Monday, April 30, 2018

Five Small Degree Waves Up Completed & Reversal

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

In the post on Friday, we said that because of the tightening range at the end of the day, one might suspect that wave was a triangle sub-wave iv which would mean there was still a higher high to go, today. There was. Then, prices reversed, as we expected from a five-wave up scenario. In the end, the S&P500 ended down -22 points.

Prices as measured by the S&P500 cash index had closed Friday at 2,670. With the futures higher over night prices gapped up to open at 2,675 and traded up to 2,683, nearing tying the all-important 2,683.55 but not quite making it. Still it was good enough for five-waves up in good form from the prior (b) wave low. Here is the daily chart.


S&P500 Cash - Daily - Potential Triangles Intact

With the cash price now below the EMA-34, and similarly with the ES daily futures price below the 18-day SMA, then the bias of the market has shifted downward again. It is possible we are getting either the second wave of minuet (c) of minute ((d)), or since (b) did not take as much time as (a), up, it is possible (b) is making further sub-divisions to take more time.

Only a new low below (b) or a new high above today's wave can help sort out the two scenarios. Until then, this is a reminder that today was the last day of the month, with the usual "window-dressing", and tomorrow is the first day of a new month with potential inflows from pension funds, 401k's, company bonuses, etc., and there is a Fed meeting on Tues/Wed, with the results to be announced at 14:00 ET Wednesday. Then there is the payroll employment report this Friday.

So, we must still remain patient, calm and flexible as the market continues in its volatile ways.

Have a very good start to your evening,
TraderJoe


9 comments:

  1. If it really is 5 waves up from 180425 low shouldn’t spx go above todays high before 180425 low? Unless spx finished a 5 wave = c wave at 2682 in some sort of flat...but I can’t find a count for this.

    Erik

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  2. Thanks Joe. While the 2612-2683 can be counted as 5 waves, it can also be counted as corrective, which means the move from the 2/9 low could be a B wave triangle that completed at today's high. That count works in all the major indexes and puts them all in the same place. If the market continues down tomorrow in an impulsive manner, then that would lend credence to this count. A gap and go tomorrow would create an island reversal as well.

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    Replies
    1. Welcome. A triangle ends a move. Why would it be there?

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    2. I'm suggestion that the triangle is not a 4th wave triangle and it did not start at the 1/26 high. Rather, the move from 1/26-2/9 was wave A, and then a B wave triangle started from that low. If correct, then yesterday's high could have been wave (e) of the B wave triangle, with wave C down still to come.

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  3. Thanks for sharing as always. I still think the d wave of a triangle is the most time consuming. So betting a higher chance for highs in the coming days.

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  4. There are too many websites noticing this triangle. Because it’s so obvious, I’m guessing it won’t pan out as planned.

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