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| S&P500 Cash Index - Possible Roadmap |
The path in the heavier blue arrows has been completed so far. That which may be upcoming is in the lighter black arrows.
It will be exceptionally unclear how deep the potential upcoming b wave can get. It could get down to the middle daily Bollinger Band (the 18-day SMA), or it could go to the lower daily Bollinger Band. We'll have to take it step-by-step.
And, while wave b, itself, may be a flat wave, all of wave 2 may not be a flat wave. That is, no part of wave 2 may travel below wave 1. Each of the larger Minor waves 1 - 5 must be a zigzag. If at any time that becomes not true, the count must be discontinued.
Then, wave Minor 3 should be shorter in time than wave Minor 1. (In this diagram, a = minute a, and is taken to mean the same thing as ((a)), or circle-a.).
Have a good start to the weekend.
TraderJoe
P.S. In looking through some of the various technical indicators, I thought I would add one of my key sentiment charts to this post. It is below, and it is the daily put-call ratio chart.
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| Daily Put-Call Ratio Returns to Zone of Speculation |
Notice how the most recent peak reading of 1.13 occurred in the "Zone of Despair" where people are most despondent about the prospects for stocks. And this reading occurred on December 21 - just a trading day before the recent market turn higher!
Now look at the Zone of Speculation. The three arrows in the lower center of the chart are the kick-off in bullish sentiment leading to the start of the bear market. The September valley preceded the October high. The November valleys preceded the drop throughout the month of December. Now look at the three most recent circles.
The Federal Reserve's announced move towards "Patience" dropped the put-call ratio to one of the lowest recorded readings in several years of charting this indicator. And, most recently, as the bulls yearn for a new all-time high, two more lows have been made in the Zone of Speculation - the later one of which is lower than the former. A lot of calls are being bought according to this indicator, and it is flashing a big caution sign.
Thanks for this, Joe!
ReplyDeleteWelcome Walter.
DeleteTJ -
ReplyDeleteAs we are projecting what may occur based upon what we've seen so far, how would the following 2 results alter (if at all) your projection:
1. c of 2 exceeds b of 1?
2. 3 ends up being a well defined 5 wave move down (not zigzag).
When time permits. Thanks!
1. Doesn't change anything as long as 2 does not go over the Oct high.
Delete2. Let's see where 2 ends first.
Thanks Joe for the note on B wave depth. I think - since this would also be the first Wave 2 back up on this degree, we would not be limited to the Nov high on that leg as well - just the Oct high, correct?
ReplyDeleteWelcome, yes.
DeleteJust keep in mind that while 2 is not limited by price, it is limited by price and time. In other words, it should not go so high that wave 3 can't exceed the low of 1 in less time than wave 1 took to complete its own travel.
DeleteInteresting reminder.In fact, one reason I doubted we ever had a third wave down was the lack of downside momentum. Even if 2 goes higher, one would expect the ferocity of a true third wave down to make the time question moot. I previously mentioned my own observation that in the old days when markets were more "normal",third waves would make their arrival known with a take-out of multiple pivots on the FIRST impulse down. We have quite a few gaps to test that theory. Price continues to wedge, and imho a break of the lower boundary will be the most reliable signal.
ReplyDeleteI agree Verne. Peter G has been correct in highlighting the Puetz window, which also fits with a big third wave.
DeleteReally like your work, E-T, your strict adherence to the rules, your honesty as a chartiste. Good stuff here.
ReplyDeleteCouple of questions for you. First, is there any reason that our L-D can't take a steeper track, like this?
Also, how do we know that we are in (a) of 2 up instead of (c) of 2? Proportionality and time? If (b) of 2 is still ahead, 2450 would seem a natural target.
IMO a real Bear Market would retest the 1810 SPX level a few times, drawing a horrifying head & shoulders in the process, with a target well under 1000.
Thanks. The expanding diagonal is possible, too, just that we haven't even made the contracting diagonal yet. If 3 becomes longer than 1, then it changes from contracting diagonal to the expanding variety. Oh, and don't forget to have your wave (4) overlap your wave (1).
DeleteBecause a flat, if it occurs can only be a "b" wave in a diagonal.
Here's a larger look at what I'm getting at here. It includes 1-4 overlap on the steeper diagonal, the right-shoulders off a neckline at 1810, and a suggestion for the consequences.
ReplyDeleteGoing lower than 1360 or so means we are out of an ancient channel going back to the 1920s, time to post content on squirrel recipes and the nightly news from ThunderDome.
I have added a chart to today's post as a P.S.
ReplyDeleteET,
ReplyDeleteDo we have enough yet to call a complete? It should subdivide 5 wave correct?
I notice an excellent Fibonacci cluster @ 2727 which would give a enough room to complete it's 5th wave. It would end it the 50% of 3. Chart link below.
https://www.tradingview.com/x/zapS0lAV/
Based on the location of the third wave of 'a', there is one way to count 'a' as complete. Upward movement can not be further ruled out - that is, there could still be an 'expanded' flat for the S&P500 - that is one way the Fib cluster could come into play. Another way is with the 'c' wave if and when it happens.
DeleteTrying to understand your narrative. What you are saying above is that the b wave of 2 may travel lower than wave 1, correct? Then you say no part of 2 may travel below 1 is not the b wave of 2 part of 2.
ReplyDeleteNo. Hopefully this picture will illustrate it for you.
Deletehttps://invst.ly/9w7fm
Assuming the minute a wave, circle-a, is completed, then it is OK for the minute ((b)) to be a FLAT. That means, it is OK for it to end where it did Friday, or for the minuet (b) wave to pursue a marginal higher high, as the Dow did. Then, the minuet (c) wave down of the minute ((b)) wave should not break the low, red, in order that the minute ((c)) wave up, blue arrow, makes a true zigzag.
I'm thinking the momentum from the breadth-thrust must be burnt off by at least one more wave up: the minute ((c)) wave to come. We are not there yet.
If, for any reason, price goes below the low on this stab downward, it means it is the Minor 3 wave, and Minor 2 ended at this high.
Let me know if this picture makes more sense to you.
TJ
Thanks TJ makes perfect sense
DeleteThe usual bottoming pattern once an index has fallen this low is to see the B wave make a modest new low, such as one day that reverses. Then we rally all the wave back in C to complete 2. That's what I expect - B to pop below the Christmas lows then snaps back.
ReplyDeleteI'm not even an Ewaver Joe, and I understood that explanation.
ReplyDeleteThe Puetze window is open wide now, the new moon is 10 days or so away, same set-up as 1987. A swift deep crashy wave 3 is what I expect, and I have some odd reasons, detailed at my blog.
Tim, I don't follow what your saying. Are you saying the 1929 style crash has already begun? Going that far back it's hard to find charts. Monthly RSI is still over 40, in my study 40-70 bullish and 20-60 bearish.
ReplyDeletere: the middle daily Bollinger Band (the 18-day SMA)
ReplyDeleteI see lots of people on the internet frequently referring to an 18-day SMA, and everyone can obviously use any length SMA that they want to use, but the middle Bollinger Band SMA that Bollinger has used from the beginning has always been a 20-period SMA.
"The defaults today are the same as they were 35 years ago, 20 periods for the moving average with the bands set at plus and minus two standard deviations of the same data used for the average."
https://www.bollingerbands.com/bollinger-bands
I see absolutely no point or purpose to your post.
DeleteI know that you normally pay meticulous attention to details, but if you're calculating standard deviation bands from an 18-period SMA, then you're not using Bollinger Bands. You're using a variation of the Bollinger Band calculation. The purpose of my post was to point that out for the sake of accuracy.
Deletembicta,
DeleteJohn Bollinger allows for some flexibility in selecting a proper middle band length. Below is a link to one of his presentations where he alludes to this. The particular period of 18 days comes from Ira Epstein who does make a disclaimer that his method is for futures markets only. I suspect he arrived at 18 days by trial and error and just found that to be the most accurate time frame to use. While Mr Bollinger doesn't say it in this clip I have heard him say that since different vehicles trade with different characteristics such as volatility one can experiment which time frame and even std deviation is best suited to that particular vehicle. On the link below you will want to start at the 14 min and 50 second point. Hope this helps.
https://www.youtube.com/watch?v=Em2ObWiiNSs
Maybe it has been addressed, but why can the Jan. 3 low not be considered a fifth wave truncation? That point would be 1 or C. Top of page 36 ewp gives a matching example.
ReplyDeleteDoes anyone know much of Jan barometer? As Jan goes, so goes the year? Unless S&P500 close Jan below 2500, it would be a positive close for the month. Does this mean we get a positive close into year end?
ReplyDeleteJay, we only have to look back how 2018 was to see how good or not the Jan barometer is. Jan 2018 was great, and year ended very badly.
ReplyDelete
ReplyDeleteA first five positive days in January has about an 80% chance of a positive year; the last forty years or so have seen three or four exceptions so it is clearly not a perfect indicator. One strange feature of the current market is how frequently signals are being negated. I no longer pay any attention to hourly or daily triggers and instead have been focusing on larger time frames for reliable set-ups. I want to see a weekly outside reversal, followed by a rising wedge break. Until then, the banksters will continue to ambush bearish trades imho...
Five waves down 'can' be counted from the (b) wave high. Can be i of (c) of ((b)).
ReplyDeleteYep, but I doubt retail investors are the ones buying. Central banks balance sheets are once again expanding. China especially has thrown in the towel and resorted to printing 24/7 to prop up their own markets. Other CBs will follow their lead....
ReplyDeleteThe slow stochastic of the daily ES has currently lost its embedded status. Let's see if it holds for the day.
ReplyDeletePretty clear 3 waves to a slightly lower low on the DOW, SPX and NDX ET. Expanded b of ii of (c)? Particularly if it can get back over a of ii at 2641 and get to at least the 38.2 at 2644 and change for c of ii.
ReplyDeleteGood man...
DeleteOverlap on NDX. So the low could be what its looked like for the last 30 minutes, i.e. b of 4 of i of (c). Possible ET?
ReplyDeleteOverlap on SPX as well. Does c of ii have to be 5 waves up?
DeleteAll C wave are 5 waves
DeleteThanks Walter. A triangle would explain the overlaps.
DeleteWhat overlap are you speaking of? I don't see any overlap in the up wave off of the low. I see it came close .05 pts but no overlap. I see 5 up off of the low.
DeleteI have checked another system and you are quite right PT regarding SPX. However NQs do have an overlap and they the same prior set up. "Could" be an expanding diagonal in that case.
DeleteLooks like 3,3,5 off the low...
ReplyDeleteEnd of Day
ReplyDeleteClose near high of the day.
Candlestick pattern - Dragonfly Doji or Hanging Man
Time above the Trigger line (8 EMA) - 16 days
Embedded reading status - 13 days
The short term ambiguity of trading signals continue. Island reversal followed by a daily hammer. You cannot make this stuff up! The banksters are throwing the kitchen sink at the declines! :)
ReplyDeleteA new post has been started for the next day.
ReplyDelete