Longer In Time ?

Still within an overall potential Minor 4 triangle count fourth wave, how might we best count the internals of this latest wave down? One clue might be that the (a) wave down took approximately nine (9) days, and the (c) wave down only took eight (8) days - thus far.

Is it possible that the (c) wave down wants to take as much time or slightly more time than the (a) wave down? It certainly is. It is a triangle, after-all. And the very purpose of a triangle is to take up time and to move price sideways.

A chart of the 4-hour S&P500 cash index is below. The downward count on the (c) wave is what the count best "looks like" at this point in time.

S&P500 4-Hr Chart - Potential Triangle Count

If price doesn't make an immediate new high over the high of Tuesday this week, it may be in a smaller triangle. So, things could get scary again, but it is still possible for the larger daily triangle to form if only a marginal new low below wave iii is made.

Such a wave would be a trap low, and serve the purpose of getting more participants more bearish before the triangle reasserts itself to the upside, in the form of the (d) wave.

In no event, however, would it be expected for the (a) wave to be exceeded lower in this type of triangle count.

Again, this can all be a part of trying to 'hammer out' the lower trend line of the triangle. It's never comfortable, and the counts can be difficult to determine. IF the above scenario comes to pass, it would demote the (c) wave back to a simple leg of the larger daily potential triangle. This might allow either the (d) or the (e) wave of the triangle to become the complex leg.

But, if it does come to pass, it might satisfy a triangle time relationship that the (a) is less often the shortest wave time-wise in a contracting triangle.

And, if this scenario does not come to pass because Tuesday's high has been exceeded, it would indicate the triangle's (d) wave is likely beginning.

If you are in the U.S., or elsewhere where this is a holiday weekend, have a very happy one.
TraderJoe

Higher High Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Higher High, Higher Low, Higher Close - Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

Many equity indexes made a higher high today than yesterday. That is encouraging for the case of the potential triangle that we have been showing for several weeks now. But still, we would prefer to see a higher swing high over the high of Tuesday's candle to better confirm the potential triangle.

The whippy behavior continues to be characteristic of triangles (and / or their cousins diagonals). Stocks as measured by the S&P500 cash index had closed yesterday at 2,605. With the futures up in the morning, the cash market gapped up +11 points to 2,616, traded up to 2,660 during the course of the day, and backed off towards the end of the session to closed at 2,641.

The intraday swings continue to be difficult to keep up with, but the market still seems to be hammering out the support of the (a) to (c) trend line above.

It's my understanding most, if not all, US Equity markets are closed tomorrow, and they re-open on Monday. But on Monday U.K. equity markets may be closed.

Have a good weekend.
TraderJoe 

Lower Low Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Although the cash market made a lower low day, there is still nothing to rule out the potential triangle count. Below is a chart of the daily ES E-Mini S&P500 Index futures.

ES E-Mini S&P500 Index Futures - Daily

Although was a lower low day in cash, it is not lower than than the current (c) wave low - let alone the (a) wave low. This may eventually help to solidify the lower trend line of a potential triangle, but risk of invalidation (a.k.a. the Bottom Torture we wrote about on the weekend) remains somewhat elevated until a higher recent swing high over two days ago has been made.

Watch it closely and have a very good start to your evening.
TraderJoe

Outside Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Higher High, Higher Low, Lower Close - Outside Candle
FED Posture: Quantitative Tightening (QT)

In order to maintain a triangle in the present form, the (a) wave must not be exceeded lower. Today's outside day might be a b, after an a wave, but it could also be just the start of a diagonal a wave up, after the small degree waves .a, .b, .c up. That would yield i, up, ii, down of the larger diagonal a wave up which would still be in the (d) wave of the larger daily triangle.

Very tough to tell.

Bottom line: if we take out the (a) of the daily triangle, it would make counting a triangle more challenging, and perhaps, impossible.

It's quite tedious, and one can only be patient, calm and flexible in the whipsaws. On the other hand, this is precisely what triangles and diagonals do. 

Have a good start to your evening.
TraderJoe

Higher High Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

While over the weekend a number of market pundits started calling for a crash (some with a vested interest in selling gold), we looked back to 1987 and wondered if we were just making the scary down legs of a triangle that might actually precede the run-up to a true top. We said it would be best for the triangle hypothesis if a higher high day were made.

The higher high day did occur today in the DJIA, the S&P500, the ES, YM, and the NQ futures. It did not occur in the Russell 2000 futures when last we looked.

The market as measured by the S&P500 cash index opened with a sizeable gap up this morning. This was followed by a 70 - 72% retracement wave downward, and then price headed higher for the rest of the day, resulting in a higher close, up about +70 points, overall. The daily chart is below.

S&P500 Cash Index - Triangle Hypothesis

If Friday was the end of leg (c) of the triangle, then it would be expected that the (d) leg cross above the EMA-34 on a four-hour chart (this chart does not have 120 candles on it for the wave of interest.). If the (c) leg down was complex, then the (d) wave up should be a simple zigzag. 

The (d) leg up, might then be followed by another scary (e) wave down - which must remain above the (c) leg - but which also should cross down below the EMA-34 on a four-hour chart.

If the (c) leg down is not done, then it may not travel below the low of wave (a) in this case.

Remember, the triangle is a structure which must prove itself in every detail. So far, the structure seems to be working, and the Elliott Wave Oscillator is likely to again go relatively flat in the next few days, which is one pretty clear indication of a potential triangle. 

If a triangle completes properly, it would likely constitute wave Minor 4, and it's purpose will have been to provide the alternation needed for the flat wave Minor 2, by not having a higher (b) wave, and to even-out the point totals with Minor 2 and Intermediate wave (4) - to help insure correct degree labeling.

When and if price exits the triangle to the upside, look for a price target of the widest width of the triangle added to the breakout point.

Have a very good start to your evening.
TraderJoe

Bottom Torture

There are several who are claiming that a 1929-style or 1987-style crash is now imminent. OK. Fine. We see that as a possibility, but we wonder, how many of those claiming so actually would have counted the lead up to the crash in one of those markets properly.

As an example, below, we are showing you how we would count the 1986 - 1987 market to it's top. Ask yourself, seriously, if you would have even come close to this count at the time, knowing what we have tried to show you about counting Elliott Waves over the years.

S&P500 Cash Index - 1986 & 1987 - Detailed Count

Your count should start over on the lower left, with an expanding leading diagonal in five waves for Minor wave 1, and a 50% retrace for Minor wave 2. The 50% retrace is deep enough to allow Minor wave 3 to be an extended wave, and it is - at very, very close to the 1.618 Fibonacci extension level.

At that point, and this is critical, there is an abrupt down wave - which is interesting - but it is way too short in time to have corrected all of Minor Wave 3. It is part of the correction, but not all of it. I know people find it offensive, but what follows is a massive (b) wave of a running triangle - way more than 1.618 x (a), down. People try to count all of  this up movement as still part of 3, but that is not correct. It is more choppy, more curvy, and not as impulsive as the "straight up" movement in 3. And, the zigzags down to wave (e) would not alternate well with the sharp Minor 2.

Further, in examining this triangle, wave (c) occurs exactly at the 78% retracement level of (b), and wave (e) misses taking out the (c) wave low by less than 1 full S&P point, and, yet, it does - as is required by a running triangle - overlap the top of the prior wave 3. This is why I have titled this post, Bottom Torture. It may be similar to a situation we are in today. Look at how that triangle hammers at the bottom.

Then, after the (e) wave of the triangle, there is a clear five-wave movement up to the Top, which also occurs just barely past the usual technical target of the triangle - which is the widest width of the triangle added to the breakout point.

Notice within Minor 5, up, the fourth wave iv, is a "running flat" wave, showing the excessive power of the upward pull of the market.

So, here are some questions for you to think on. If you were counting waves in 1986 - 1987, would you have counted a nearly four-month triangle correctly? Or would you have been screaming for a crash at each of those lows?

And would you have counted the leading diagonal correctly? It is the "wind-up-before-the-pitch" that gives the market its power to rise nearly vertically in the next wave. Would you have arrived at a proper target for the post-triangle wave? And how about that "running flat" fourth wave, iv, within Minor 5. Would you have thought the move was over at it's b wave, and started counting with a i, down at that point? Yet, a running flat is in the right place at the right time, and serves to take up more corrective time in the count.

My point is this. Markets can play with us. They will do what they need to in order to fake us out and get us headed in the wrong directions at the wrong time.

Can today's market make a lower low on Monday or later next week? Absolutely. The only point of the above chart is to ask you to be careful about thinking the Elliott Wave count is what you think it is (and also to show that a triangle did proceed the 1987 top - whether that happens again or not). The above chart follows all of the Elliott Wave rules and most of the guidelines I am aware of. But the overall count is not visually apparent without work, study, and a prerequisite knowledge of the patterns and the rules.

When you have those in your grasp, I think you can see, then, how each of the descriptions of the above waves fits the wave personality for those points in time. You will also note in each case how the wave patterns try to keep waves 2 and 4 somewhat with similar or less net points traveled. Does that always have to happen? No. It just often has in the past.

Can a deep wave 4 occur in our current market? Yes. But, again, if we are ending a Primary 5th wave, then why is there no triangle or diagonal as of yet? Curious Elliott analysts want to know.

Have a great Saturday.
TraderJoe

Razor Thin

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

By the narrowest of margins, the Dow Jones Industrial Average, cash index, just missed making a new lower low below the Feb 8th low.  By 173 points, the DJIA stopped (today) shy of it's 23,360 low. That is less than a day's trading. In the process it retraced more than 90% of it's up wave to Feb 27.

Looking at the DJIA futures, on the weekly chart. This put's the futures skating right on the channel up trend line, of course.

DJIA Futures - Weekly - Sitting on Lower Channel Line

This is a very precarious position. The margin is razor thin - even thinner than above in the cash index. Some of  today's metrics include: once again, about four times as many declining issues as advancing issues; more new lows than new highs; and more declining volume than advancing volume.

The S&P500 Cash Index stopped for the day just below it's 78.6% Fibonacci retracement level. If the market wishes to form a triangle here, it can do it. But, the odds to do not favor it without first seeing higher high days.

If you use the ES S&P500 E-Mini Futures, the daily swing line is still downward, and price closed under the 18-day SMA, the 100-day SMA and lower daily Bollinger Band. The daily slow stochastic is in over-sold territory, but there is no sign of it curling up yet. So, the best conclusion is that momentum is currently pointing down.

The yellow area on the chart above is the daily / weekly fire danger zone that I wrote about in several of the prior posts. Keep your eyes on things closely.

Have a very good start to your weekend.
TraderJoe

Tariff Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil higher
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Yesterday, we stated, "Below the recent 2,695 low and triangle possibilities may be extending lower, or worse. We'll address those latter possibilities if and when needed."

Today, the 2,695 low was indeed broken in the S&P500 cash index. That occurred on the market open. Clearly, the i, up, ii down possibility did not hold, and was invalidated.

Cash closed yesterday at 2,712 and with the news of the tariffs being imposed on China, stocks opened gap down -21 points lower at 2,691, and traded down to 2,679 in the first ten minutes, then bounced to 2,694 by 10 AM, and turned around and headed lower to 2,661 by noon. At that point, there was another rally attempt to 2,691 which failed, and stocks then sold off to their 2,641 low, and closed at 2,643.

We show you the chart below only to remind you that we cited that if price began to break down into the 78.6% retracement level, it would be a condition of "Fire Danger", it would only take a spark to set it off.

S&P500 Cash - 30 Minutes - Broke the Daily Low

That spark was apparently the tariff news.

Both the DOW and the S&P500 made new daily lows today, and new lows for the month of March. The NQ futures came close, but had not by the settle. They easily could.

The DJIA is now just shy of its 78.6% Fibonacci retracement level on this wave down, of its up wave from Feb 9 to Feb 27. And the same concept above applies to the Dow. If price trades much beyond 80% it should be considered as in the same danger zone, as above, only on the daily chart.  The S&P500 is just shy of it's 62% downward retracement.

So, a larger triangle or taking out of the Feb 9th lows is now in play. I do not know that the Z ? wave of a triple zigzag is completed, yet. The best alternate for the count is that W = i, X = ii, Y = iii, X = iv, and Z = v. One thing I do not like about the count as a triple zigzag is that there are no overlaps. But, it is very hard to count wave i off the top unless it is a very, very compressed leading contracting diagonal. I tried to count it that way in real time, and it did not have very good form. Remember, it is the (c) wave of a triangle that most often has the most complex wave structure to it.

And, the down wave takes longer in time than the up wave - which would also still fit a triangle's internals very, very well. I am not advocating for a triangle. I am trying to "rule one in" or "rule one out". So, we'll have to see how the DOW holds up against the S&P over the course of the next few days.

In no case can the Dow make a lower daily low that February 9th, and still be in a triangle. Same with the S&P. The daily ES futures closed below their daily Bollinger Band, and the daily slow stochastic closed in over-sold territory. So, while the price bias is down, it is also in a region where one 'might' expect to close lower again only about 5% of the time. Could it happen? Absolutely. Simply just keep the odds in mind.

The advance-decline line finished at 572 - 2,420 (or 1 : 4.2) which is entering the impulsive territory.

So, again, be cautious, patient and flexible. And have a very good start to your evening.
TraderJoe 

FED Day

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower; RUT higher
SPX Candle: Higher High, Higher Low, Lower Close - Outside Candle
FED Posture: Quantitative Tightening (QT)

Well, after yesterday's inside day candle, today was an outside day candle down. The S&P500 cash index had closed yesterday at 2,717 and it began trading slightly lower to 2,712 for just the first few minutes before turning higher to trade to a higher recent daily high at 2,739 during the FED announcement.  The ES traded at 2,744 or slightly over it's 18-day SMA of 2,741. During the FED press conference, the market turned lower and took out yesterday's daily low, at 2,710 before swinging around again to trade higher again to 2,730, then lower again to close close at 2,712, down about -5 points on the day.

If you recall, the 62% retrace level of the prior up move was 2,705 - 2,706, and the actual daily low is below that at 2,695. So, although it was a poor close the situation needs to be watched closely. Above today's 2,730 high in the next two days may constitute a trap for the bears. 

Below the recent 2,695 low and triangle possibilities may be extending lower, or worse. We'll address those latter possibilities if and when needed.

Here is a chart of the daily S&P500 showing that price is currently defining another rising trend line from the February lows. Also, is a Fibonacci ruler showing that a deeper triangle could easily be defined, if the market wishes, because the (c) wave down of such a triangle is not yet 62 - 78%.

S&P500 Cash Daily - New Rising Trend Line

If the market goes lower, the deeper triangle is likely. If the market breaks today's high in a third wave up, then the upward contracting diagonal assumes more emphasis.

Once again, it is The Fourth Wave Conundrum at this time, and flexibility, patience and assessment of the possibilities - rather than a dogmatic position are likely needed. Objectively, I have no particular interest in which is to occur.

Just fyi - yesterday and today Crude Oil may have begun it's climb out of a triangle I have been monitoring in my own work for some time too. A daily chart of Crude Oil futures is below.

Crude Oil - Daily - Upward Breakout of Triangle

In this case, price has the right look for a triangle, and the upward move certainly has the appearance of being the powerful thrust out of a triangle. This suggests price may go over the prior high. If price does go over the high, I will have more to say, later.

For now - have a very good start to your evening.
TraderJoe

Pre-Fed

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed higher; DJUtil lower
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

With the FED announcement tomorrow and the first of new Fed Chairman Powell's press conferences, it was not a surprise to see the ES E-mini S&P futures volume shirk to less than 1.0MM contracts (~920k), and the NYSE stock market volume around the 3.2 billion level as participants lightened positions some.

The S&P500 cash index closed yesterday at  2,713. With a very narrow trading range, stocks opened with a small two-point gap and traded up in the opening minutes to 2,724. After the first half-hour stocks began to trade lower and reached 2,710 by mid-afternoon. The pull-back was almost, but not quite, 50% from yesterday's low. About 14:00 ET stocks began again to rally almost reaching the high but not quite. And then they followed with a smaller pull-back into the close - at 2,717.

Here is yesterday's chart updated for today's prices.

S&P500 Cash Index - 30-Minute Chart

From a chart perspective, the first thing to note is  that the low of potential wave ii was not exceeded lower. Next, prices trading on both sides of the mid-line of the down channel showing that the market knows that mid line is present. For a move higher to resume, prices must get over the down-sloping upper channel line, and eventually exceed the (a) wave upward. Today's 50% pull-back was just enough to get an extended third wave if tomorrow is a gap-up day.

If prices fail badly at the channel or before, and exceed the low of ii, then the next best downward count is to think of ways that the daily triangles could be extending lower. More on that if it occurs. We note the EWO is green and still rising, yet the market internals were still negative today with more declining issues than advancing issues, more new lows than new highs, and more down volume than up volume. This is exactly the type of technical deterioration we would expect in a market topping process - all while the major averages are reporting they are up.

Not much else to report on for this very slow day. Have a good start to your evening.
TraderJoe

An Analogy

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

While other web-analysts were trying to tell you we were somehow in a fourth wave, on Sunday our post took a different position. It was more possible we were going to make a second wave lower. Stocks, as measured by the S&P500 cash index had closed Friday at 2,752. The futures were lower over-night, and stocks gapped lower at the open, opening down -10 points to 2,742. Stocks continued trading lower all day until about 14:30 ET at which time they reached 2,695, down about -58 points. A late day rally attempt lifted prices to 2,713 or down about -39 points.

On Saturday, we had pointed out the potential of a triangle in the 15-minute chart of the S&P500 cash index. It turned out that's what it apparently was.

Below you will find an updated count on the S&P500 30-minute chart. The triangle is shown as wave X.

S&P500 Cash Half-Hour Chart - Possible Wave ii?

I had counted three-waves down from the 2,802 top, as a-b-c which overall made a wave W. The triangle is essentially wave X. And it is likely we had a second zigzag down today as a Y wave. Throughout the day, we monitored the 62% retracement level, as price played with it all day. Finally, going into the close price closed back above that level and back well inside the channel.

So, it is very possible we have made the second wave down, as shown that we wrote about on Sunday. But, this is not for certain. Price must get back up over the (a) wave of the triangle to confirm this count. If it does, fine. If not, we want to make an analogy.

Several U.S. states and various countries post "fire-warnings" at various time of the year. This means the "conditions are ripe" for a possible fire, and the danger is high. But it would still take a lightning spark or a careless camper to trigger the blaze. In the case of lightning, it is clearly a matter of probability as to whether a fire is started or not. The same is true in Elliott Wave work - always, and for every count. Every wave count is an assessment of probability.

So, the analogy is that if price in the cash market gets down below the 78% Fibonacci retracement level, one should then regard it as a significant danger for upward prices. The odds of a second wave begin to fall off badly below that 78.6% level, so watch price progress here very closely. Yes, a second wave can go down to the 99% level, but the odds get lower and lower the less the cushion is.

If prices should break the low, it's possible the daily triangles are extending lower. If prices gap higher and make a third wave upward, then it is possible the S&P500 cash index is making a diagonal like we showed Sunday.

Again, due to The Fourth Wave Conundrum, nothing is for certain at this time. Have patience, use caution and think about the various possibilities.

Hopefully, those tools will allow you to have a good start to your evening.
TraderJoe

How You Can Tell - 12

Thanks to all who read Saturday's post. If you read it, you know I have counted an a-b-c down, with the possibility of a flat wave following it. Many of you also know, I was probably the very first, if not only, Elliott Wave analyst to show a picture of a contracting ending diagonal in U.S. equity indexes. You can view that post here at this LINK if you have not seen it already.

This morning, I was considering the implications of the a-b-c down from yesterday's post in the overall context of the waves being made - whether triangle or diagonal - and had to ask this question. If we have just made an a-b-c lower, regardless if it is to be followed by another a-b-c lower, then why is the wave so short in point length?

To make a long story short, I concluded that such a wave could be a second wave, and the chart below is how it could fit into the overall pattern of a diagonal wave for the S&P500 Daily Cash.

S&P500 Cash Daily - Potential Contracting Diagonal

At this stage the wave labels are just placeholders - for clarity only - and the overall pattern is again still just a potential pattern: a diagonal is a pattern which must prove itself. But, I had, in near real time, successfully counted for you the wedge shaped a wave up and told you why I thought, since there were no large pull-backs - it was an impulse wave in a wedge with an extended first wave. Also, as an a wave, it did not go anywhere it important. It did not break any new all-time highs.

Then, I was able to count out the .a, .b, .c waves of the flat to the b wave down. Now, the giveaway might be that the higher high for wave i might just well be expressing it's motive wave character - the ability to move price in the direction of the main trend. And, this corrective wave lower - whatever form it takes - could just be wave ii. Most analysts are trying to count this as a fourth wave. What if it is not?! It almost certainly is not the fourth wave of an impulse in the DJIA because of overlap.

What I like about this count, is that it now gives us a very specific invalidation point. Wave ii may not go below the low of wave b. Perfect. That is the way Elliott wave counting is supposed to work. We are supposed to get clear invalidation points for the counts to help limit risk.

Then, if after a wave ii completes, a wave iii carries to a higher high than i, we might suspect the diagonal is really on!

In the process, as the indicator panel attempts to show, divergent high peaks would be expected on the Elliott Wave Oscillator (EWO, or AO on Investing.com), and there should also be a higher low (on the EWO or AO) for wave 4. And wave 4 must overlap wave 1 downward, yet remain shorter than wave 2.

I do not know how long this can take to play out exactly. Perhaps we will get more clarity as the pattern progresses. What I do know, is at this point, I can see the still potential pattern clearly, and it will be of great assistance with clear invalidation points to help in counting the overall wave position of the market. I have not seen this pattern or the one I posted earlier anywhere else on the web or from any Elliott wave service for that matter.

So, I consider this as value-added for you. And - free at that!
Have a very good weekend.
TraderJoe

How You Can Tell - 11

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed higher; NDX, NQ lower
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle
FED Posture: Quantitative Tightening (QT)

In the category of you can't extract blood from a stone, you also likely can't get much more information from the market than it offers. So, there is not much point - at times like this - in beating one's head against the wall looking for more clarity than we can get. But I do think it is essential to see what information is there, and not throw away any that is there.

With that in mind, here is the chart of the S&P500 Cash Index - 15-minutes that we have been working with all week.

S&P500 Cash - 15 Minute

This chart essentially says, "we have spent two days going downward, and, after breaking the downward channel to the upside, spent two days going sideways."

We counted out for you in near real time, the A wave down, and the B wave "running flat", all based solely on measurement and structure, and not based opinion. The C wave down - also based on measurement - best counts as the ending contracting diagonal shown. It fits all of the rules and leads to the right conclusion: the upper parallel trend line will break - which it does.

Next, beginning on 15 Mar, there is the break of the channel upward, and a divergent back-test of it downward, which actually makes a lower low in the S&P500 (but not the DJIA), and then a very sideways structure, currently, to which one might try to draw some trend lines. We have sketched in some.

Before we go on about the possibilities for this wave, we will note that, at present, as a triangle it is not very well formed yet. Even to the untrained eye, I think one can see it is not entirely symmetrical yet: the top line is flatter than the bottom line. Also, it is possible to count the up portion from 15 Mar to 16 Mar as a five-wave-sequence or as a three-wave sequence. So, that alone generates some caution. But, we don't exactly know what will happen before the FED meeting this week, and so a triangle could get better defined, or the trend lines could be a good effort, but still just an illusion, and the pattern will break unexpectedly in one direction or another.

So, here are some of the possibilities for this structure. From an A-B-C down, if sideways movement continues, and a triangle is better formed, the triangle could be an X wave, with a further A-B-C down yet to come - to allow the daily triangle on the DOW to extend it's lower trend line further lower. The same with the daily S&P 500.

Equally possible, if the potential triangle prematurely busts upward, is an X wave in the form of another flat. And that is because of the lower low following the C wave. In that case, the middle leg of the potential triangle is, in fact, and impulse, and - provided a new cash low is not made - then the down movement at the end of the day on Friday is all or part of a second wave lower. Further, there has not yet been a 62% upward retrace of this down wave.

Next, because, with the DOW's downward overlap, and a very ill-formed upward channel on the S&P500 it seems less likely that this is a fourth wave of the upward progress, as currently structured. Again, a fourth wave of an impulse is impossible in the DOW, but might be possible as a larger triangle in the SPX. But this is now pretty far down on the list. Remember, the DOW and the S&P are fully out of synch wave-wise because they topped on different days. It is even possible, because of that extra wave in the DOW for it to make a non-overlapping impulse down.

There are few technical clues. I mentioned the DOW's weakness relative to the S&P. Another one I see was the NDX was a bit weaker in the last session than other indexes. Again, due to The Fourth Wave Conundrum, it is hard to get or present more information than is available.

So again, be careful, cautious and patient until things clear up just a bit.
And have a good start to your weekend.
TraderJoe

How You Can Tell - 10

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower; DJIA, DJTran, up
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Overall, on the longer term daily chart, with an inside day on the Dow Jones Industrial Average there is no resolution yet to the Dow's potential daily triangle that we showed yesterday. Nobody was willing to bite.

On the shorter term, I was expecting up movement at the open, and then a lower low from yesterday's post. That is what happened on the S&P500. It is not what happened on the Dow. Further, I was expecting we had made an A-B-C down in a channel. That is what happened, but with a minor tick too high today in the S&P500 cash index, the potential expanding diagonal C wave invalidated. So, here is the best count I can offer considering the current waves and following all of the rules.

S&P500 Cash Index - 15 Minute Chart

The problem wave was wave (ii) which invalidated yesterday's expanding diagonal C wave in the cash, but not in the futures, as it is higher than wave iv, which is not allowed by the rules. Too bad. Dead is dead. Then, with today's lower low, it is possible we had the third wave of a contracting diagonal overall for a larger (A) wave down. One more new low, shorter than wave (iii) is needed to allow such a count. Then, there should be a B wave up. The alternate - which is harder to fit into a daily count - is that today's new low is the smaller (b) wave of an expanded flat wave. But, it could happen that way. Expanded flats are more common than diagonals so we should respect that.

Further, we don't know that wave (iv) is completed. That's why the question mark. If it is to remain as wave (iv), then it must be shorter than wave (ii) and still be countable as a zigzag wave.

If we do make a larger (A) wave down, then it might simply form a better zigzag lower - which can still fit with diagonal and triangle counts.

The bottom line? No one needs a counting mess like this. We are mid-range between the recent highs and lows and there is not a good trend in force. We also need to note that within this down wave, the DJIA and the S&P500 made their previous high on different days. The S&P topped on 13 Mar, the DJIA topped on 12 Mar, which only adds to the mess.

So ...caution, patience and flexibility remain the by-words. Have a very good start to your evening.
TraderJoe

How You Can Tell - 9

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil, up
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Yesterday, I was expecting some kind of up wave at the open, and then further down waves. That is precisely what happened, and the size of the waves seems to be what matters.

With reference to the chart below, this morning's up wave labeled c of B exceeded the size of the wave labeled a of B. And, the down wave to b exceeded 161.8% the length of a. Yet, the c wave up, as expected, did not exceed the high of a. Therefore, this middle wave meets all the criteria for a true "running flat" wave, and has, with the waves following it, been designated an overall B wave in an A-B-C, lower. So far.

S&P 500 Cash : 5-Minute Chart - Since the March High

IF the up wave designated as c were to be designated as ii of 1-2-i-ii, then this would be a degree violation, and that is one way that the concept of wave degrees in Elliott Wave is helpful. In a true 1-2-i-ii, then wave ii can not be larger than wave 2, or it violates the very meaning of the term degree.

Next you'll note the whole down wave is in a rather specific declining channel. This is one hallmark of a corrective wave. 

Third, again because of the size of the wave marked (iv), and the fact that it overlaps the wave marked (i), it appears the overall C wave will be an Expanding Ending Diagonal. Right now we have (iii) longer than (i), (iv) longer than (ii), (iv) overlaps (i) without traveling beyond the end of wave (ii), and all of the sequences thus far can be counted as zigzags. Now, more than likely, wave (v) down should also become longer than wave (iii). Already, there is a lower low than (iii) so the fifth wave has not failed, but the question is will (v) become longer than (iii), as it should. A case can be made that we have made the a wave down of (v), with possibly a b up, and c down to go tomorrow.

Overall, if we do make an A-B-C down, then, again, depending on length, we can still be in a triangle or a diagonal. 

On the day declines exceeded advances by 1,247 : 1,703. This is nowhere near as severe as those truly impulsive days that are from 1 : 4 to 1 : 9, and so that may still provide a clue regarding correction versus impulse.

As I noted last night in the comments, it was possible with the overlap in the Dow futures to see a potential triangle - completed or in progress. Below is the daily chart of DJIA - Cash Index. Yes, regardless of whether I preferred to see a triangle or not, one can argue that the exact shape painted out below is that of a triangular shape - right up until today.

DJIA Daily Cash - Triangular Shape In the Dow

The shape is fairly symmetrical, although not perfect. And as I alluded to in last night's comments, it all depends on whether the (a) and (c) waves are five-wave sequences or three-wave sequences. A triangle like this could become more symmetrical - and take more time - if the current down wave travels to below the current (c) wave location, around the 78.6% Fibonacci retracement level, and then there is a larger (d) wave up. It is, however, currently possible for prices to 'pop' and make the thrust out of the reasonably well-formed triangle from here.

Do I know for sure? Not on your life. This is The Fourth Wave Conundrum, and so I remain flexible, calm and patient. And I will not pretend to know something that I don't, and I will not purport to sell you a service that claims to know, when it doesn't know either - like some of those other web-sites. I am however, just gratified to see the triangle shape on the chart, with each significant wave on the opposite side of the daily EMA-34. It does bring a smile to my face, and I hope it does to yours too.

Remember, the alternate for a triangle is almost always that (a) = 1, and (b) = 2, and (c) = i, and (d) = ii. In this latter case, then since (d) or ii, is smaller than (b) or 2, then, finally there would be no degree violation.

Have a very good start to your evening. I truly hope this helps.
TraderJoe