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| S&P500 Cash Index - Daily - Present Day Doji |
Compare and contrast this chart with the similar one for 2007. Note also there is a Doji candle at 62%. This one is red.
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| S&P500 Cash Index - Daily - 2007 Doji |
The reason for this second chart is not so much about the colors of the Dojis. It is more about what happened 'after' the Doji in 2007. Notice that the 62% level was exceeded to some degree. There is no magic, per se, in the exact level of 62%. Still - to some degree - it was respected.
It was not until there was a clear outside reversal candle lower (red bearish engulfing candle) that the worst part of the bear market and financial crisis took hold. But - even then - look at how the bulls fought back on the very next candle and made another 70 - 80% retrace based on the size of the wick.
Next is this present day chart which includes an indicator known as the Fisher Transform. It tries to help spot divergences in the following manner: if a typical stock market move is 18 - 21 days long, then setting the period of the transform at (it's default) of 10, helps identify the 'mid-point' of the momentum. And divergence often, not always, follows.
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| S&P500 Cash Index - Daily - With Fisher Transform |
So, the divergences at the September, 2018 high, and the October, 2018 low are pretty evident. They help show where the wave is 'grinding' rather than impulsing. Of note, there was absolutely no sign of divergence at the December, 2018 low. This is often the sign of a "C" wave. Many, many "C" waves don't diverge on daily oscillators - sometimes they do on the intraday.
Of note, there is 'potential' divergence now with price versus the Fisher Transform. But, the transform is still making higher histogram bars, and would need to make lower bars first, before any assumption that the up move is over. Until then, the divergence is only potential. One of the valuable aspects of this indicator is, however, the relative smoothness of its transitions.
Have an excellent rest of the weekend.
TraderJoe
Cheers, thank you for the response in the previous post! Those upper gaps have been putting a bit of a kink in my bearish view. Looking through some of my favorite tickers, they are present across a lot of equities in the S&P at varying levels. AAPL for instance. Long term there are lots of gaps below in the S&P, but historically every gap hanging above that has existed seems to get filled. It’s because of that I’m questioning my approach.
ReplyDeleteAssuming that the gap was placed there for a reason, and that the ATH has already been met, because of depth of the downward swing, I am considering a scenario in which it might be permissible to fill them. Please excuse the following as it may be spoken incorrectly from an EW labeling side of things :
The current up move (in its entirety) is an “A” , is a setup for a pullback to “B”, which is in turn a position to send another wave “C” to fill those gaps. The general motion of the prices seems to occur in 3 wave nature and I’m debating if this isn’t possible on a large scale now.
This is completely just a theory, but it suggests that the ultimate decline - when it happens - when leave no gaps above to contemplate. While individual stocks don’t represent the whole and work their own counts in time, I think this might support a case for allowing their gaps to fill as well. If this is possible, and it is still possible to call this a 2 wave even at those highs, then it may serve to set a much longer slide for 3.
Again thank you for what you do, I’ll continue to watch and learn from everyone here. I fully accept any error in logic that I may have made here. I'm more braced for downside than up at the moment.
How long would you wait for the gap in the cash S&P500 from the two dates of 20 Mar to 23 Mar, 2009 to fill? It's been 9 years.
DeleteYes, many downward gaps were filled by the previous bull market. But clearly the market does not have to fill gaps if it does not want to.
hi joe
ReplyDeletefor a lot of people he says that the decline is over and that we are coming soon to a bull market
if we are in phase 2 which is not finished yet
as you say, phase 3 will last how long and downside?
thank you joe
Please see the 26 Jan post.
DeleteIn the big picture, are the prime bear counts have us completing 2 here of a leading diagonal that zig-zags lower in 3/4/5, versus this being a 2 that leads to a 3 meltdown run an alternative bear count? And the prime bull potential the December lows marking end of wave 4, with current move a first wave of a five-waver that targets major new highs?
ReplyDeleteThe rally off the Christmas lows was strange by historical standards, with the closet I can find the run to test the 200 day during the 1998 crises, which then went on to hit new lows before the FED slashed rates to save the day.
In addition to the two possible 1,2 counts you allude to, some counts also see us completing a c of a larger B wave up, with a large C down ahead to finish a fourth wave. I have even seen a count contending this move up is only the a of an abc up for a B wave. That is Avi Gilburt's call and one of the few times I think he is off the mark on his call. To be fair, he does have an alternate. This price action has in my view, all the hallmarks of a 62% second wave move,ahead of a third, or possibly a C, wave to the downside. Price will tell all.
ReplyDeleteI guess everything depends on how low we drop once this rally is complete. If we make it all the way back to the lows - or go beyond - then the next bounce is likely not to reach current SP levels (like early 2008, where first big bounce was higher than the second bounce after retest of lows.)
DeleteConversely, if we retrace only 1/2, or even a 1/3rd of the rally off the Christmas lows, then a much deeper rally push toward the old highs would likely happen.
Tough market to trade till we get to pin the tail on this donkey.
Indeed. The bullish counts expect a second wave correction. The bearish ones a third or C wave. It seems the bearish case requires new lows. I have seen one count calling the move off the December lows an A wave and that seems to me a stretch...pun intended...
DeleteI see this as a C wave down of wave 4. Wave 3 top May 17, 2015. Short and sweet wave A down, followed by a B wave up to The top september 2018. October 28 wave 1 down (abc), wave 2 (abc) top up November 7. Wave 3 (abc) down bottom December 25. Wave 4 (abc) up, overlapping wave 2, done in a few days? Wave 5 down to Approx 15000 in three waves.
DeleteIsn't the chart labeled 2008 from 2007?
ReplyDeleteYes, it was. Thanks for catching that error. Corrected.
DeleteSo far our markets are holding up relatively well compared to foreign markets. Europe and Germany look the weakest using a monthly chart.
ReplyDeleteI was on the fence whether or not to post but in study I’m finding foreign markets can provide clues. As we progress this year I plan on looking at other indices.
There is a marked absence of selling in US markets.
ReplyDeleteSideways consolidation above the 2700 round number pivot is pointing to a move higher. I think it will be a ffth wave.
Back in 87 and 29 there were 3 sideways days before it all began.
ReplyDeleteToday should be the 3rd such day,and then it's on.
Black Monday on 18th January I think.
My target for QQQ is 103.92. Had a that level for weeks. Check out the fib relationship to the QQQ recent high last week. It's not magic, it's divine intervention. Debt bubbles will be burst. Good luck all.
The DOW has a new low over Friday's low.
ReplyDeleteMeanwhile, the NQ makes a new daily high, although right into its 100-SMA.
DeleteYep. Nasdaq has negated Friday's shooting star with the higher high.
ReplyDeleteIt seeems to me the immediate bearish case remains viable only with an outside reversal day as the other indices will likely follow Nasdaq to higher highs...interesting price action!
Joe-
ReplyDeleteDid you receive the email I sent to your yahoo address?
Thanks.
My take on current count. May still see above 2720.
ReplyDeletehttps://invst.ly/9z10x
coskund4-
DeleteI have one small difference, but we end up at the same place. That's
either good news or bad news for both of us, lol.
Five waves up now finishing from recent low at 2699?
ReplyDeletePrices have now just reached the 1.618 level; actually the S&P500 is still short in the cash market by 0.39 points. And the Dow is short a bit more than that. But it is close enough for government work. This is sufficient to call the move A,B,C or 1,2,3, with the latter required until or unless a wave 4 does not hold.
ReplyDeleteThanks for the update, TJ. This move is kind of frustrating.
DeleteI deleted the next day's post as I did find a degree issue with it. Still working on it.
ReplyDeleteA new post for the next day is up.
ReplyDelete