Wednesday, May 30, 2018

i or x

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)

Based on yesterday's hourly chart of the cash S&P500 Index, there are two excellent possibilities for today's wave: either it is part of a first wave up, after the minute (e) wave of the larger triangle on the daily chart, or it is wave x of a more complicated double zigzag for wave (e) - still in progress.

Here is a cash chart on the fifteen minute time frame.

S&P500 Cash Index - 15 Minutes - i or x

In order to confirm a minute (e) wave of the triangle is completed, then price would need to get above the minute (d) wave high. That has not happened yet. Yes, the downward wave sequence in the channel was clearly an a, b, c three-wave sequence. Further, there is very poor alternation in the downward wave, so I conclude it is a corrective wave sequence of some type. 

Next, the upward wave sequence that began yesterday and continued today has a "no pullback" look to it. And, while it can very well be the first wave of the thrust out the triangle, the no pullback character can also just mean it is the "x" wave of a double zigzag. For the up wave to survive as the x wave, then it should not make a new high above the (d) wave, as that would invalidate a double zigzag count.

Otherwise, if the x wave survives, the (e) wave can travel more fully lower. I have no preference which occurs, remaining neutral and counting waves.

Have a very good start to your evening.


  1. Do you think that thiscount is valid for NDX ? Is possible in NDX that the triangle finished on 04/25?
    Thank you joe.

    1. hi 6Q .. that count is possible; as in the "smaller triangle" which I have diagrammed quite often now. But, even in the NDX, a larger triangle is 'possible'. Only the RUT - which has a higher high already - has most likely confirmed the smaller triangle count.

  2. Hi Joe,
    Hope you are well.
    I just heard a very interesting analysis of the market by someone from Morgan Stanley on CNBC. It was not based on EW but it fits so well with the scenarios we have discussed that I wanted to share it. His contention is that from an S&P perspective we had an unsustainable pop in earnings growth that coincided with a more agressive Fed posture. He maintains that this has since December placed the market in a time correction, that will range from 2450 to 3000 and will last until the end of 2019. He further speculates that we are in fact in a bear market of a rolling nature and quoted how many sectors have already had corrections of greater that 10% just not all at the same time. He speculated that it will be a bear market that is disappointing to the bears since there won't be a big flush.
    Don't these concepts just scream a shallow 4th wave correction. It seems to align with the EWI count. I mention his opinion here as I find it fascinating that a fundamental approach meshes so well with an EW concept.

    1. Hi PT. Doing well thanks. A wise and experienced bank trader (Thomas Long, with FXCM) once told me "the stock price 'must' reflect the fundamentals". It is the fundamentals, and people's opinion of them, that make up the current price bar. What the fundamentals omit is the part about "people's opinion of them". When the crowd gets loopy and bullish, that where EW takes over. When the crowd gets depressed and bearish, that's where EW takes over.

    2. Nice observation: Fundamentals, but more important, the *sentiment* with regard that fundamentals.