Tuesday, January 21, 2020

Temporary Simplification

Today was an interesting day. AAPL and the NQ futures made a higher high. The ES futures and cash S&P did not, but by just 0.25 - 0.50 points, an amazingly small margin. Also of interest, neither cash nor futures left a gap at the high. Still, we were able to follow the count downward in yesterday's comments, and you are welcome to review them at your leisure. The chart below of the ES 5-minute futures will simplify the short term picture.

ES Futures - 5 Min - Base Channel from the High

We have drawn a "base channel" around today's downward sloping waves. We caught the timing on a second wave very well; it is now longer in time than a first wave down (note, first and second can refer to a and b). Because this is such a short term chart, and there is insufficient information, we can not say that the downward waves are definitely i and ii, or a and b. For a third wave lower, there needs to be a 1.618 wave lower that breaks the lower boundary of the base channel, before there is a larger wave upward that breaks the channel upper boundary.

You can see that the setup is there. There may be a smaller degree .i first wave down following the wave ii / b high. As long as any upward price movement tonight remains in the channel, a downward count can remain in effect. Certainly so, if the base channel is broken lower. Very often, gaps down for third waves lower start in the overnight. Will that happen tonight? We don't know with certainty.

For that reason, we have placed a "wave counting stop" above 3,327 - which really is not all that far in points from the current price. Any movement above that level would likely indicate an incorrect count, and require counting like a sideways triangle or upward diagonal. But, we are not there yet, and it bears watching.

So have a good start to the evening and keep one eye on the overnight futures.
TraderJoe


22 comments:

  1. New futures ATH. Market is relentless.

    ReplyDelete
    Replies
    1. New high necessary after clearly corrective move down. it is a fifth wave, possibly of a third imo...

      Delete
  2. The 'wave counting stop' was hit tonight in the after-hours. The two-hour futures are on a whopper of a divergence, since the "Iran Tensions" low. Chart it out for yourself. Sure looks like the fifth wave of ((C)).

    Best wishes to all.
    TJ

    ReplyDelete
  3. Given the likely divergence, here's a potential way to end the up wave since October. It's the ole extended first wave again.

    https://invst.ly/plbhn

    Having said that, I can see one other option that keeps the triangle in the middle and makes an ending diagonal out of the whole structure. But that would require overlaps and a probable higher high.

    TJ

    ReplyDelete
    Replies
    1. Interestingly, a 14-period RSI on the 2-hr chart peaks on ((3)). Something to keep an eye on.

      Delete
    2. A quick question on the chart referenced above. Is your ((2)) the triangle highlighted on the line chart several posts ago? If so, I thought that 2nd waves could not be a triangle? Perhaps Im misreading the chart.
      Thanks

      Delete
    3. This places the upper limit around 3370 (3rd wave being shorter than 1)- I have similar count. Now in 3 of 5 of 5

      Delete
    4. A triangle cannot be the ONLY structure in a second wave I think....

      Delete
  4. There was a bollinger Band sell signal yesterday. Possibly 3338-9

    Then....................

    ReplyDelete
    Replies
    1. Looking at aapl.....maybe 324-25

      If that holds we could get a decent retrace.

      Delete
  5. Joe, the composite cycle chart here looks similar to your current medium-term count:

    http://www.heritagecapitalresearch.com/daily-state-of-the-markets/what-do-the-cycles-say-about-2020

    ReplyDelete
  6. There is a way to count a top here, but I would like to see a full reversal day as beginning confirmation.

    ReplyDelete
  7. This action has a feel of topping off now

    ReplyDelete
    Replies
    1. Jack I agree.....for the first time in a while the bounces are
      not so fast.....heavier feel.

      Delete
  8. Two questions: (and apologies if I missed these being addressed anywhere)

    Long term: If we have three waves down and three waves up since fall 2018, would it be reasonable to expect that the three waves up of 2019 is wave three of a very large ending diagonal?

    Short term: Given the overextended and squeezed nature of recent price action with little if any downside traction, would it be reasonable to expect that the apparent five waves up starting yesterday forms a wave 1 of an ED for five of five of C that could last a couple days?

    Thank you for all you do! You are appreciated by many!... Despite any petty snipes that are neither productive or instructive

    ReplyDelete
    Replies
    1. Please see the next day's post which is already up.

      Delete
  9. NAS and then SPY are the strongest. I guess they're waiting for AAPL to finish up.

    ReplyDelete
  10. A new post has been started for the next day.

    ReplyDelete