Market Indexes: DJIA, SP500, NDX closed lower, RUT higher
The S&P500 closed yesterday at 2444. At the open, it gapped higher and traded to 2450, again stopped by the resistance of the EMA-13, and EMA-34. This created a slightly larger blue b wave than we showed last night (in the triangle count), or a slightly larger wave ii in the more impulsive ((1)), ((2)), (1), (2) count.
Prices then reversed lower, closed the gap, and traded down to 2439, before rallying to 2447 in a retracement. When news hit of the continuing arguing between the President and the Senate Majority Leader, prices again reversed and traded down to a lower low at 2436. Prices attempted to rally again, but only to 2445, failed and reversed lower to close at 2439.
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| SP500 Daily - Outside Day Down |
The daily candle has a higher high than yesterday, a lower low, and a lower close than yesterday. The futures only has the lower low. Still, no gaps have been filled, and the number of intraday reversals is characteristic of the "grinder" we have referred to in the last couple of days.
Today's trading action near and at the close was suggestive of a gap lower tomorrow. If that occurs, we may get a third wave within a diagonal lower. Since that remains to be proven, I will only show that count if it occurs tomorrow, and discuss any implications then. Suffice it to say on the cash chart the more impulsive count lower would come into question if the high of today's candle were taken out higher within the next two trading sessions, as this would constitute a "bear trap". The triangle count can survive taking out the high of today's candle.
For now. Keep it simple. There are lower highs on the daily chart, and there are two recent lower closes. Still lower daily lows are expected in this down trend. While this does indeed even 'feel' like a corrective fourth wave - in the way that it is trading - patience and flexibility are still needed because fourth waves, as I have said before, can be quite unpredictable.
Have a wonderful start to your evening.
TraderJoe
Hi TJ, thanks so much for your daily posts and careful EW work. It really stands out, and I've been following it for quite a while. Great stuff!!
ReplyDeleteWhen this 4th-wave kicked off, you said:
"The purpose of the fourth wave lower, Minor 4, is to attack the lower channel, and to provide some alternation with the second wave in the sequence, Minor 2. So, to get down to that channel, wave Minor 4 may either be a zigzag, a zigzag that starts a triangle, or a multiple zigzag. This is because wave 2 was a "running flat" wave, and a "running flat" predicts a strong up move after it - which it did. And only a sharp or a triangle can alternate with a flat."
Does the potential impulse down count still jive with that?
Yes, it does. The impulse count lower would be to the minute ((a)) wave of the zigzag. There is plenty of room for price to impulse lower in an ((a)) wave, before making a minute ((b)) wave, up, and then a minute ((c)) wave down to complete Minor 4. Good question.
DeleteTJ when you were showing the Balance Line as per Bill Williams, were you using the median 13 MA smoothed and displaced forward 8 bars, which I believe is the standard? Thanks
ReplyDeleteHi Star. That is the standard, and if you ask me officially about the balance line, that is the calculation. But, ask me some night when I've had a few beers, and you'll find the EMA-34 offers an excellent approximation to the alligator overall, of which the official balance line is one of the components.
Delete