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 indicated that a lower low today would result in a countable impulse wave lower, depending on the reaction to the employment report. A lower low day occurred after stocks popped and hesitated at the open. First, here is an intraday chart showing how this impulse was counted in real time.
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| S&P500 Cash Index - 15 Minute - Classic Impulse Lower |
Of interest, the gap is clearly in wave (iii) of 3. Further, wave (v) of 3 was identified in real time as a potential ending diagonal wave. And, it turned out to be just that. How do we know? Because wave 4 more than fully retraced the diagonal, and did it in fewer bars than the diagonal took to build.
Wave 2 was a very sideways flat wave, and wave 4 was a sharp zigzag for excellent alternation. Within wave 5 the five clear sub-divisions can be seen but are not labeled. And, there is a five-minute diagonal for wave (v) of 5, if you look at it on that time scale. That diagonal has also been proven out.
The key signature that we look for is the Elliott Wave Oscillator diverging on wave 5, and that is quite clear even on this 15-minute chart. The wave is roughly parallel, with a little undershoot in wave 3 - just as we always expect to indicate where the greatest downward momentum is, and a little overshoot for wave 4. The overshoot for wave 4 indicates the "attack on the Elliott parallel trend channel" I have written about many times before. Wave 5 met a Fibonacci projection of 0.618 x net (1 through 3) once the bottom was broken. That is the second most common target for an Elliott fifth wave.
That's the good news.
The bad news is that this is likely a minuet "a" wave of minute (iv) as some key levels were not broken on some of the charts. (Or it is the sub-minuet "a" wave of a triangle's first leg). And that most likely means a b wave will follow it. And the b wave can literally be "any three" from a zigzag or double zigzag to a flat or even a triangle itself. Good luck in calling that one! A target for wave b? It could be anything from 23% - 78% retracement, so I simply won't guess.
Here is the daily chart again to show that the Elliott Wave Oscillator continued as red and declining today, but is still above the zero line.
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| S&P500 Cash Index - Daily - Impulse Lower |
Keep in mind that even though the channel is currently drawn as it is, wave minute (iv) can easily travel back down to the level of minuet wave iv.
I hope these updates have been of some help. If so, leave a comment, or more importantly help spread the word to others.
Have a good start to your evening and to your weekend.
TraderJoe
Joe ... Thank you for your hard & great work . It is very much appreciated .
ReplyDeleteWelcome. Thanks for saying!
DeleteThanks for the great insights Joe...much appreciated
ReplyDeleteWelcome Shawn. Don't recall too many comments from you, so thanks for saying.
DeleteThanks a lot for your insights.
ReplyDeleteHow long do you think (iv) will normally take, any idea? A couple weeks?
That depends on its form. If it is a simple sharp, then a shorter period of time. If it is a triangle, then it could take longer than wave minute (ii). But, in either case long enough for the EWO to meet +10% - 40% of the height of maximum on the EWO - as per The Eight Fold Path methodology.
DeleteNice lower frame breakdown analysis! You mention an attack on the Elliott parallel trend channel in your comments. Where I can read your thoughts on this?
ReplyDeleteThanks!
In The Eight Fold Path Method for Counting an Impulse which is the featured post.
DeleteIn the EW principle, where can one find described the pattern you propose for minute (ii)?
ReplyDeleteThanks.
See page 53 of the 10th Edition flats as W-X-Y.
DeleteJoe, it's the case that, for quite some time, your work has been outstanding. Not only has your analysis been spot on, but the tone and quality of your commentary has been exemplary. It's one thing to count waves, but the analysts' bedside manner, how one deals with the inevitable issues of ego, are equally important. I've followed you enough years to recall earlier in your work when these qualities were not as finely developed as they are now. This speaks to your hard work and dedication. Congrats on your growth and continuous learning. Please keep up the good work . . . after-all, having guided us through the rewards of the bull market, you've got to get us safely though the next bear market. :-)
ReplyDeleteAnd equal thanks for being a long time reader & proponent. It has taken a long time to navigate from Prechter, through Neely, and Williams. They have each had much to teach, and some to have to unlearn. And so you are correct, an ego does not serve the student well.
DeleteJoe,
ReplyDeleteDo you analyze Gold, GDX, or fixed income? Your thoughts on longer term outlook for alternate asset classes would certainly be interesting.
-TJ
Daily GOLD futures currently have three-waves down from Jan '18, counted as 0 = 1,392, 1 = 1,333 (Feb '18), 2 = 1,388 (Apr '18), 3 = 1,167 (Aug '18). It is currently trying to decide if it is making a fourth and fifth wave lower for an impulse or end the wave at that Aug low inside of a triangle. So far, the current up wave meets fourth wave parameters. The situation would change if this up wave gets outside of a 38 - 50% retracement. Hope this helps.
DeleteVery helpful. Do you publish your analysis on other markets? Anyway thank you for all that you do.
DeleteFantastic analysis and patience as always!
ReplyDeleteI find the use of degree confirmation/violation very interesting, do you think we can use degree violation in any degree of the trend? Both intraday and > daily?
The first abc leg of the recent diagonal is bigger then (i) of minute (iii), so I guess that’s an degree violation? But maybe of lesser importance when (v) took the form of an ending diagonal. We have to compare apples with apples?
Yes. Degree confirmation should work in any degree of trend. Otherwise the concept of wave degree is meaningless. One reason I show the alt: (v) is in case the degree is off by one. I'm still looking at it.
DeleteI think the answer to this problem is that sub-minuette blue .i is not larger than the largest minuet wave which is black iii in the above chart. Since a larger wave was built at a higher degree, then the next wave up can then not exceed the largest wave in the higher degree series. This is as opposed to blue .i having to be smaller than black i. I am, however, still studying this topic, and it is very very interesting to see exactly how larger waves are built from smaller ones. So, this is still very much an 'open issue'.
DeleteThis may be further borne out by the fact that the remaining waves can be counted with their degrees in tact, and the timing for the turn was virtually perfect in real time.
And in the fifteen minute chart, a lower low on Monday might help resolve degree labels there, by placing a truncation at the top for v of (iii) and perhaps making the down wave a :5, :3, :5, :3, :5 Leading Diagonal 'a' wave. I will explain more clearly if this happens on Monday.
Deleteso the difficulty with restrictions of a nest 1 2 i ii ...3 4 5 is that dont the restrictions on the i and ii eventually then compare against future waves 3 and 5. are you saying maximum up wave at any degree need to smaller than max up wave at higher degree which is less restrictive than every i must be smaller than every 1 or preceding 1... i do remember in real time this issue arising in the counting of some waves.. thanks again...
Deleteas i think more about this, the only restriction on impulse is 3 wave cant be shortest. so perhaps the only restriction ACROSS degrees is a rule that says the largest 3rd wave at any degree can not be the smallest of the largest wave 3 at the higher and lower degree. Simple rule and keeps the spirit of wave counting..... Think of waves in 3 dimensions. Comparing wave 3 to wave 1 and 5 is across 1 dimension, and wave 3 to wave 3 from other degrees another dimension. its more flexible yet will still create right proportions over time..???
DeleteAnd keep in mind, that since the largest gaps occur in Wave three, how is this to be accounted for in degree labeling? Since the 1970's we have futures so we might see some of this overnight action, but before then a 'gap was a gap'. And how was that related to the internal degrees of waves in a third wave? The topic is a little complex, and so the ideas above have some merit. But, there is by no means a definitive treatment of this topic.
Deletethanks. i agree its a deep concept. I went through an hourly chart of this year with labeling without taking into account degree violations. I then applied the rule i mentioned above. There were 2 instances where the 3rd waves were too small for degree. It was remedied by feducing the size of a larger 3rd wave. Anyway, doing so allows for a couple variations on your count which may be attractive but were rejected because the relative sizes of first and second waves in nest. All in all your approach leads to fewer counts which are more likely to remain valid and predictive than other services and techniques. keep up the good work.
DeleteThanks, and again, check back on Monday, because on further review I think there is a degree violation on the 15-minute chart; off the high. I'll address than Monday because I'm pretty sure I know what it is.
Deletei will... hope you are not going to the big 12 12 nest lol
DeleteDow, S&P and NQ all with new lows; correct prediction from degree labeling. Will explain in today's post.
DeletePosted early at 12:30 PM ET on 08 Oct.
Deletethanks joe. here are facts. the oscillator will meet minimum requirements for 4th wave with close at 2893 and 2902 next 2 days. Additionally, after a brief rally, any close below 2855 would exceed the maximum allowance for a fourth wave, using daily closes. So we know abc to 2855 is suitable and below that we may have completed a higher degree. But since the oscillator will be signaling a completed 4 around the coming b wave top, its a conunudrum i suppose. Do you have any suitable alternative counts allowing for the impulse we just saw to mark the ENDof a 4th wave and not the beginning? And do you agree that this woudl be a good way for us to eveluate whether we completed 5 waves not 3 since the triangle? thanks marc
ReplyDelete'Could be' the five waves down ended a fourth wave flat. But very hard to find the alternating companion 'two' in that case.
DeleteSo, also I understand why you are using closes to calculate zero on the EWO. The problem is the just is nothing magic about the zero point on the EWO. A wave four can stop above or below zero on the EWO. It can even 'triple bump' near the zero measurement.
Deletethanks. I was finding values to get 10 percent of max value and minus 40 Oct of max value ...
DeleteRight. Just saying those values could recur within the fourth wave.
DeleteCant say enough thank you for your hard work. I miss you intraday . Best Korhan
ReplyDeleteHi korhan. Thanks for saying. I miss it too. Still not sure what's going on.
DeleteGreat job as always. Thanks for your guidance.
ReplyDelete