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)
While it was a rapid start to additional down side today, clearly from the post on Friday it was no surprise to us. The S&P500 cash index gapped down at the open, traded down to 2,699, and then rebounded a bit into the on the walking back of some trade comments, and closed at 2,717, down approximately -38 points.
Friday we had pointed to the likelihood of a flat wave being formed. The decline today feels like all or part of wave .iii of c of minute wave (ii). The clear gap is what makes it 'feel' that way - something objective, not something subjective.
With today's down movement, the Dow Jones Industrial Average has already met it's 'minimum' target for a flat wave, crossing below it's prior a wave, down.
Below is the daily chart of the ES E-Mini S&P500 future, showing the break lower of the red down fractal we indicated was a key to this count. The S&P 500 cash chart - you are encouraged to examine one for yourself - now also has the absolute minimum expectation for the flat, as there must be overlap from minute (i) to minute (ii) - even if the minute (ii) turns out to be a 'running flat'. Now, there is such overlap in cash - as we showed in the futures on Friday and show again below.
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| ES E-Mini S&P500 Future - Daily - Flat More Likely |
As far as we can tell, the diagonal is wave .i of c, the break of the upward diagonal trend line is .ii of c, and we are now in wave .iii of c, lower. We called the diagonal perfectly - waiting until all the parameters were met. And we called for the break of the diagonal trend line, and the next wave down.
As you can the see, the daily slow stochastic has not bottomed or turned upward yet. So, more downward movement is likely over the next few days.
The best alternate for this count is that it is still wave (e) of the much larger triangle we discussed earlier, but that would only be suggested first by this down wave becoming longer in price that the wave (e) location which is shown above.
Yes, we must still remain patient, calm and flexible, as we are still in The Fourth Wave Conundrum until we are not.
Have a very good start to your evening.
TraderJoe
Joe, it seems to me that what you're calling wave b of the flat is the clearest 5 wave move up that ES has had all year. How are you counting that as a 3 wave subdivision? Thanks.
ReplyDeleteI have already covered that. I said the market had to hold a 38% retrace for a fourth wave. It did not.
DeleteET, I can see the 3rd wave down today, on 30 minute I show 160 bars sometime on Friday. Best guess I come up with 2670 area,near or at the 200 day ma.
ReplyDeleteI didn't consider the b wave flat idea because I thought it was a bit to strong. I like the idea and that is a sign of strength in the market. You just have to look hard to find strength in indicators. Thanks for the post!
Welcome Bill.
DeleteJoe, the count is an irregular flat (ii).
ReplyDelete(a) Is there a fibo limit (e.g. 1.382x or 1.618x) to length of b relative to a beyond which the odds of the wave pattern are significantly reduced? It's now 115/66 = 1.74x.
(b) I read somewhere to expect the c wave to exceed the bottom of a by the same amount as b exceeds top of a (2791 - 2742, or 2627). Is this normal in equities?
(c) Or alternatively, the more "normal"(?) c = 1.618 b = 2791 - 1.618*(2791-2676) = 2605? Except this would be such a deep retrace as to reduce the odds of 2594/2792 as impulsive (i).
Your comments much appreciated.
The accepted limit for an expanded flat is c = 2.62 x a, when subtracted from b, provided that does not go beyond the start of i and cause a violation. But don't overthink it - just count five down.
DeleteJoe, this question is off topic, but can you tell me where it's written that waves ii and iv of a LD or EDT must be zig-zags? Thanks.
ReplyDeletePage 87 of The Elliott Wave Principle by Frost and Prechter, 10th Edition. Bottom of page:
DeleteDiagonal RULES, "Waves 1, 2, 3, 4 & 5 of an Ending Diagonal, and Waves 2 & 4 of a Leading Diagonal always subdivide as zigzags".