Sunday, December 9, 2018

Second Bold Prediction

I know my readers expect a lot more of me than just showing them when two moving averages cross. So I want to remind everyone that it was all the way back on July 1st, 2018 (at this LINK) when I posted that I could see the possibility of  a downward diagonal in Crude Oil, for the [C] wave to end the downward cycle.

The chart below updates you on the progress of that potential ending diagonal [C] wave.

Crude Oil Futures - Monthly -

From the above chart you can see that prices traded below the $50 level, and overlapped the Minor A wave upward. This rules out any upward impulse because if A were 1, instead, and C were 3, then wave 4 down would have overlapped 1/A which is not allowed in an impulse.

Prices have also broken down out of the perfect trend channel. And such a trend channel itself it more indicative of a zigzag wave than it is of an impulse (see The Eight Fold Path Method as to why.) That's quite a change from near $80 to under $50, so I hope the prediction showed the power of knowing the Elliott Wave patterns and their typical progress.

So, now it is time to suggest a path for stock market prices in the near term. The chart looks like this.

S&P500 Cash Index - Daily - Potential Path

It would be typical for wave ((iii)) to become 1.618 the length of wave ((i)), and that is because wave ((ii)) has taken more time than wave ((i)), already. This should set a sufficient base (or ceiling in this case) for the decline.

It is not clear that wave minute ((ii)) is over. There are ways it could extend in time. One way for it to extend in time is for the (y) wave to stretch out into a triangle - perhaps surrounding the holidays. However, the current waves are sufficient for minute ((ii)).

The next step is to draw the "base channel" around waves ((i)) and ((ii)), and the break of the base channel lower would likely be minute ((iii)), downward.

Following wave ((iii)) then should be a non-overlapping retracement for wave ((iv)) - length of time to be determined, followed by a fifth wave downward, which might approximately wave ((i)) in length.

One uncertain item is the degree of the current waves. I am currently showing them as minute waves. But I reserve the right to show them as Minor waves based on some considerations later in future. Time will tell if that becomes necessary.

Have an excellent rest of the weekend.
TraderJoe

P.S. For those trying to construct expanding diagonals, this is the more common form. Note how 'deep' wave two is, and wave four is greater than a 62% retrace.

ES Futures - 5 min - 'Potential Expanding Diagonal' - Must Prove Itself

A upward  wave of more that 1.618 occurred. Therefore, The Eight Fold Path Method may shed some light on this wave. Additional chart below.




EWO may come back to zero line. This is the only labeling that supports degree conformation.
 

97 comments:

  1. Thanks, Joe! Your oil analysis was dead- on. I saw other EW analysts expecting oil to go over $100/ barrel again

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  2. Did you mean to say MINUETTE ONE?

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  3. Bold prediction indeed! Do Neely's rules allow for y wave to morph into a triangle if this prints lower low than ((1))? Apply rules to label waves looking backwards is one thing (and challenging), trying to make actionable decisions on future trades is another thing equally challenging.

    Thanks and enjoy rest of Sunday! Early this week should be telling.

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    1. No. I don't think it would be a triangle if below ((i)).

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    2. How can (y) be a triangle?
      Doesn't a triangle preceed the final move? Where should the final move be in this case if wave ((iii)) follows?
      I always understood that an X wave may be a triangle (only the X wave preceeding Y or Z, if that's the last one)
      Whare am I wrong?
      Thanks for the Sunday post! Always a pleasure to read you.

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    3. Please see figure 1-47 on page 53 of the tenth edition of The Elliott Wave Principle, by Frost and Prechter. This section deals with 'complex corrections'. In this case the triangle would break down, not up. If you don't have this book, or haven't read it 'several times', it really is needed as a foundation to this work.

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  4. Maybe the trick is to look at other indicators. I see that the daily Bollinger bands seem kind of wide for wave iii type of a move. Argues for some sloshing around between 2600-2700 through the holiday season for the BBs to squeeze.

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    1. Can slosh .. still expecting c:5 of minuet (ii), up.

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    2. This is why I was puzzled by your comment about not being sure minute two was complete. I assumed minuette one of three down was underway. I you are expecting minuette two up, then clearly minuette one down is complete.

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  5. Then in Jan, Baam! Bada Bing Bada Boom!

    To readers:
    How are you making trading decisions based on Joe's chart today?

    Thx

    -TJ

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  6. Good morning Joe,

    Thank you for this post. After viewing your Oil chart I decided to take a look at XLE monthly. Price data starts in 1998 and then in 2002 price retraces below the opening prices of the ticker. From what I can see from the Crude chart back in 1998 was a wave 1 and price did not retrace 100% of it in wave 2 in 2002 but on XLE it did because the ticker went live in the middle of wave 1. In counting EW on XLE can we still label that as a 1,2 even though price retraced all of XLE wave 1? Tricky question because of when the ticker began trading.

    Thank you

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    1. Apples and oranges. "Seeks to provide precise exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries". Why would anyone want to count something that is such a mish-mash, the same as Crude Oil?

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  7. Thanks Joe. One confusion for me. As I read this wave ii maybe over or a c5 up wave up is still a possibility, correct? However if we break below wave i then the c5 will not happen and wave ii is over as wxy. Looking forward to seeing your weekly and monthly charts soon. Your teaching me a lot and I can see I have a lot to learn. Thanks

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  8. thank you Joe
    it's an analysis like you just did that I was waiting for
    Congratulations for your work on Monday

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  9. joe, i did some more thinking about the question i asked in yesterday post about how low wave a can fall off that (3) in my chart. i realized that it was the preceding wave in the sequence that places restriction. not the wave 2. which would be 2 waves ahead.
    the only restriction 2 puts on 4 is that it should show alternation from whatever structure 2 took on.
    also, if a larger degree 4 happened prior then it must be smaller than the larger 4 in both time and price.
    That said, I then looked at your long term count off the 2/12/16 weekly bottom. while your (i) as you note does not exceed 100% of 1 in price. (i) does so in time. 0 to 1 is 28 bars. from 2 to your (i) if you have it 6/23/17 is 34 bars. i'm not sure why that is allowed.

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    1. It's all driven by the daily futures. When I look at the daily ES futures, there is no conflict in time or price. The futures are tradeable, the cash is not. Suggest you reconstruct a daily futures chart, as I showed on several updates.

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    2. In your video at 9:56 it is a chart of weekly cash. the extended first wave is less than 100% in price. you mention that. but it is more than 100% in time. that count should not be valid. if I am wrong do explain. i'm not sure why you mentioned ES futures.

      https://studyofcycles.blogspot.com/2018/10/elliott-wave-video.html

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    3. Because the degree work was originally done on the futures. The shallow retrace is what tipped me off to the extended 1st wave in the first place. You might not have been following me back then. Again, the time constraint does work in the futures.

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    4. No, I was not around then. If I look at daily futures I still have the same question.

      here is visual.

      https://invst.ly/9gtjq

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    5. This is what I have: https://invst.ly/9gtu0; the 1 is 100% of Minor 1. The overlap in the futures is what let's it work. Futures overlapped many times when cash did not, and made price excursions of 200+ futures points that cash did not. Best I can do.

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    6. I still can not get this to work, Joe. If I move 1 to 9/8/16 i can get the time to work. however, now i can not get price. it goes over the top. There also a new issue. Now, ((ii)) is longer in time than 2. not allowed.

      https://invst.ly/9gu4x

      I am really trying to understand it. Where do you have 1 ending?

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    7. Joe, I'm looking at your chart. Gerald is saying the ((i)) on your chart takes more time than the initial 1 (not on your chart) ending 8/23/2016 of which it (i)) is a subwave.

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    8. Marc, I moved the 1 to 9/8/16 in my last link I provide. See my 6:43 post. This fits time requirement however now price does not fit. I, also, note that there is a new issue that being circle i to circle ii takes more time than 1 to 2. 1 to 2 is a larger degree wave. Therefore, that is not allowed.

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    9. Joe, ive been following a while. Is it fair to say that for wave degree violations
      price is a rule
      time is a guideline?

      If time is just a guideline - then i the second wave of a 3rd wave extension could be shorter than expected due to the upcoming 3rd of 3rd. Thats the environment we are in right now in SP. Just curious. Thanks for all the time consuming and hard work over the weekend.

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    10. Neither of your approaches is correct. That's why I have my ruler placed where it is. I'll explain more in the formalism of degree violations. I promise it won't be long, but it is more important to worry about the down wave now.

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  10. Hi Joe, For crude oil I understand this cannot be a wave 4 because it would overlap wave 1 however I do not understand why this count cannot be correct? 3 of 3 is the high in EWO, perfect channel up for a impulse. The only thing that that I can find that would make this invalid is EWO for where I have wave 4 is not at the zero line or even close to it.

    https://www.tradingview.com/x/h4C2DYof/

    Thank you

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    1. Because (4) did not approach / go below zero on the EWO.

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    2. Ok thank you! Glad I was able to recognize that as a problem before you reassured me.

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  11. Thanks very much for all your work and answers. Would a gold chart be possible?

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    1. Hi Kent - GOLD chart not needed. Place your Fibonacci ruler from the Apr high to the Aug low. What percent retrace are you at? I won't do the work for everyone. If the retrace holds, you have one count. If it doesn't you have a different assumption.

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  12. hi Joe amazing work again. Thanks for shedding some light for lost souls like me.

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  13. Joe, What about a leading diagonal as an alternate for the double zz on friday:

    i=2642, ii= 2665, iii= 2631, iv= 2647, v= 2623

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    1. Hard to find 5 waves in iii, v looks like an expanded diagonal on 1 min chart.

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  14. Current down wave is between 105% and 138% of the three up waves. It can 'now' qualify as the b:3 wave of an 'expanded flat' (and no longer a 'regular flat') but needs to start a c:5 upward wave this week. Regardless, the lower low is even more bearish.

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    1. Thank you, Joe! I was just about to ask regarding that very subject. You read my mind.

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  15. Now below the prior October low of 2,603.54; this now completely disproves all those who asked, "why can't the diagonal downward be the 'ending diagonal' of a C wave for a larger fourth wave?" Market has spoken.

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  16. Cash now below a 138.2% retrace; assumption of anything other than a failure not good. More bearish...

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  17. When or how does a expanded flat invalidate? Is their a rule that says expanded flat invalid and we are in a wave 3 here?

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    1. Most Elliott analysts give 150% as the maximum for expanded flat. Beyond 162% is a 'failure flat' only - meaning the prior waves highs could not be exceeded.

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  18. At 2,583 the ES daily is traded below the lower daily Bollinger Band of 2,591. That is an approximate 5% probability by the definition of how the Bollinger Bands are constructed. (Two standard deviations ~98% on each side of the mean in a 'normal' bell curve). The Bollinger Bands use two standard deviations around the average.

    Yet, here you are today witnessing an event with 5% probability.

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    1. Guess we were thinking the same thing at the same time.

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    2. ET - A true wave 3 should ride this BB down agree?

      -TJ

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    3. Maybe obvious to some but Isn't it very interesting that +- one standard deviation ~34 and two standard deviations +- ~13. I.e. fibonacci numbers!

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    4. the question is now conditional probability - given we are under the BB what are probabilities of events going forward

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  19. For those familiar with Ira Epstein who Joe refers to occasionally:
    On a daily chat price is through the lower Bollinger Band and pushing it down. At the same time the move is powerful enough to also move the upper band up expanding the bands. Although stochastics are in oversold territory, these conditions would allow for price to ride the lower band and cause stochastics to become embedded. This is what one would expect of a 3rd wave.

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    1. For those unfamiliar with Ira Epstein:

      http://studyofcycles.blogspot.com/2015/11/paraphrase-of-ira-epsteins-rules-for.html

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    2. Thanks. This is interesting...just finished reading DYNAMIC TRADING by Miner for the 2nd time. Amazing book. Do you and Joe have any recommendations of what to read. The best books on EW?

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  20. I'll be drawing a channel around the fifteen minutes cash bars from Friday through today. Looks like the upper channel would bust at around 2,625 - 30. Above that would be positive. Below the channel again, negative, most likely.

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  21. For those who follow interest rates, on the TNX the lower boundry of the up channel from March has been broken.

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  22. ET, does down way from failure on 12/3 qualifies as expanding diagonal 0 - 2792.63, 1 - 2702, 2 -2730.5, 3 - 2621.53, 4 - 2708.54, 5 - 2583.23, looking at 1 hr chart on spx.

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    1. No. Wave 2 would be much, much less than a 38% retracement; and expanding diagonals typically have 50 - 62% retracement, minimum, and often up to 87% retracement.

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  23. Off of the bottom 1 min chart. possible abc A up now in B triangle. Terminal C to follow to top of channel then another move down? Just a thought

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    1. the 12:23 low broke the 12:05 low wouldn't that invalidate the triangle?

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  24. Yes, it would be appropriate. I am now trying to determine if it required.

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  25. Replies
    1. It can still be 5 waves up from bottom as there is no overlap, (i) of a was 2592.52 and b was 2592.92.

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  26. For those trying to construct Expanding Diagonals, I have added a chart in the P.S. to show you the most common form of expanding diagonal. Note how 'deep' wave two is, and wave four is greater than a 62% retrace. Still, 'must' prove itself.

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    1. There is that 2625, cash; looks like the channel has been cleared, but has to survive a back-test/test of the lows.

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  27. Looks like we just completed a 5 wave move up off the low with nice alteration between 2 and 4. Back test then continuation higher?

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  28. Looks like a leading diagonal with 5-3-3-3 structure so far, currently in the 4th wave seen best in futures.

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  29. From the 11:45am high, the 162% extension would be at 2,365 futures, which came close and was just tapped. Can consider ((ii)) in the diagram above as a 'failure low', and then we could have 5-3-5 with the possibility of a third wave.

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    1. That new high and reversal 'may' have been the b wave of a flat to alternate with the zigzag :3

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  30. In this expanded flat, could fail C at 61.8% of price of A ?

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    1. current up wave just turn at 61.8% of A size.

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    2. Thank you Joe, I've seen my mistakes after I compared my count with your last chart.

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  31. A third chart has been added above. Bottom of channel just tapped.

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    1. Notice, there is a "running fourth wave" in the internals of wave 3. That is quite a strong indication of more upward movement to come.

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  32. Wave (iii) within 3, is 'exactly' as long wave 1; not one tick more.

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  33. So would this be the first wave of a bigger C wave?

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    1. More than likely, Walter. If B:3 was this morning's low, I show 1.62 x A:3 at 2,724 on the cash 15-minute chart.

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  34. I hope today just serves as an example of why Ira Epstein's guideline says "one does not add 'new shorts at a lower daily Bollinger Band". This is not trading or investment advice - just an example of one of Ira's guidelines in real time.

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  35. With due respect to Joe, I just don't see 5 waves in wave 1. I used trendlines and channels to make some trades #keepingitsimple - my chart https://imgur.com/a/kEOD9SO
    p.s - that's a huuge wave iv within wave 3 but I'm sure Joe knows best

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  36. whats the origin of the ABC that may be forming

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  37. Hi Erik B, Can you please expand on your comments in ref to the correlation your seeing with SD and Fibonacci.

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