Wednesday, October 2, 2019

The Hole is Getting Deeper

U.S. Debt Clock: $22.71 Trillion; prev $22.64
ES Daily Candle: Lower High, Lower Low, Lower Close: Trend Candle
Market Posture: Examining for a Fourth Wave
Daily Swing Line: Lower (Lower High, Lower Low)
Daily Bias: Down (Settle Below 18-day SMA)

Yesterday, we noted the case for extreme flexibility in counting these waves. We said we would not begin an upward count until the high of yesterday's candle was exceeded. With the overnight gap, lower, and subsequent follow-through, yesterday's high was cemented for the time being. Several of the better wave counters here noted the proximity to be able to make a 1.618 wave downward, and the market did that and slightly more. That being the case, this upward count, as a concluding wave possibility was published.

ES Futures - 4 Hr - End of Intermediate (B)

If the market has topped, and that seems more and more likely, then this is the best count to the Z wave of the Intermediate (B) wave. If you're concerned about the degree labeling, you can also make the case that iii is actually ((a)) in an expanded diagonal - as we showed in the Dow - and the triangle is minute ((b)) with a subsequent failure ((c)) wave. Either way, the effect is the same.

Have we, in fact, topped?

We know that price has overlapped the minute ((a)) wave up, in the downward direction, and that certainly is not good for any upward count. In the next days, we will be looking for a fourth wave as in the hourly chart below. IF the fourth wave forms properly and then makes a fifth wave down, then it is likely we will have topped. The only other alternate I see is three waves of a larger triangle, downward.

DJIA Cash Index - 1 Hr - Fourth to Follow?

Recall that the trick in the bull market was that the bulls never allowed fourth and fifth waves in the downward direction to form properly. So caution is still by-word until we see an impulse wave truly form on at least the hourly time frame. Also, note, with the overnight trading (Europe, Japan, etc.), there is no guarantee that the third wave has completed just yet. Certainly, the Elliott Wave Oscillator looks like a third wave.

Today in exquisite detail we counted out an ending diagonal - which ended a wave, and which was then exceeded upward by a three wave sequence on the 1-minute chart. You are encourage to review yesterday's notes.

Have an excellent start to your Wednesday evening, and remember that Friday morning is the payroll employment report.

TraderJoe

27 comments:

  1. hi joe
    I see it's moving for the month of October.
    for the weekend, you can do a weekly chart with what you think it will happen
    thank you very much

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    Replies
    1. Pour l'instant, vous devez vous contenter de voir si les vagues quatre et cinq se formeront correctement sur le graphique horaire.

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  2. Gold real funky from 1465. Im think diagonal is finishing up.

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    1. Looks like gold completed an impulse today, a wave 1? The correction from the high down to 1465 looks like only 3 waves, a (4)th wave? Now, after an appropriate wave 2 correction, a wave 3 up may take gold to new highs, or does gold play around here in a B wave of a (4)th? wave?

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  3. Looks like the drop today completed (3) for major stock indexes, with a (4) battle to take place on the 200 day moving averages for Industrials and NASDAQ, to be followed by a hard break below 200 day to complete that sell wave with a (5) of a ((1)) or a correction ending ((C)). That's my count (till someone - or the markets - proves me wrong!)

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  4. Cash chart. I see 2 short term scenarios from here

    https://www.tradingview.com/x/ouNl7IXt

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  5. Cash, 5 min. chart...3 waves of an expanding triangle are in place.

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    Replies
    1. d leg down of triangle may be a flat. Needs a long c from here.

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    2. I'll call the triangle idea busted and opt for an inverted flat correction.

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  6. ES 5-min; now into five waves up from the morning low; and also a "Degree change" as this wave up is longer in price than the second wave. So, if we were in the third wave down, we should now be in the fourth wave up.

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    Replies
    1. Overlap in NDX means that today's low completed an abc down from the 9/19 high.

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    2. No overlaps yet on QQQ or Compq

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    3. QQQ, NQ, and NDX have all overlapped. Wave 4 can not overlap any part of wave 2 in an impulse wave. Today overlapped the 9/27 low in those 3 indexes.

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  7. Actually no overlap on NQ either if wave 1 ended Sep 25.

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  8. Wave FOUR cannot overlap wave ONE I believe.
    As TJ has noted, they have successfully negated developing fourth waves previously...

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  9. A lower index low and lower high in VIX will confirm a fifth wave down...

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  10. MSFT has overlapped wave 1 down. Bear count is either X wave now or a nasty 1-2 i-ii nested.

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    1. Looks like i would be bigger than 1 though

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    2. Yep you're right. Could still drop from here though to make a bigger complex diagonal with this first abc down

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  11. ET, if one draws an ABC on a chart, and lets say target for B is 1,618*A, actually it is pretty hard for the subwaves of B (a, c) to both be smaller than A, and still reach 1,618, it is possible of course but the terminal locations for a and c is pretty narrow.
    You have said before that there is some mechanism that regulates this, you have also showed "outsized B waves" before.
    What I'm trying to say is maybe we should be more open minded with degree violations in corrections, and not do all we can to find them and reject alternate counts.. at least I need to have this in mind.

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    Replies
    1. Understand that the whole "degree violation" theory is Joe's alone. It's Joe's unique contribution to EW. Elliott never mentioned it, nor has Prechter or Neely. While the 'degree violation' theory makes logical sense, the math falls part very quickly when considering extended waves. For example, if (3) of 3 is a 2.618 extension, then it's very easy for (4) of 3 to be larger than the prior wave 2 of larger degree, especially if that wave 2 was a shallow running correction. In reality, it's just as valid to claim that Elliott's method of using 'degrees' for wave labelling was simply a way to easily communicate the chronological order of the waves, and to notate how they are grouped together. IMO, if Elliott had meant that all larger degree waves had to literally be larger than subsequent smaller degree waves, then he would have said so.

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    2. Yes it makes logical sense, all effective systems/functions have to have some sort of pattern to sort and group data, that’s why ew and degree concept works on the financial markets, because it’s a effective machine that discounts everything it can to a certain amount of certainty.
      Just because Elliot didn’t mention degree in the same context as ET have on this blogg, doesn’t have to mean it doesn’t work or is irrelevant.
      I have followed this blogg long enough and have seen many occurrences of how degree helps with the proper wave labeling. You are right that it’s hard to keep degree between all waves with 2.62 extensions etc, but that isn’t the proper use of degree as I understand. For ex we can’t compare a 1 with a lower degree iii, it’s 1 vs i of 3 and 5. Wave 1, 3 and 5 have totalt different wave characteristics with different market participants, volume, breadth etc so it makes sense that we shouldn’t expect degree to work between all waves.

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  12. It looks like you can count an contracting diag off the top in VIX today. It could be the high today was a B of a running flat. Otherwise VIX had further downside after this retracement.

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

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