Wednesday, October 24, 2018

Most major markets Lower Lows

Market Outlook: Probable Long Term Top Identified
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)

With "five up" yesterday, today was the best chance to see a higher high daily candle. That did not happen. As far as I can tell, the five waves wound up being the 'c' wave end of a flat wave for (B) today. Price in the overnight marked nicked the high of yesterday and then began falling off quickly. Bomb threats in NYC today did not help. People asked yesterday if lower low prices were possible, and I responded that they certainly were.

Today, the NAS/NDX, RUT, DOW and S&P500 all made new lower lows. That is a second lower low for all. Yesterday, I published a count of a potential diagonal as an alternate count. That potential diagonal is still on the table as of today's close. There is nothing about an impulse that has been ruled out yet. It can still very well be the main count. None-the-less the internal wave count is so wicked as to demand a look at the potential diagonal.

S&P500 Cash Index - Hourly Chart - Potential Leading Diagonal

First, nothing says that wave (C) of ((3)) is now over. It may want to spike lower tomorrow to the 78.6% extension where ((3)) would be 78.6% x ((1)). Further, as a diagonal, the wave must conform in every manner to a diagonal wave.

So, now we have very, very objective criteria. If wave ((3)) becomes longer than wave ((1)) downward, then the diagonal is over - meaning invalidated. Finit. Kaput. Then we move on to a 1.618 wave downward - out of the gate.

However, if before the end of the month, wave ((3)) remains shorter than wave ((1)), and we get a fourth wave ((4)) up, as shown above, which remains shorter than wave ((2)), and occurs as a zigzag, then it is possible we will get a fifth wave down to end the series in which a wave ((5)) must remain shorter than wave ((3)).

Again, these five waves down would be to a minute (i) wave, downward.

Please have patience and flexibility. The market is doing the best it can to throw us and everyone else off its course. Again, there is nothing wrong with an impulse lower, it just doesn't "look right" at this time. No upward counts can be considered until there are higher high days. 

On some technical notes, the NQ today just made an outside reversal day down. And today confirmed a cross of the 18--day SMA down under the 100-day SMA on the daily ES futures chart with Bollinger Bands. A lot of moving average cross-over people follow those carefully in the futures. You are encouraged to review the daily futures charts with 18-day Bollinger Bands to see where prices are now in relationship to those bands. NYSE breadth is about 3 or 4 : 1 on the downside; most truly impulsive kick-offs are 9 or 10 : 1; so that may fit more with the diagonal, but new lows are completing swamping new highs.

You have your work cut out for you.
Have a good evening.
TraderJoe

10 comments:

  1. Joe, I'll offer an alternative, which is that the market is in a 5th wave down from the 10/17 wave IV high. Wave i ended at the 10/18 low, and yesterday's reversal high completed a running wave ii, and today began wave iii. Yesterday's reversal high overlapped the 10/18 low in every index except SPX, but I think that situation in SPX is allowed. I'm unaware of any rule that says otherwise.

    ReplyDelete
    Replies
    1. Yes, a wave 'must' overlap to be corrective to another wave. Otherwise it could be 'anything' and anybody's wave count would mean anything to any one. I have never seen an instance where it was necessary to assume a corrective wave didn't overlap 'somewhere'.

      Delete
    2. Wave a of the running ii certainly overlapped, but wave c of ii (in SPX only)terminated just shy of the overlap. I have seen lots of Neely's counts of running corrections with the same situation. At any rate, time will tell if it's correct or not.

      Delete
    3. Just one of the reasons Neely has been so wrong.

      Delete
    4. Well, the fact of the matter is that the market doesn't always perfectly adhere to EW rules. For example, on Tuesday's update, you correctly stated that the reversal from 2691 up to 2750 was a 5-wave move. "... based on having five-waves up at the end of the day today." There is no doubt that it was a clear cut impulse wave, but then the market went directly to new lows yesterday. So, in my head, that means that the impulse wave has to be a c wave of a running correction. You treated it differently, as you have now labeled that "five-waves up" move as a 3 wave subdivision, and you made that change so that it would fit your new count. However, in my mind, 5 waves is 5 waves. It can't become 3 waves after the fact. You frequently change previously labeled 3 wave moves to 5 wave moves as well, for the same reason...in order to force fit the previously labeled wave into a new count. So, nothing is perfect.

      Delete
    5. Nope. I said the five waves remained five waves, just at the end of a flat, with a small b wave; too hard to see on the hourly chart.

      Delete
  2. Hallo Joe, going back to your previous posts, can we still consider the idea of an impulsive wave (i) downward that ended today with a final expanding diagonal as wave ((5)) (the latter would correspond to wave ((3)) on your today chart) ?

    ReplyDelete
    Replies
    1. Yes, that is 'plausible' Matteo. But the RSI divergence doesn't look that good yet. So, "pick your poison" as the saying goes. Also, due to overlap 'can not' be considered as such in the Nas/Ndx.

      Delete
  3. Interesting assessment! If this plays out, I assume this would be wave a of an abc?
    Would the target area for a rally be to (2) or beyond?

    Thanks!

    ReplyDelete