In the stock market, sentiment is getting a bit "toasty". Contrary to when I called a potential long term top in the stock market in October - when people were ebullient about the prospect for stocks - now, as the downturn is taking hold, everyone is trying to take credit for calling the top. Common pundits such as Jim Cramer, Peter Schiff and Ron Powell are now calling for a correction, a bear market or even depression-like conditions. In his latest newsletter, Robert Prechter won't even publish a stock market count, taking credit and sitting on laurels, when he was incorrect since April of this year, when an immediate down turn did not materialize, but, instead, we got a new all-time high. So now nearly everyone is board.
Well, not quite. There are still the mutual funds and pension funds that are trying to figure out how to get out of this mess. And there are people who might be jolted by their upcoming 401k statements. But still, the lopsided sentiment can now be seen in this chart of the weekly put call ratio. It is up in an area I have not seen in more than two full years.
 |
| Put-Call Ratio - Weekly - Enters "Zone of Despair" Above 1.0 |
Just as we formerly identified the "Zone of Speculation" near the all-time stock market high, here in this chart we show the "Zone of Despair". People are buying a lot of puts.
If you couple this chart with the one below, it can be seen that the possibility of a stock market pop might be near. Make no mistake. It 'is' in all likelihood a bear market. But, there are 'sharp rallies' in bear markets. They are characteristic. The chart below is the hourly chart that we have been following on this site. What I have been trying to figure out all weekend is the degree violation noted by reader Marc Spungin and I, as prices crossed 2,498 to the upside. That is because the wave is larger than wave iv, of higher degree. This seemed to signal a change in degree about to occur. Maybe it is.
 |
| S&P500 Cash Index - Hourly - Degree Change? |
From wave (iii) to ((A)), we know that sequence is three waves. So, it could easily be an A:3 wave, up. There was a quick but almost uncountable reverse wave to the down side which might be a B:3 wave. If that is the case, we might expect the C:5 wave upward next to make a wave (iv) as a Flat that would alternate well with with the clear zigzag for wave (ii).
While we don't know that the B:3 wave, down is done (this is being written before the futures open), we should look for that occurrence.
There should be allowance for "five waves up" either as an impulse or in the form of a grinding diagonal, before counting downward again. However, for an impulse wave down in no way should a wave (iv) upward overlap with wave (i) downward.
Best wishes,
TraderJoe
P.S. Chart added after the close. Gap-and-go day. Flat wave (iv) did not materialize. Had to be a flat wave ii, instead, to preserve degree. Ugly stuff. EWO at a new low. And, wave (iii) nearing 1.618 x (i).
 |
| S&P500 - Hourly - Still in Wave (iii) |
It is possible iii and iv were done today, but it would be more proportional to make a channel down. By measurement, at that location, wave i is less than (i) and preserves wave degree. Being in the iii of (iii) is more commensurate with amounts of point drops being seen.
Joe,
ReplyDeleteThanks for all you do. I'm so appreciative that you take the time to do this blog when you have nothing to gain. It's better to learn how to fish than counting on someone else to give you a fish. Thanks for your teachings.
Over the weekend I found a pattern from the 2008 sell-off that likes very similar to our current pattern that's very difficult to count. I attached it as a PDF I hope it can be opened.
Thanks again,
Merry Christmas to all.
S&P 2008 chart vs 2018.pdf
what i do is go to imgur and put it there. then provide how that image can be found here.
Deletehappy holidays
Thanks Gerald. Here's the Imgur.
Deletehttps://imgur.com/a/L1IANyb
Thank you Joe! Merry Christmas and Happy Holidays to all the other readers, posters and commentators who contribute here.
ReplyDeleteDoes anybody have a recommendation of where one can go to create an index? I am looking to track the industry of Health Care Equipment & Supplies. It would give me say 30 min candles of how the index is performing during the day updating in real time.
ReplyDeleteJoe,
ReplyDeleteI like your count and comments.
if count doesn't play out above,
I believe measurements allow for
a morning rally shy of 2440 then blue (iii) to travel to approx 2375, or
blue (v) could have ended at circle(b) making circle (a) blue (iv), opening door for larger rally.
If the impulse concluded at 2462 there is no degree violation. what followed can be a wxy correction. the problem is the uncountable mess that followed later that day...
ReplyDeletebut if the third wave already concluded, as in your count, it is a very short one...
anways, thanks for sharing your thoughts & Merry Xmas ��������
Perhaps black iii is only black i
ReplyDeletethis wave would still have same limit. wave 3 is shorter in current wave and cant be subwave
DeleteIf that was a degree change on 12/21, is it possible that the current wave is Wave 5?
ReplyDeleteup move was a degree violation should be in higher degree wave up
ReplyDeleteLet me rephrase that: if that was a degree change on 12/21, is it possible that the wave in question on 12/21 was a very short All Of (iv), and the current wave is Wave (v)?
DeleteIf (iv) must be a higher price range than this, than my idea is not true. Just wondering. Thank you.
Non elliott concept here:
ReplyDeleteOn a 5 min chart we just had a classic bollinger band reversal signal.
That is a low below the bollinger bands, a bounce then a new low inside the bollinger bands. Then a bounce and a small pullback now confirmed by a new local high.
whether it is a corrective wave or a change in trend remains to be seen.
DeleteDaily Russell 2000 with embedded slow stochastic, riding lower band, and making lower AO histogram. https://invst.ly/9lxzj
ReplyDeleteJoe, If you are here. I have a question. I seem to remember reading in the EWT book that when you get below a certain wave degree ie. very small ones, some of the rules and guidelines get bent a little or violated. I've done a preliminary search in the book but can't locate that passage. My question is if one is counting and impulse on a 1 min chart is alternation a necessary requirement.
ReplyDeleteHi P_T. It's really kind of up to you to tell me your reference for the bent rules and guidelines in the EWT book. Prechter does say that on some very short term charts, wave four overlaps of wave one 'might be' allowed. But there he was talking about 'hourly' charts. And, he was likely not too correct in that assessment. When it comes to one-minute charts, to me, there is little reason ever to look at that time frame.
Deletecurious if anyone sees this:
ReplyDeleteFrom 2585 on wed 15 min chart.
1-2-3 down and now working on a flat or triangle 4th
looking at EWO may only be 4 of 3
Deleteim measuring as diagonal off october high entering wave 4 up
ReplyDeletenot sure if its going to work
DeleteHello Marc, Merry Christmas
ReplyDeleteI could be mistaken but wasn't it already discussed that Minute i was a diagonal and you can't have a diagonal as a subwave of a larger diagonal. On the other side of the equation I have made the point that minute i could also be counted as a 3 wave move which supports your position. Muddy waters. lol
Thanks PT. A diagonal within a diagonal might be exceedingly rare but does it actually break any rules?
DeleteA leading diagonal can 5-3-5-3-5 or 3-3-3-3-3. I may be wrong but I thought Joe said you can't have a diagonal within a diagonal. I could be wrong.
DeleteThanks PT, just trying to learn here.
DeleteLooking at 2346.63 as target, that is 1.618 of i of ((3))
ReplyDeleteI'm looking at the last 10 minutes as an ED for 5 of 3 so with a 4 and 5 to come your target seems realistic.
Deletewave 1 wouldnt be a diagonal - joe said he didnt like it so much but it would have to do - ive been revisiting it
ReplyDeleteI thought ET was ok with diagonal as wave 1 ?
DeleteYes, wave ((i)), and (i) of ((iii)) are ok as diagonals.
DeleteDid any see joe's post advising of a new chart which is now gone? The commentnot the chart
ReplyDeleteSee below P_T. I wanted to review label degrees real quick.
Deletetrouble with count is the degree violation posted yeterday and the size of one of the third waves.... still working it out
ReplyDeleteMarc .. please review the above chart. I don't see a problem with label degrees yet.
DeleteWave iii should remain shorter than (i).
DeleteThe chart has no violations as labeled. If you were to try and label black i with subwaves you would run into multiple violations. The wave in the chart is not consistent with the rules. I have measured that wave and spotted violations which are in the imgur link above. The wave is just too long and the larger wave near end create all kinds of havoc. I understand why we want it to end where you have label black i. Maybe you can either look at my count identifying violations or post a count of that wave by itself as an impulse. thanks
Deletefyi, im referring to chart posted today.
Deletelink for black i count is posted below
https://imgur.com/a/eKO1leM
DeleteAfter the close I added a chart. In order to preserve wave degree, I moved i to after the FED, and wave ii is now the unexplained flat. By measurement wave i is just short of the length of (i), and (ii) is the longer wave in total length.
ReplyDeleteMarc, if you are still here. I am wondering what is making you think of a diagonal from the top ? We would need 4 to overlap 1 which is 250 points away and we haven't even had an up move to begin the trek yet. With 3 clean waves down why a diagonal?
ReplyDeletei was using futures had a better look - trying to work out the few tricky violations and see whats left. maybe the suggestion i had to call the 4th wave done last night will work. but im not worried about a 10% rally being achievable in this market if thats the count that works. Thanks for looking into it. i am seeing violations i could be wrong lets wait and see
ReplyDeletethanks joe.
Deletei am examining black i in the chart above. Trying to make it work but im stuck on violations.
see attached
https://imgur.com/a/eKO1leM
I posted my chart after the close. i is less than (i), so no degree violation. Everything before i is a 'smaller degree' than i. Have a good one!
DeleteBe safe, no kidding. SPY lost another .5% after the close and the 2 Year Treasury yield crashed. Hope everybody here has a wonderful holiday!
ReplyDeleteCompletely agree. I have been telling a lot of folks about a potential GD like environment approaching and everyone is a disbeliever. I mean no one buys the idea of another 1930s. Quite chilling
ReplyDeleteAs long as SPX 2327 is not broken the odds clearly favor that wave iii of 3 finished yesterday. The futures (ES) are much cleaner to count at least to me and show a completed impuls from the FED meeting down. If 2327 is broken than that count is wrong because wave iii is shorter than wave i and at that point wave v would be longer than wave iii.
ReplyDeleteWe are currently at the 161% extension of wave 1, and over the next days there should be the typical end of month money inflows.
DeleteI have no wave 1 on the chart. Please use the same symbols are me or you will confuse people.
DeleteJoe, if I understand your revised chart correctly, the maximum for iii would be about 2287, and iv would likely be a zigzag or short, sharp zigzag combination. Please correct me if I'm wrong. Thank you.
ReplyDeleteCouldn’t agree more. Prepare for the worst, hope for the best I suppose.
ReplyDelete