Monday, August 26, 2019

Nothing Broke

U.S. Debt Clock: $22.54 Trillion
ES Daily Candle: Lower High, Lower Low, Higher Close: Neutral Candle
Market Posture: Neutral-to-Negative and Probing Waves
Daily Swing Line: Lower (Lower High, Lower Low)
Daily Bias: Down (Settle Under 18-day SMA)

While nothing "broke" by the rules today, let's fix it anyway. The cash S&P 500 index chart on the 15-minute basis really is no longer "looking" like a proportional fourth wave - even though it measures OK at the close.

And because of the overnight futures waves which keep being both 1) dramatic, and 2) invisible in the cash markets, it seems like this is the better downward count.

ES - 2 Hr - Diagonal and First Wave Down

Even at the ((A)) wave up this morning, the futures were very near the 62% retracement level. And, there are now more up bars to ii than down bars to i.

So, if the count is correct, then there is an Ending Diagonal at the high. I did call the truncation at the (c) wave on the 1-minute chart. But other readers of the blog suggested the ending diagonal - which is longer in time - and then a completed first wave down to last night's overnight low. I have suggested before that counting the cash market is getting to almost be a fruitless exercise. This is another example.

The main reason for showing this chart is that if there is a true ending diagonal at the high, then the low of the (b) wave must be taken out in less time than the diagonal took to form. And looking at brokerage quotes for the ES, it already has been - although you would never know it from the above chart! I did confirm it using a second source of reliable quotes before writing this post, but this is a real caution for those using the "free" tools: they have the potential to fake one out (even though they didn't me, this time).

So let's see how this goes: neutral, flexible, patient and probing.
Have a good start to the evening,
TraderJoe

54 comments:

  1. i, ii buckle my shoe and suits futures and cash. Agree ET, most plausible bear count at the present moment. Taking out the start of the diagonal on the initial drop this week is interesting to say the least. Next consideration is what will be the inspiration for iii of ((iii)) down should it be next on deck? One can only wait and see.

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  2. wouldnt a new high for ii count as in impulse it already has 1.618 extension and good 02 TL and good 4th wave attack and proper EWO signature. so if your count is right then ii is complete

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    Replies
    1. They can simply make ii last longer with like a 5-3-5 or something.

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    2. not that simple which is why they didnt try... yet...

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  3. The bottom line is that Ending diagonals are RARE!. While I enjoy reading your blog it is really annoying that you claim seeing ending diagonals every day. And of course the most of them would get invalidated later ...

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  4. IF we go straight down then I'm not convinced that wasn't 4 of (i)

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    Replies
    1. U used 2 negatives referring to possible 4 wave.

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    2. I did, and it's not a double negative. "Not" expresses doubt, "wasn't" is an identifier, as in "not 4".

      "IF we go straight down then I'm convinced that was 4 of (i)" is a very different statement.

      Thanks for the wake-up.

      IF we hold ES 2888 Monday spike then down...

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  5. ES produced a contracting ed coming out of triangle. Looks to me we are working on a b of a flat at this time.

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  6. You have counted the downwave from the 7/26 high to the 8/5 low as an impulse wave, even though it can't be counted as an impulse wave in any index other than ES/SPX/SPY, and now you're counting the rally from the 8/15 low as a contracting EDT, even though that count doesn't work in any index other than ES alone. This seems like forced counting based on major league bias. To say that EW no longer works in the cash markets is bizarre, as it's very easy to see the counts that work in both the cash and futures markets together.

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    Replies
    1. do you have an alternative? Thx

      -TJ

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    2. Without an alternative set of counts which we can see, review, try to poke holes into it, all we have to follow is Joe's point of view.

      I thought EW is all about each chart on their own. That said, I do agree that on a very large degree, major indices should be in sync.

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    3. The Alt that works across the board in every index is that the initial wave down from the top was a corrective wave-a, and then it was a corrective wxy rally (wave-b) from the 8-5 low that ended at either the early morning high on 8-22, or at the lower high just prior to the Trump tweet in the early afternoon on 8-22. Either way works at the moment. Also, I'm sure that Joe would be the first to tell you that you are not limited to his point of view at all. My impression is that his primary goal is to teach novices about the process of counting waves so that they can then go an do it on their own.

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    4. TJ even on a large degree they are off too. Only US indices made new highs this year

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    5. -Your wave-a is Joe's wave 1. Both are comprised of 5 internal waves.
      -Your retrace wave is B in the form of a wxy. Joe's retrace wave is a 2 in the form of a wxy.
      -You are predicting a wave C down which should have a internal structure comprised of 5 waves. Same for Joe but he's calling it a 3.

      Am I missing something? You guys are on the exact same page thus far, the implication is that Joe's count would have a 4 and 5 for a lower low after your C completes. In other words, both counts are each other's alternatives which can only be proven out down the line after this next leg down.

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    6. @ C

      Each country's economic factors and underlying drivers are different. I would expect world indices to be on different wave lengths. For example, Japan's last high was in 1990. However, looking at US indices only, given they're subject to the same macro economic trends, I would expect them to be on a very similar or same SuperCycle or Grand SuperCycle count.

      I'm not an EW expert, but in order to trust it, I would have to believe what I typed above.

      link to labeling wave degrees:
      https://school.stockcharts.com/doku.php?id=market_analysis:identifying_elliott_wave_patterns

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    7. Grand cycle is too big to be concerned about. But it's fun to speculate on. Agree with your comment to mblcta.

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    8. (-Your wave-a is Joe's wave 1. Both are comprised of 5 internal waves.)

      Incorrect. There are not 5 internal waves down in either the DOW or NDX.

      (-Your retrace wave is B in the form of a wxy. Joe's retrace wave is a 2 in the form of a wxy.)

      Incorrect. Joe has the retrace as an abc in the ES futures. As I previously noted, that count is impossible in all other indexes.

      (-You are predicting a wave C down which should have a internal structure comprised of 5 waves. Same for Joe but he's calling it a 3.)

      Incorrect. I have not made any prediction on how the waves will subdivide in the future, because that's impossible to do. I have only made the assertion that they will not be part of a larger impulse wave, because the initial decline from the top was corrective, not impulsive.

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    9. Gonna ponder on this and scope around the other indices some more. Thanks for the food for thought

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  7. Another wedge-shaped pattern with overlaps, already. Count is contingent until lower trend line breaks.

    https://invst.ly/bx9zz

    TJ

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    Replies
    1. Your count makes sense ET.
      This is mine on the cash - https://imgur.com/qbRx9NW
      (no sign of a 5 wave decline yet)

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    2. good point KS. That down leg has a lot of overlaps

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  8. I think Nikkei can be counted as a leading diagonal off yesterday's high.

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  9. The daily ES is 'fighting it's battle' at the 18-day SMA, but the day's gains are fading fast.

    https://invst.ly/bxade

    TJ

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    Replies
    1. Nasdaq and Dow futures fighting that exact same battle.

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  10. My ALTERNATE count on SPX - https://imgur.com/wGQnzFb
    pretty self explanatory for anyone with basic EW knowledge
    #doyourownresearch

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  11. ES and Russell futures have gone negative on the day. Cash SP500 still positive.

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    Replies
    1. Trend line on the lows has been breached, lower.

      https://invst.ly/bxaqd

      TJ

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    2. Small cap sell off differential is huge today.

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    3. It might be a moot point, though what makes you add W/X/Y, when A-B-C could be used? Is there something that says the first should be used, rather than the second labeling? Is it a way to separate A-B-C from a-b-c?

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    4. Kevin - My Understanding:

      abc is a 5/3/5 structure. WXY is a 3/3/3 structure. Each of the w x and the y would be comprised of an abc which would be a 5/3/5 structures at a more micro level.

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  12. Non-EW Observation:

    The rate of decline in bond yields in 2019 scares

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    Replies
    1. Bonds futures could be on the verge of a reversal - very very late cycle - no confirmation yet - nice decline from the high of 167.15 on 30yr bonds today...need to see a close below 162.3 to really get some mojo going

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    2. Chris Carolan just posted a chart on Twitter, looks like bonds are entering parabolic phase, a few months to go maybe?

      Re shares, lots of 1929 echoes currently, and a Puetz window to boot.

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  13. Any lower low will result in five-waves down on the ES 1-min chart.

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    Replies
    1. Elliott_Trader - "A picture is worth a thousand words" PLEASE :)

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    2. There's the lower low; here's a chart.

      https://invst.ly/bxbdi

      TJ

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    3. Now trading above the channel mid-line, on a divergence with 'about' 150 candles.

      https://invst.ly/bxbmw

      TJ

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    4. Be patient and cool. Let an up wave prove itself to begin a count. The alternate for a longer downward count is a running triangle fourth wave with a lower B wave.

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    5. Watch very carefully to see if this up wave is shorter in price and time than ((4)), but overlaps ((3)). If so, and there is another lower low, then a contracting diagonal might form in the downward direction. Alternatively, this is a flat wave.

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  14. ..nope .. new measurements based on measured wave lengths suggest a contracting diagonal can not form properly. Nice to rule that one out.

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  15. Yes, in regard to ur last comment. You're on fire today ET!

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  16. Lower low, without upward overlap suggest impulse is LARGER. See below. But not if v > iii.

    https://invst.ly/bxb-1

    TJ

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    Replies
    1. Back above mid-line of channel with a higher high. Need to change time-frames as there are well more than 160 candles at this point. An up wave must still prove itself.

      https://invst.ly/bxc4n

      TJ

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    2. ES has broken down channel to the upside after holding off the lows. Next milestone would be an upward overlap.

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    3. Joe -

      I was doing great understanding the structures until I read the 'impulse is larger' followed by seeing your 5 wave structure with a smaller 5 wave structure appended to the back end of it. That wave i is way longer than ii - v combined. Never seen anything like it. Gotta be rare

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    4. Now there is upward overlap on ES 2,870; next milestone would be 38.2% has also just been hit.

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    5. @TJ .. when the first wave is the extended wave in the sequence, then the second wave is usually less than a 38.2% retrace.

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  17. Break time for me .. I have some errands. Try to be back by the end of the cash session.

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  18. Back .. so far, the potential for another channel. IF the channel breaks down, look for a flat, instead.

    https://invst.ly/bxeav

    TJ

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    Replies
    1. The downward ((B)) wave is not 90% yet; therefore a zigzag could occur. Unfortunately, after-hours needs to be monitored to be sure ((B)) does not break down further.

      https://invst.ly/bxejl

      TJ

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  19. A new post has been started for the next day.

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