A Long, Long Way from Home

S&P500 cash and ES futures made higher all time highs overnight or in the cash session today. They won't show up in the Daily Tracking chart below (which has the closes only). The tracking chart has had the prior projections removed to show a couple of points. Feel free to refer to past posts for earlier projections.

ES Futures - Daily Close - Versus Projection

One of the things that we wrote earlier was that if wave (ii) was less than a 38% retrace - which it was - then the upward wave, minute ((a)) should appear in a wedge. In this form, with the channel removed and actual trend lines drawn, you can see that those trend lines do converge and a wedge is formed.

Secondly, we think today is the top of the minute ((a)) wave. Why? Because we have been counting a diagonal upward in the futures since the 3,180 overnight low on January 7th. We can only count that the diagonal completed in the overnight. You can refer to the chart below.

ES Futures - 30 Minute - Diagonal Completed

The market pushed that diagonal to it's absolute limit. The measured limit for wave ((5)) was 3,287.75 and the actual overnight high was 3,287.00 - a difference of three ticks! None-the-less using the principles of degree labeling, we can not label the wave any other way. The clear over-throw of the ((5))th wave can be seen, and wave ((4)) has been exceeded lower in less time than wave ((5)) took to build.

So, now we have a diagonal to a top, and the question is, "will it be an ending diagonal?". And that's what the title, "A Long, Long Way from Home" refers to. By the principles of degree analysis, we can see that today is the longest and largest downturn since the upward diagonal began. So, somehow the degree has turned. But there is no concrete confirmation that the minute ((b)) wave has begun in earnest until that 3,180 level is exceeded lower.

Just for grins - if you have time - you should see where the CBOE Equity Put-Call Ratio has been in the last several days. I have showed you this chart many, many times before. Prices have been traveling in the Zone of Speculation for many days now, with the 10-day moving average the lowest in two years!

CBOE Equity Put-Call Ratio - Daily - Solidly in Zone of Speculation

And, it is also worth while having a look at the CNN Fear and Greed Index, which - to save space - we will just refer you to this LINK. The chart of interest is at the bottom of the page. Look at the latest readings a few days ago: the highest greed ever seen since the index began!

Readers of the blog comments earlier know that, today, we have two waves down with a 1.618 relationship in the form of what 'may' begin an expanding diagonal. Such a pattern must complete properly, but they hemmed and they hawed after that employment report today, and finally took out some important levels near the close. See my comments from yesterday, if interested.

Have a good start to your weekend!

TraderJoe

P.S. This chart was added after the post was made, and answers a question posed by a reader, below.

DJIA - Daily - Ending Expanding Diagonal

Note that the chart in the book started with January 1980. You have to go back just a few months to place the structure in its true context. If you do that, you'll find all the right lengths in terms of both price and time with (v) > (iii) > (i) in both. Note there is a tiny little truncation (*) in the fifth wave of c of (v) which would be considered perfectly normal after such a large structure and diagonal at that.