Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Yesterday, we wrote that a zigzag or double zigzag was expected downward. We warned that more downside movement to 2,771 could be expected as a 38.2% retracement. Once that level was attained today, we warned that further downside movement could mean that the (c) wave of minute ((ii)) might be forming an ending contracting diagonal. Further down movement did occur.
Using the all-hours futures, which contains all of the information, it is still possible a single zigzag downward was made. Here is that chart.
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| ES E-Mini S&P500 Futures (All Hours) - 30 Minute Chart - Zigzag |
We called the low during the first up bar at the end of the day as an upward degree violation occurred. The downward waves are messy, but cash has a clean ending diagonal on it, and the lengths in the futures are correct. The count is that of a Leading Diagonal ((A)) wave down, three waves up for a ((B)) wave, and an impulse down for the ((C)) wave. At the end of the day, there was upward overlap.
Now looking at the hourly chart of the cash S&P500 Index below, we note something very telling.
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| S&P500 Cash Index - Hourly - Maybe Not Done Yet |
From the Oct 29th low, if you were calling ((A))-((B))-((C)) up to Wednesday's high of this week, you would have the two legs of a zigzag that would be essentially the same length in time. This would not be in accordance with the Principle of Alternation. Usually, in a zigzag, one of the ((A)) or ((C)) legs takes much less, or much more time.
So, the best suggestion at this point is not to rush things. The market makers have to be sure the fewest number of people are on board for any significant decline, so they can just whip things around more and in the process try to get people lost in the count.
But, if there were about to be a significant decline, wouldn't it make more sense that the last wave upward were, in fact, a diagonal wave - since diagonals often, often, often (not always) end C waves? There is already one good sign for the potential diagonal, and that is that wave (1) of ((C)) occurred over wave ((A)), as this shows its character as a motive wave. Now an upward wave (3) must do the same in some manner countable as a zigzag (even if it will contain a flat or triangle B wave). And then a wave (4) would have to remain shorter than wave (2).
One would have to get below the prior B wave of (1) to change my view on that.
Have a very good start to your evening and your weekend.
TraderJoe
thanks joe looks good
ReplyDeleteWelcome marc.
Deletecheck the first chart wave c
Delete4 bigger than (4) by 1 point if it matters
Not sure where the fours ended; that may have been the triangle I referred to intraday.
Deletealso seems like that move up first chart end of day was attacking the channel as a fourth wave with circle A as 1, circle B as 2, (3) as 3 and 4 would be expanded flat with b wave low - perfect channel, no overlap, alternation (flat versus expanded flat idk if thats alternation) and wave 3 = 1.618 wave 1, ... just trying to see what I'm missing thanks - if its a possible impulse would be good to know
DeleteNothing. I agreed late in the day that was a good possibility.
DeleteThx and have a good weekend. I was disappointed to hear of your decision on not providing DXY And Gold analysis, but I understand your POV Re. teaching vs doing
ReplyDeleteYou, as well.
DeleteIt does look like a contracting diagonal is in place. What changed, was it the magnitude of the drop of ii or what we thought was iv? Thanks.
ReplyDeleteYes, as I wrote, once we got below 38%, the Elliott Wave Oscillator on the shorter term chart broke the -40% level which typifies an impulse.
DeleteFascinating to read an analyst who understands the subterfuge of market makers in influencing the wave forms. I suspected the decline today was not really the big one owing to a glaring lack of downside momentum and the ED provided the perfect explanation. I loaded a ton of bull vertical put credit spreads in anticipation of more upwards movement early next week and it looks to be the right call. The reversal from an ED will be sharp and unmistakable. Thanks again!
ReplyDeleteWelcome for the counts Verne. How you 'load the wagons' is totally up to you.
DeleteThanks. Two differences though: wave (2) of your ED (C) has not completed yet, and it needs one more zz to finish on Monday; also, I counted 2604-2814 as a zigzag, with the 5th of c truncated (DOW didn't).
ReplyDeleteNo, sorry. There can only be one zz in each leg of a diagonal. If there are lower prices for (2), it will be because today's wave down makes a fourth and fifth wave to make an A of (2). I don't think that's very likely, but it 'could' happen, then a C wave of (2) would follow provided the current November high is not violated. That would make a deeper wave (2) overall. But, at this point, that can only be an alternate.
DeleteAnd, no, again, the wave from 2604, upward, must be an impulse, and not a zigzag, if there is a diagonal ((C)) wave after it.
Thanks for pointing this out I was just about to ask why another zz was needed.
DeleteWould there be a degree violation if (2) of ((C)) becomes bigger than ((B))? (2) is a few points shorter as of today.
Have a great weekend you to!
Understood. However, I counted the upward move (2604-2824) as a zigzag, the W(A) of a double ZZ. Now, 2814-2764 is a completed impulsive w(a), the rebound by the end of yesterday is w(b), Monday's w(c) will drop to sub-2740, thus complete W(B). The diagonal ((C)) wave you proposed seems unlikely.
DeleteThanks Joe... Fantastic analysis as always.
ReplyDeleteYou were right on top of this. It was really nice to have you in the blog making comments during the day.
ReplyDeleteFirst question: In the proposed upward ED, wave 1 hit the 61.8% retrace. I know the top channel line is just a temporary placement but would still expect to top out somewhere near the 78.6% fib just based on the geometry needed to maintain a wedge shape. Other than an expanding diagonal is there another scenario that would allow for a deeper retrace?
Second question: On the initial drop this morning, try as I would I could not get a five count. It wasn't there. I looked as the ES which included overnight action and I could get a five count. It may not have been there either. Where I'm going with this is when dealing with moderate and large gaps is it possible or permissible for the gap movement to represent more that 1 wave?
Both upper and lower diagonal lines are temporary placement. It is way too early for a diagonal to be accurately called; need at least four of the waves. The downward wave ((A)), ((B)), ((C)) in the first chart can still be ((1)), ((2)), ((3)) of a larger (A) wave of a larger zigzag. That is because ((A)) has not been upwardly overlapped yet.
DeleteThis was also pointed out in other comments.
The above scenario would answer the second question.
Some analysts are saying the B/2nd wave is done and the c wave of it was just a zigzag that completed yesterday. I cannot give any refutation other than it would be a pretty abrupt top. What are your thoughts on that count?
ReplyDeleteLook at my comments regarding the 'time' of each wave and alternation. I will not repeat what you can already read.
DeleteThanks I read that I just wasn't sure if there was any other evidence.
DeleteI would be very, very careful with that one. Try this exercise. Go to stockcharts.com and you can plot $SPX 'behind' daily $CPCE. If you can tease out the pattern there, you need to share it with us, as far as its being 'predictive' of the next day. Sometimes it works. Sometimes not.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteJoe - I've enjoyed your analysis as it is very helpful and thank you for doing it! Quick question - you've mentioned posting during the trading day. Do you have a trading site separate from this one? If so, would you provide the URL? Thx
ReplyDeleteHi Joe, based on what you said on the 9th, "One would have to get below the prior B wave of (1) to change my view on that", I am assuming your view is not too bullish near term?
ReplyDelete