Today's slightly lower cash close was not much, but was sufficient to confirm yesterday's outside key reversal day down. As most technicians know, the outside key reversal day - whether up or down - is one of the strongest technical signals there is. That is because it indicates that a group of participants were caught at the highs, and they are looking to get out (in the case of an outside key reversal day down.) Or, on the flip side, in the case of an outside key reversal day, up, there is a group of market participants that got caught at the lows, and they are looking to get out, too.
Today, we have have several things: 1) we not only have yesterday's key reversal day down, but, 2) we have a confirmation of that day with a lower closing low; 3) further we had at the end of the day a near exact 62% retrace of the down wave - from the truncation - on the cash S&P500 index, 4) as the daily chart below shows, we also had a back test of that lower wedge line - and so far - that back test has held. Finally, 5) fifth and Fibonacci last - there was a countable ending contracting diagonal at the end of the day that met all of the degree requirements. Elliott analysts know the significance of that pattern, so I do not note it lightly!
You can see the contracting ending diagonal and the intraday chart at this LINK. The pattern has an excellent 'time signature' as each of the waves is contracting in time, just as expected!
You can see the contracting ending diagonal and the intraday chart at this LINK. The pattern has an excellent 'time signature' as each of the waves is contracting in time, just as expected!
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| SP500 Cash Index - Daily - Fisher Transform Dropping |
Because of the lower closing lows, the Fisher Transform is dropping and further confirming the divergence with price.
Next, as of the futures settlement all of the Dow (YM), S&P (ES) and Russell (TF) futures had lost their daily embedded slow stochastic readings. Only the NDX (NQ) futures had not. So, this likely means many stock indexes will begin to interact with their "lines-in-the-sand", their 18-day SMA's, and there might be some battle there between the bulls and the bears.
Some have said, "today was clearly a consolidation day for a move upward." To the contrary, the evidence above suggests today was a consolidation day for a further move downward.
Have a good start to your evening.
TraderJoe
hi joe
ReplyDeletewhat is the objective of the final wave of decline
What do you mean by final?
DeleteThanks TJ. The ending contracting diagonal you mapped out is one the clearer patterns of late and fits well with market's notable loss of upward momentum. That's 2 days in a row cash could not match the overnight highs in YM/ES. ES retrace made it to 60% and YM 50% in the overnight session. This is a sign market temperament is changing. Another was the muted response to the very healthy ISM reading of 59.7 (vs expected 57.3). Market would have rallied on such news up until recently. When time is up market direction will change regardless of news. First serious target to add weight behind a trend change would be to get below Monday's lows.
ReplyDeleteGood summary.
Deletethanks joe
ReplyDeleteWelcome marc.
DeleteET, Looking at the roadmap on a monthly chart we might want to start watching monthly RSI 14. If we follow your roadmap I'd expect monthly RSI to break 40.
ReplyDeleteSo after yesterday I decided to put more cash under the mattress. I jumped the gun a little but risk is going up without me.
Thanks Joe. The 18day SMA line in the sand is not too far below, it's only at the lows of the first leg down. If the 3rd wave triggers, it should blow right through it and the line in the sand might be the lower Daily BB (2710-2720) and/or Fib extensions (1.618 of Wave 1, at 2716).
ReplyDeleteI'm hoping at least, given i'm positioned for it. That said knowing hope is not a good strategy.
DeleteI certainly could be wrong interpreting today's price action as consolidation ahead of a move higher. That conclusion is based on a few things.
ReplyDeleteWe have seen repeatedly how sudden buying can negate bearish signals in this market, even in the face of very bearish-looking set-ups.
More importantly, the kind of steep bearish divergences we are seeing, and the degree of trend change expected, imho points to a turn that will be quite violent.
In my experience, a third or C wave down at this degree is not generally given to the kind of meandering we are currently seeing. Just one trader's perspective, and I would be very happy to be proven wrong, but based on what I am seeing, I think a defensive posture with regard to short trades is very much in order....
Verne .. once again - last time - please stop trying to provide trading or investment advice ('defensive posture with regards to short trades'.) I have provided a summary of Ira Epstein's guidelines for trading elsewhere. You are free to start your own site with your own guidelines. This site is about wave 'counting'. Get it?
DeleteGood counting Joe. Thank you.
ReplyDeleteGreat work Joe
ReplyDeleteWave (ii) of yesterday's five-minute ending contracting diagonal has been exceeded lower. We may need a smaller degree wave ii up for the down move. That count happen at any time, but a retrace - to be valid - must hold the diagonal highs.
ReplyDeleteChart showing wave (ii) has been exceeded, lower. Confirmation of diagonal lower would come from exceeding the the black 'b' wave lower in less time than the diagonal took to form.
Deletehttps://invst.ly/a7jwp
TJ
Fyi C=0,618*A to the dot on cash
ReplyDeleteThe 'b' wave has just been exceeded lower in less time than the diagonal took to form. The contracting ending diagonal 'c' wave is now proven out. Lower prices - with some backing-and-filling should result.
ReplyDeleteChart showing black 'b' wave has been exceeded lower in less time than the ending contracting diagonal 'c' wave took to form.
Deletehttps://invst.ly/a7k1z
TJ
Cash now has its largest retracement of the morning and is likely in a smaller degree wave two.
ReplyDeleteSPX giving goodbye kiss to the lower 4hr Channel Line.
ReplyDeleteES 'line in the sand' or 18-day SMA would be about 2,772.
ReplyDeleteRussell 2000 futures are now quite well below their 18-day SMA.
Deleteabc down? So some sort of diagonal or running 2 with very deep ii
ReplyDelete*deep "b" I mean
DeleteHere is an example of where the (b) wave of a FLAT is NOT a degree violation because it is shorter than the impulse wave down in length.
ReplyDeletehttps://invst.ly/a7lbn
TJ
The purpose of such a FLAT is to make wave ii/b longer in 'time' than wave i/a.
DeleteAlso .. as either a larger sideways 'triangle'; or as a diagonal ((c)) wave, there would be no degree violation for the same reason.
DeleteThanks for pointing this out!
DeleteTJ -
ReplyDeleteLast several days, you've been absolutely masterful! It's quiet a learning experience watching you navigate through the counts.
-TJ
If price fades from here, instead of the failure c wave of the flat, can have a diagonal, lower. A lower low is needed for the leading diagonal lower.
ReplyDeleteHere is the Leading Diagonal idea; which still requires a lower low. I have verified that wave ((4)) is shorter in both price and time than wave ((2)).
Deletehttps://invst.ly/a7m2v
TJ
Cash now has the required lower low; now wave ((5)) must remain shorter than wave ((3)).
Delete..and the ES hits the 18-day SMA, the 'line in the sand', at 2,772 with the bulls fighting all the way - which is what likely causes the choppy diagonal.
ReplyDeleteAny wave over 2,781 will start an upward correction. I'm going to be taking a break for a few hours ; )
DeleteWell deserved =)
DeleteBack testing LD
ReplyDeleteNow It gets interesting. Was that the C in a b of a flat or 1 of 3?
ReplyDeleteThis comment has been removed by the author.
DeleteNot sure what I was looking at but it looks like 100% time extension on SPX diagonal would be 9am.
Deletelittle SPX barrier triangle?
ReplyDeleteET,
ReplyDeleteWhere is your "big picture" count on the weekly/monthly? Thanks!
This is as far as I've gone; copy and paste link as needed.
Deletehttps://studyofcycles.blogspot.com/2019/02/updated-roadmap.html
TJ
Here's a late afternoon update
ReplyDeletehttps://invst.ly/a7njl
TJ
Small preliminary channel has broken down in yet a further bearish development. The futures have tagged 90% or better downward. Could now be the "b" wave of a flat or the next impulse starting lower.
DeleteES new low of day; Russell futures new LOD
DeleteTrend line on 5 minute chart from 2813.49 and 2803.12 highs is where SPX found support this morning. Does that line get touched? Or does it break? Very close so far.
DeleteWould be inclined to give the expanded b wave of a flat the benefit of the doubt for the moment, particularly whilst it still looks like 3 waves for the "b". YM and NQ halted right at the 38.2. ES didn't even make it that far at the first attempt.
DeleteVerified that a plausible b:3 is 108% and can qualify for an expanded flat
ReplyDeletehttps://invst.ly/a7nsq
TJ
SPX bounced on a TL from Mondays low and the a wave of the previous triangle.
ReplyDeleteA new post has been started for the next day.
ReplyDelete