Yesterday we had written that a 38% retrace for a first wave down looked a little too cozy. It was. Prices rose today, and filled a gap on cash - which is quite common - and also filled a gap at 2,934.50 on futures. Persistent gaps in the futures (one that last for more than a few days) are a little rarer than on cash.
 |
| SP500 Cash Index - 2 Hr - More than 50% Retrace |
Until there is more information, the probabilities have to be spread out evenly at 30-30-30 between these various scenarios.
- Second wave up as a,b,c
- Impulse up
- Larger triangle
The larger triangle arose from looking at the Dow Jones Industrial Average and noting that the down wave took less 'time' than the up wave, but did not make a new low.
You can read more on that comment at 12:33 PM in yesterday's thread. Here is the chart LINK so that you don't have to search for it. Any wave over 78.6% will be considered as part of an impulse up or as a leg of a triangle.
Right now we are counting upward. And as of the futures close a c wave would be greater in length than an a wave, which is really what tilts the probabilities.
Have a very good start to your evening.
TraderJoe
Would the impulse (or I suppose it could form an ED) be the Z wave of the larger WYZ?
ReplyDeleteIt could be in the original count. Or it could be the C wave of Y.
DeleteThanks ET. Sticking with a-b-c up for the time being. Looks like we'll get an immediate drop on some US domestic political news, perhaps 15 points +/-. I haven't seen it yet but that's what I hear. That would be in perfect proportion for iv of c and target the prior iv near 2925. The upward trendline comes into play around 9.00pm EST. If that political event ended iii of c on ES then we know v of c has to be the shortest but can still be nearly 60 points. So the 2982 target really comes into focus which is c = a x 1.382.
ReplyDeleteFor those of you following the after hours at all, price dropped to very close to the 38.2% retrace for what is likely a wave iv of the larger C wave. Keep your eyes on it.
ReplyDeletehttps://invst.ly/bn8hc
TJ
Hmm this pullback is starting to cause degree violations so likely not a lower degree 2..and why Is it starting to look like a wedge...put Call ratio dropped pretty much today compared to yesterdays A/1 up fyi
ReplyDeleteTriangle option for iv of C.
ReplyDeletehttps://imgur.com/tNuK20A
Uncanny how ES hit my exact marker at 2917.75 two hours before the cash open to rule out the triangle option.
DeleteJoe, this is one of my favorite posts from you as you've put forth multiple probabilities. It helps with positioning, risk mgmt, and planning. That said, in the interest of learning, I'm taking a stab when each of the alternatives gets invalidated and confirmed.
ReplyDelete1) Second wave up as a,b,c
- Becomes very low probability if it goes beyond .79 retrace at 2984.
- Gets invalidated beyond 100% retrace above 3025.
- Is confirmed if prices drop below 2825 (new lows)
2) Impulse up (assuming it doesn't turn into leading diagonal)
- Invalidated if prices drop below 2885 (since that triggers a wave iv overlap
with i)
- Confirmed if we get the 5 up sequence with a retrace followed by a higher high.
3)Larger triangle
- Invalidated if prices go above 3025 or below 2825.
- Won't get confirmed until after the fact, it has to prove itself out.
2 of these 3 calls for new highs, so 66% probability now as opposed to 20% Monday evening.
-TJ
I just realized staring at this pullback all morning (like rest of the world) that the market can do basically whatever it wants..probably depending on how sentiment is evolving. It can go straight up in an extended fifth wave, it can be finished with the abc and attack the 90% level below or worse, it can morph into a more complex 4th wave all day and impulse higher later or next week. I think nothing would break EW rules.
ReplyDeleteHm I thought learning (at least a little) elliot wave would make trading easier..lol
Agree Erik B. It's a 4 and it's not a triangle so anything goes … flats, hats and spats.
ReplyDeleteYes one can understand ETs 30/30/30 estimate.
ReplyDeleteI really believe that combining sentiment data with EW counts is the best way to distinguish between alternate counts.
On monday there where a buyer of 2230(!) Oct31 2500 strike puts for $5million which could hedge a $560million portfolio. Thats why I "like" the bullish scenario maybe the triangle ET showed yesterday, or recent bottom as X maybe. That would burn lots of the unusually high amount of put options premium that's been bought this week.
The set-up seems to be a repeat of the May decline. That proved to be a 3-stepper A-B-C that headed to new highs once complete. If so, we are finishing up the middle B wave, before taking the next C wave down to complete the correction.
ReplyDeleteMy view of smallcap. The corrective B must have started at the beginning of may otherwise there will be a degree violation. Question is if C is finished..
ReplyDeletehttps://invst.ly/bnosq
DeleteDon't be surprised to see some sort of rally now. The charts are ugly now and I think we can kiss good-bye the idea of a v of C. Why a rally now? There is no clear impulse but YM does have a 1.382 relationship between the initial AH drop and today's cash market drop. Not much to go I know but best I can find at the moment (lol). Looks like this market is going to become unpredictable once more. Wouldn't attempt an EW count just this minute on what I've seen today. Need to review.
ReplyDeleteDid cash have to do its thing to the 0.382 retrace? A v = i gets price back over the high. But, truncations should be watched for, too.
ReplyDeletehttps://invst.ly/bnq1-
TJ
Plausible ET. Big iv compared to ii but plausible. I thought the 1.382 relationship I saw in the YM might prove important and it was. Now YM, wait for it, has retraced just over 90% of the drop. We are not going back down in a flat are we?? Shouldn't do so as it seems like 5 waves up.
DeleteWhen you look at that potential iv in the ES, the way we were counting the c wave, it's retraced in the vicinity of 75% but technically speaking did not overlap. ii didn't even retrace 23%. I watched a you tube video once with the host talking about fibs and retracements. He said if wave ii is shallow then expect wave iv to be deep. He said he commonly expected wave iv to retrace 62% if wave ii was shallow. This correction after the rally is certainly taking some time which at least is validating its degree particularly if its wave ii of v of C.
DeleteIf this is 2 of v of c it should decline at least 8 points on the SPX and 96 points on the DOW for degree purposes assuming we had 5 up to begin with.
ReplyDeleteThe up wave was 95 minutes. 66 minutes for the correction thus far.
ReplyDeleteThere is a diagonal here; not sure of it's purpose yet.
ReplyDeletehttps://invst.ly/bnrm7
TJ
high of diagonal just exceeded .. ending a flat
Delete87 minutes now. Acting more like a 4th wave so far. Things can change quickly though.
ReplyDeleteDOW poking above the top.
ReplyDeleteI think this is the correct up count
ReplyDeletehttps://invst.ly/bnrrl
TJ
..at the close, the count looks like a larger flat, but has to be watched in the overnight.
DeleteStill in iv ET? Thought about that too. YM went over the top in what looks 5 up on the 15 minute chart which you can see all the internal waves of the C wave. But perhaps only an expanded b wave after all (again). Thanks ET, good job this week brother.
Deleteyw .. Billy
DeleteAnyone else thinking possible truncation? We are getting deep in the ninth. That would SPX/ES not the DOW. With large PUT positions in place and OPEX coming up that is not normally a good time to be short the market. However today's rally looks proportionate enough to be considered all of v of c.
ReplyDeleteBased on the very short term (hence somewhat unreliable) MACD, and the position of that short term diagonal, there is still this flat possibility down to 62 - 78%. Beyond that a first up wave gets dicey.
ReplyDeletehttps://invst.ly/bnsle
TJ
FWIW, this is my count on futures
Deletehttps://imgur.com/KcSMXc4
Close. I think you missed the fifth wave truncation.
Delete