Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)
Today is a good example of why one should remain humble about wave counting, and spend most of one's time measuring and ruling in & out possibilities. Yesterday, we said we had no indication that the upward triple zigzag was over with. It wasn't. There was some kind of election news and prices gapped up, and then ground into ever smaller and smaller bars. Pretty awful stuff. During the day we gave parameters for an ending contracting diagonal, using hourly candles. See yesterday's comments section. It busted higher. The result of that bust was that - even though there is no change to the initially overlapping upward count, there is a change to the way those overlaps work.
The new chart is below. We still can not count the initial portion impulsively. It can only be counted as a contracting leading diagonal. And, let me tell you, from the standpoint of wave-counting it was a real fake out kind of wave. Because of the lengths of waves ((1)) and (1), there are no degree violations in any portion of this count.
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| S&P500 Cash Index - 10 Minute Chart - Zigzags Converted to Leading Diagonal |
Notice that wave (3) of ((3)) is on a peak of the Elliott Wave Oscillator, and wave (5) of ((3)) diverges. One might expect the EWO to come back down to cross the zero line for a fourth wave, before the fourth and fifth waves higher.
Cash prices ended today on the 61.8% retrace of the entire hourly declining diagonal, as below.
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| S&P500 Cash Index - Hourly - Back to 62% Retrace |
Did the ((B)) wave back test the diagonal as cleanly as we had thought it might? Nope. But it did stop at the previous (4)th wave - a common location. That is why yesterday we said, the three waves down could be "all or part" of the ((B)) wave. You never can tell.
Again, we note, there is no clear sign of a reversal at this point. And if a fourth wave does occur, a 78.6% or deeper retrace, can still occur.
Have a very good start to your evening.
TraderJoe
P.S. Here's what we might expect from the C wave up. We know that it started with a Leading Diagonal first wave. So, if a fourth wave forms properly - about 38% to 50% - then a fifth wave should be an impulse overall, although v of (v) of C could be an ending diagonal, if it occurs because it would be of one lower degree. Further, we know a typical EW measurement is (v) = (i). So, wave (v) could be the length of the leading diagonal. You will have to do the homework there to determine the measurements.
Excellent job, Joe!
ReplyDeleteThx, I added a P.S.
Deletethanks joe.
ReplyDeleteWelcome. I added a P.S.
DeleteJoe,
ReplyDeleteThis is not criticism. But today I was surprised when (after the close of the cash market) you labeled a, b and c of B complete at 2700. From all posts prior to that, I assumed the SPX was still in b of B. Yesterday you did say that there were three waves down in a B wave (or part of a B wave), but without raising the possibility that C had started, I had no idea that it was a possibility. All prior posts diagrammed b of B as incomplete.
Probably some people read yesterday's post as you intended it, and maybe, to EW experts, the combination you identified was a signal that a new move had started. But for us non-experts, could you please raise the possibility that a new move may have started when that's the case?
Thank you so much for all of your hard work!
I will. I said as strongly as I could, there was a new higher high which just about 'proved' there was an A wave up. Did the (b) wave fool me being so short in time? Partially.
DeleteI added a P.S.
DeleteWith today's strong volume I chose to look at much longer term indicator. The monthly force index (13 ema) crossed 0 last month and is still below 0. It doesn't quite line up with recessions but it's not far off. This whole rally has been without volume. I'm beginning to wonder if the choo-choo is out of steam. This indicator gives oil a very bearish look.
ReplyDeleteI added a P.S.
DeleteHeck of a corrective wave.
ReplyDeleteDoes this mean the C or 3 wave to new lows is likely to happen during what is normally a low volatility period around mid Nov to end of Dec?
Could well be. I added a P.S.
DeleteAre you expecting A=C and the top to be around 2856 around 78.6 retracement? or is it possible for C to be greater than A? I can't see how it'll be much higher because we are already at a very deep retracement.
ReplyDeleteI added a P.S.
DeleteThanks Joe. Nothing has changed from my perspective. I still see the rally as corrective. What you have labeled as (1)(2)(3), I have as abc. From that point to your circle B at 2700, I have as an expanded flat wave x, and then from there I have another abc that probably isn't over yet. So I still see the initial wave up from 2700 as a triple zig-zag, as you previously labeled it yesterday.
ReplyDeleteFrom an entirely different point of view, the daily candle pattern from 10/30 to today's close, is an identical match to the daily candle pattern from 3/02 to 3/09. The only difference is that the current pattern started with 3 green candles, while the previous pattern started with 2 green candles.
Everything has changed from your perspective, because your original set of double zigzags was your whole justification for saying the "b or ii", up, could be completely over. You've been blown out of the water and you still won't admit your errors.
DeleteIf you are still counting as a triple zigzag, you are further admitting you are incorrect. You can't have a triple zigzag after a double zigzag. Not possible.
If you keep this up, you can kiss your account bye-bye. I do not want my readers to read the wrong thing as much as I can help it. The errors I make using legitimate EW are enough to handle. I do not want them to think they can do things like have triple zigzags after double zigzags. Wrong!
I added a P.S.
DeleteThe counts I have posted violate no EW rules. Counting waves always requires monitoring and adjusting, just like you adjusted your triple zz to a LD. However, the subdivisions of each wave never change. Only the groupings of the waves sometimes change. My initial thought that the rally could be over as a double zz at 2757 changed after the market immediately dropped 57 points in 3 1/2 hours down to 2700. It was at that point that I saw the potential for an expanded flat, and have stayed with that view ever since. However, even if one wanted to continue to call 2604-2757 a double zz, that would simply become wave w, followed by wave x to 2700, and currently in wave y. The end result is still the same corrective action.
DeleteIncorrect on almost all counts again. Your account moves closer to the trash can.
DeleteThat was indeed a head fake! Thank you!
ReplyDeleteIf you look at the daily chart of the Health care etf (xlv) It might be doing the (v) of an ending diagonal. And because this sector has an index weight about 15% in sp500 it might be a good idea to keep an eye on this diagonal to better ”time” a potential (iii) down on sp500.
Good idea. I added a P.S.
DeleteHi Joe, I am new to your blog and I am very thankful I have found it!
ReplyDeleteI am somewhat new to Elliott Wave could you point me in the right direction has to what you consider the best and proper way to learn it? Is their a certain book, certain course, etc.
Thanks in advance!
The simplest way to start is to go to the (free) Stockcharts-dot-com Chart School and read their information on Elliott Wave. While not complete, nor entirely accurate it is a good introduction. Here is a link.
Deletehttps://stockcharts.com/school/doku.php?id=chart_school:market_analysis:introduction_to_elliott_wave_theory
Read all of the continuing articles (links at the bottom of each page). Just realize the description of Leading Diagonals is only 'partially' correct. In addition to Leading Diagonals being 5-3-5-3-5, as we just saw, they can also be 3-3-3-3-3.
If you have not read Frost & Prechter's, The Elliott Wave Principle, you should. But, the above link is a bit easier.
Thanks a lot I will read it today and buy the book!
DeleteOne more thing I keep hearing people reference your YouTube videos are they still up? Would love to watch to see if I can learn some more.
Have a good trading day.
Robert, I started ET's recommended read list back in 2015. I'm going to be old and grey before I have confidence. Of course analyst and trading are 2 totally different feats. I've gained a bunch from Dr Alexander Elder and Bill Williams. Good luck!
DeleteI greatly appreciate that Bill I will be sure to check out their works!
DeleteBrilliant dissections and putting them all in proper perspective.
ReplyDeleteTherefore no need for any off side Qs guys. You cannot be "more correct" than what
the market says. Joe listens to that better than me / we can.
Joe one thing is that potential distance to travel.
I make C to reach 2864 approx;
(1)that then invalidate the likely 3--4-5 down.
(2)it also invokes the inverse H&S neckline @ 2815,
and gives a simple chart count to 3020.
Please critique this assumption. Many Thanks.
See the added P.S.
DeleteHave a good evening Joe. Reading your update each evening has become a part of my daily routine.
ReplyDeleteYou have a good evening too, Lez...
DeleteJoe,
ReplyDeleteIs there any significance to the C=A measurement at around 2853?
Some. See P.S., above.
DeleteOn Marketwatch.com there is an interesting article about midterm elections and the development of stock markets in the year after since World War 2.
ReplyDeleteThey write: "Since 1946, there have been 18 midterm elections. Stocks were higher 12 months after every single one. Every single one."
Additionally they point out: "Since 1946, stocks have risen an average of 17% in the year after a midterm. And if you measure from the yearly midterm lows, the results are even better. From their lows, stocks jumped an average of 32% over the next 12 months. For perspective, that’s more than double the average performance for stocks in all years. We’re also entering the third year of a presidential term, which is historically the strongest year for stocks."
Let's see where we end up this time.
Thomas,
DeleteThat is an interesting concept. However one must put it into perspective. I don't know if you have access to a long term chart and Elliott count of the Dow, but if you will note that super cycle 2 ended in 1932. Since that point we have been in super cycle 3. As you know wave 3 is the longest and strongest wave so one would expect overall upward progress. However, based on the current count, super cycle 3 ended in early Oct. and the overall bias will be shifting to a downward direction so it will as you point out be interesting to see if that election cycle concept holds up.
Regardless of news event or election, or mid-term; stocks have 'always' risen since 1932. So one can make a case for any bullish count they wish. It is sentiment, and credit balances that will make the difference as the FED reigns in.
DeleteHi ET. Could it be that the whole price increase since 2604 on October 29th is just the A wave of a flat correction? This would give the markets sufficient time to end this year with positive signs. At least in the US.
ReplyDeleteSince we likely haven't finished the C wave yet, and that might take us to 78%, I would say the above scenario is less likely. The purpose of the flat would be to extend the correction - would it not?
DeleteJust after the FED minutes were released at 14:00 EST, a down trend confirmation was obtained for part of all of wave ((4)). So far, wave ((4)) has bounced off the channel extension for wave C, but it is extremely short at ~14%, it is also currently shorter than wave ((2)) in time. SO, this could be only PART of wave 4. Keep an eye on it.
ReplyDeleteThanks ET, deleted my comment cause it was it was a minute before you posted this.
DeleteNot sure if you follow other markets but if you do follow the US dollar I would be grateful to know your thoughts. I think the dollar has been in a correction in 2018, correcting the move from late 2016-2018 low and we should be coming into the end of the correction soon after a few dollars higher? Wondering if you had any thoughts on that.
Thank you!
I don't like thoughts as much as I do measurements. The weekly dollar has not yet upwardly retraced 61.8% of the 2017 decline; nor is the gap at 100 filled yet. I'm 'trying' to help everyone see it is not 'my' thoughts or techniques that matter - just standard Elliott wave patterns and measurements.
DeleteI completely agree with you because when you let thoughts get in the way that is when you use forced counts to validate the thoughts. I guess what I was wondering is if we were in a 5-3-5 up from the 2018 low. 5 up to August 15th for a wave A then a simple zigzag for a wave B ending September 21st, and now about to see another 5 up possibly in a diagonal? From what I can see that is what I get but would appreciate any guidance as if you see something else or the same.
DeleteThank you