by the close of trading today. Notice, that the slow stochastic has become un-embedded, and price is now trading below the 18-day SMA.

NQ Daily Futures at the Close - And Cross of Slow Stochastic Lower

 Well, that's it for today. Have a good start to the weekend.
TraderJoe

Continuation - 4

No changes to the current count. During the trading day, the Dow Jones Industrial Average made a new all time high as James Comey, former FBI Director was testifying. The new high was promptly sold off. The S&P500 Index did not make a new high. First, let's deal with the DOW. Here is the hourly Dow (YM) futures chart we've been showing you.

Hourly DJIA (YM) Futures with Higher High In Wave 5

In order to get to 0.618 times the net distance traveled in waves 1-through-3, the Dow should have gotten to 21,288. It did not, and it fell short. Therefore, it is possible there is more to go. The above sequence of waves from wave 4 has a very definite "three-wave" look to it. So, we suspect there is a diagonal forming - most likely a contracting ending diagonal. You will note that I referred to that possibility of a diagonal even yesterday - before it started to form!

Now let's look at the SP500 5-minute cash chart. Here is how this diagonal might be labeled at this time from the same wave labeled 4 in the Dow chart, above.

SP500 5-Minute Chart : Potential Contracting Diagonal

Usually wave ((i)) of a diagonal makes it over the prior high of wave 3 to show it's motive character. It did in the Dow. It did not in the S&P500 (so there is just a split verdict there, and that is not a rule but a guideline as I understand it). Next, wave (ii) downward made a very nice 78.6% retrace - which is characteristic of many diagonals.

So, that leaves us with the idea that wave (iii) must make a higher high than wave (i) in order to continue an ending contracting diagonal upward. This is the most likely case, as we are getting daily Doji candles here. The market narrowly avoided an outside key reversal-day down today.

As the Dow chart, above, shows, any movement below the prior wave 4 would invalidate an upward diagonal. If that should happen, consider an expanding diagonal downward from the point labeled as ((i)). Again, we think that is less likely.

It could be the market is trying to "walk us over" to the date of the Fed meeting, which is on June 14th. Hard to say. In any case, the daily ES price is still above the 18-day SMA, and the daily slow stochastic is still fully embedded above the 80 level. See my paraphrase of Ira Epstein's guidelines for trading at this LINK if unfamiliar with what that means, as I do not provide trading or investment advice.

By contrast, the slow stochastic on the US Dollar Index (DX) lost it's embedded status under 20 as of the close of trading today.

That's about it for now.
Have a good night.
TraderJoe

Continuation - 3

The major change to the Dow chart below is the time frame, from the previous 10-minute bars to bars which are each 15 minutes. This was to allow 120 - 160 candles on the chart, per The Eight Fold Path Method. The overall count is not changed. Wave 4 occurred at 140 candles.

Price did indeed gap up today, at the open, surpassed the 21,185 level noted yesterday, then did a turn around to make new lows, extending the fourth wave, as we had noted clearly via the alternate count in blue, yesterday. This was the scenario where yesterday's up wave was only an ((x)) wave. The next ((z)) wave, lower, occurred in a clear three-wave sequence, with an ending (b) wave triangle stuck in the middle.

It is interesting that - at no time - did the DJIA close below the 31.8% retracement level. Notice, too, how the count of the extended fifth wave of 3 resulted in the retrace attaining the level of between the prior wave ((iv)), and the wave (ii) of the extension. That is, in part, some of the benefit of true Elliott Wave work. While some web-sites were projecting a "third-of-a-third", we said we'd prefer not to buy at the highest levels in history and to wait for a pull back. Well, such a pull back did indeed occur.

DJIA 15-minute Wave 4 Added a Wave But DJIA Did Not Close below 31.8% Retrace Level

So, the downward count to wave 4, is ((w))-((x))-((y))-((x))-((z)), either a triple zigzag or triple combination, but in any case triples are always terminal in Elliott Wave work. It should be noted that wave ((z)) ended on a nice divergence with the Elliott Wave Oscillator (EWO) when compared to the prior wave ((y)).

This same divergence, but using RSI(5), was also pointed out in the real time chat room on the hourly Dow futures, a copy of the chart posted, is also shown below.

DJIA (YM) Hourly Futures with Divergence on RSI(5) at the Low

Towards the end of the day (refer to the first chart, above), the Dow broke the ((x)) wave high, and is now likely in sub-wave ((i)) & ((ii)) of wave 5, up. That would be simplest. But, since a fifth wave is likely and wave 1 was not a diagonal, then wave 5 could be, but does not have to be. Therefore the ((A)), ((B)) in red on the first chart is for the case where the fifth wave becomes a diagonal.

One should note higher highs are possible (particularly with the ECB meeting tomorrow morning), and that would be very clean. So we hope that happens, but not from a monetary standpoint, only from a clean wave-counting point of view. If things get muddy, it might be because of the Comey testimony which will follow, and for that reason - and just the reason that we are likely in a (b) wave up - we are also prepared for a truncation.

Since we have cleared the ((x)) wave, and wave ((i)) of 5 at this level equals wave 1, up, this, in fact, could be the truncated wave. We think that is quite a bit less likely. But, it is possible. The next level to look for would be anywhere over the high, and up to 21,288 - which is 0.618 x net (1 though 3).

Stay patient and flexible. Things are proceeding well, so far.
Have a good evening.
TraderJoe

Continuation - 2

All I have done with the Dow's 10-minute chart below is use MotiveWave instead, so that each wave label shows up crisply.

DJIA 10-Minute Chart - Likely Wave 4

The market opened with a gap down this morning, and immediately hit the 38.2% Fibonacci retracement level - as we have been projecting for a couple of days. After the initial decline, the market rose and almost closed it's opening gap, but did not. The S&P500 did eventually close it's opening gap. The Dow did not.

However, the rise was steep enough as to be out of proportion as a fourth wave with it's companion second wave from yesterday's initial decline. Therefore, in real time we relabeled the entire larger fourth wave decline, 4, as a w-x-y wave (all three wave sequences in the decline).

The first rise to 10 am could be labeled as (i) or part of an (x) wave. The Dow must gap up over 21,185 to start a third wave. If it does not, and makes a lower low, the down count could be continuing as the triple zigzag option shown in blue.

Have a good night.
TraderJoe

Supplemental: Russell 2000 Count

Russell 2000 Current Elliott Wave Count

Continuation

This is a continuation of the same 10-Minute chart of the Dow Jones Industrial Average we showed you on Friday (second chart down), using the Eight-Fold Path Method to count an impulse wave.

DJIA 10-Minute Chart Continuation of The Eight Fold Path Method

The market opened lower today, almost hit the 23.6% retrace level, then rebounded higher and stopped just short of the wave 3 high - twice! Therefore, we appear to have the the three waves down to an a:3 wave (of a flat or triangle), followed by a very nice looking three-waves up to the b:3 wave of the very same flat or triangle. Towards the close, price broke below the .b, down, wave of the b:3 wave.

Some key points to note are: 1) if this is wave 4, it is now longer in time than wave 2, and is growing more complex by the day. That would be very good alternation, and the time relationship would be typical of many Elliott Wave impulse waves. 2) The downward price retracement still has not hit either the 23.6% or 38.2% retrace level. It could do that, but, while likely, is not a requirement if a triangle forms from here. 3) Notice that price in wave 4 has finally attacked the lower channel line as per the method, and today, price is weaving around the blue EMA-34, very much in fourth wave fashion. This indicates good form & balance to this point, because every black numbered wave is on an opposite side of the EMA-34. 4) The Elliott Wave Oscillator is still within it's wave four limits of +10% to -40% of the peak reading in wave 3.

This chart simply suggests that after wave 4 wraps up, there should be one more higher wave set - provided it does not truncate. Let's hope we don't get a truncation so we have a clean spot to count from.

On this chart, invalidation would be any downward wave that overlaps wave 1. But, note that blue .ii is at the 38.2% retrace level, and black iv is at the 50% retrace level of wave 3. In practice, the latter should be used as a wave counting maximum for downward travel, without a new high, first. And, recall it certainly appears like the fifth wave of wave 3 is the extended wave in that sequence. That most likely means a triangle should not form here, because the retrace levels of the extension would likely come into play.

When we showed you the longer term chart on Saturday, we are trying to do nothing different than to apply these same rules and guidelines where applicable to the daily chart.

Hope this helps. Have a good evening.
TraderJoe