A Very Simple Situation

It is quite true when writing a market blog that many people want to know your "long term" view without bothering to wonder what is around the next corner first. While I do not claim to be a market Nostradamus, the immediate situation does not have to be anywhere near that mystical or exciting.

Below is a chart of the NASDAQ 100 futures (NQ) on a fifteen minute basis. As most market participants know by now, it would be hard to see the market going down without this sector failing, and probably first. So, instead of looking at daily charts and groaning over the longer term chart again, let's look at this chart of the short run, instead.

NASDAQ 100 (NQ) Futures - 15 Minutes - Simplified

This chart makes life so easy it almost hurts. The chart is currently of an expanding double-zigzag downward. Those two zigzags are labeled as w-x-y in red near the separation line of the indicator panel. As important as the expansion in price (with y being longer than w in price) is the expansion in time. The second zigzag takes much more time than the first.

Then, after these two zigzags, there appears to be another zigzag upward, based on where prices stopped for the week. But we caution, this up wave has not proven to be over, yet. The only thing the up wave has proven is that it, too, is longer in time and longer in price than the prior upward wave marked as (ii) or x.

Yes, you guessed it. IF the high of 7,855 holds, then this pattern can begin to shape up as an expanding diagonal downward of the 3-3-3-3-3 variety. But, this pattern is on a razor thin margin! IF the pattern holds, then more lower lows might be expected. But, because of the razor thin margin, if the high of 7,855 is exceeded, it simply means there is more upward price movement to be expected. What is very nice about the potential pattern, however, is the deepness of the retrace waves. This deep type of wave is what is generally expected in an expanding diagonal. So far, so good.

Try to remember that Tuesday of this week is the last trading day of the month which often, not always, brings some sloppiness due to month-end window-dressing. And then Wednesday would be the first day of a new trading month - which we have written before often, not always, results in positive inflows.

But right now, the task is ridiculously simple: watch the overnight futures for clues on whether this pattern breaks or holds. The task is to find a valid Elliott pattern, and, until then, just be flexible and patient in wave counting.

I'll have more to say on the long run in the future.

Have a good rest of the weekend.

TraderJoe

P.S. The NASDAQ 100 futures did have an invalidation of a few points in the overnight session. And that little invalidation now tells us a LOT about the current count. See chart below.

NASDAQ 100 Futures (NQ) - 4 HR - Extended First Wave

Because there is only a double zigzag downward from ((iii)), we now know to potentially expect higher highs. There is now an impulse up in the futures from the wave labeled as ((iv)). So, the count is of an extended first wave, with a retrace for wave ((ii)) of much less than a 38.2%. But wave ((ii)) is longer in time than wave ((i)). Wave ((iii)) is shorter than wave ((i)) and stopped at the level of 78.6% x ((i)).

Wave ((iv)) is a clear double zigzag that alternates with the flat double-combination for wave ((ii)). IF, for some reason, new highs are not obtained, though I expect they will be, then the current impulse up is the failure or truncation wave ((v)). Remember, Wednesday could see first of the month inflows from pension funds, 401k's, etc. Wave ((v)) would need to remain shorter than wave ((iii)).