Market Indexes: Major U.S. Equity Indexes were lower; NDX, higher
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Over the weekend, some financial rumblings in Europe (FTSE, for example) had some of these stock indexes lower. As a result U.S. futures, although initially higher, were lower for much of the holiday weekend, and opened lower.
The market as measured by the S&P500 Index had closed Friday at 2,732. With the futures lower, the cash market opened down -10 points to 2,722 and continued trading down to 2,720. Within the first half-hour, there was a feeble rally attempt to try to close the opening gap, but it failed, and stocks headed lower to 2,718 by mid-morning, the initial low of the day. From that point, there was a better rally that did close the opening gap, and then price headed to a high of 2,738 by noon.
From there, stocks sold off again into mid-afternoon reaching a lower low at 2,707 before rebounding to close at 2,716. Lots of froth and chop for everyone.
Because of the lower close, it served as confirmation of the doji candlestick from Friday, as below.
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| S&P500 Cash Index - Confirming Lower Close |
Today price played ping-pong with the 34-day and 13-day EMA's, with it's opening and closing within those limits.
It is likely the five-wave up count from Friday is over. As most Elliott analysts know, after a five-wave up move there should 'at least' be a three-wave downward corrective movement. That appears to be getting under way. It could be the minuet (b) wave of the larger triangle minute ((b)) wave upward, or it could fall apart into something much more, lower.
The advance-decline line and up - down volume statistics were only about 1 : 2 in favor of the losing column. So, at least as of yet, it does not seem like a full on impulse downward - but it needs to be watched carefully. Any higher high than Friday's high would be more suggestive of the Minor 4 triangle or an immediate fifth wave impulse. But, so far, that is not in evidence.
So, take it easy. watch it carefully, and have a very good start to your evening.
TraderJoe
Hi Joe,
ReplyDeleteI have got a question. How do you look at correlation between EU and US markets? I would expect the major bottoms and tops to be driven by fundamental reasons and therefore I would expect them to more or less coincide in time.
Now I follow DAX as well as the S&P. In my view the DAX started a 4th wave correction on Nov 7th, than made an expanding triangle followed by a C wave as of Jan 24th. If a triangle marks the last wave of a formation than the 4th wave correction in the DAX should be over right? That would mean a 5th wave is on its way in the DAX.
Now does this mean anything for the S&P? If the tops are expected to coincide than something has got to give in time. Can it be that the decline from the 29th is a sharp and in that way catches up or should we perhaps expect more complex 5th wave for the EU markets to allow time for the S&P to make a larger 4th wave and 5th wave. Or perhaps you don’t see any correlation at all.
I would be interested to read about your thoughts on this topic.
Regards,
Ronald
Hi Ron. The DAX did not make a low in 2009 below its prior monthly low. So, whilst timing may seem to create lows at the same location, their implications for each market may differ. Next, there is 'never' a situation in regular Elliott Wave analysis in which an expanding triangle upward is followed by a C wave down. Yea, I know that's what your eyes see, but it is only three waves down to an (a) wave on 1 Jan, a (b) wave in three waves up to a new high in late Jan, and then a (c) wave down in a typical expanded flat fourth wave. Price always exits a true triangle in the direction from which it entered it. Since this one didn't, it tells you the structure you are seeing as a triangle is not one.
DeleteHi Joe,
ReplyDeleteSince you mentioned the confirmation of the Doji signals I thought I might take the conversation one step further. I know this is getting away from EW and if you prefer I not go this way in the future just say so.
I also follow another system that uses a combination of candlesticks in conjunction with a filter called the T line or Trigger line. The T-line is just the 8 period ema. The concept is that when one gets a candlestick reversal signal, even a confirmed one, you take no action until price crosses the T-line. This filters out a great deal of the false signals candlesticks generate. I say this in light of the fact although yesterdays candlestick confirmed the Doji signals, the market today seems to be indicating that it was indeed a false signal. You will of course note that yesterdays bar did confirm the Doji signal but did not violate the T-Line. Also another possibility for the false signal is that candlestick signals tend to be more reliable then the market as measured by stochastics is either over bought or over sold. This was not the case on the recent signal. Stochastics were only in the low to mid 60's