Monday, April 27, 2020

Minute ((b)) Qualified

The chart below of the cash SPY shows that it (and the SPX) "went marginally over the top". Since they clearly made the 90% retrace level, they qualified for the Minute ((b)) wave that has been discussed for several days now. We said we could not call them "b" waves until they reached that 90% level, and here they are - and then some.

SPY - 30 Min - Minute ((b))

Today's up movement filled that cash gap at the 287 level shown by the black dashed line. However, there are now two open gaps below the current price - as shown by the red circles. The higher high occurred on a divergence with the EWO, and the day ended with a reversal candle. As typical, a confirming significant lower close candle in the cash market would be needed to better confirm the activation of the pattern.

Note that the up wave took a longer time to reach the new high than the down wave took to form. Also note that the futures have not (as yet) eeked out a new high. There would be nothing wrong if they did.

Also, note on the daily chart that the ES slow stochastic is now back up above 80 at just the "over-bought" level, as it is not embedded.  But, price bias is higher, and price is not up to a daily upper Bollinger Band.

Blog readers are encouraged to draw the relevant up trend lines and monitor the situation to see if price breaks below them, and back-tests. The location of minute wave ((c)) can not be precisely located at this time, but it may be expected to travel below minute ((a)), even well below it - if price chooses.

But let's take one thing at a time and see if confirmation of a move lower begins to occur.

Have an excellent start to your evening.
TraderJoe


50 comments:

  1. Here is something quite interesting. After the 1929 bottom around Nov 13th, the Dow bottomed at 198 and over the next month rallied 35% from the lows and then sold off 15% over the next few weeks. The current Dow rally from the lows made over a month ago is close to 35% as well. It would need to hit 24580, but at 24200 hit today ---seems close enough. If we decline 10% from here, the gap from 21400 will be filled around May 11th. I drew a trendline from the lows made in March until August (five month rally to close the Dow gap at 25300). It took five months to close the Dow gap at 300 from 1929 low to 1930. That 1930 rally convinced everyone that the economy was back on track and NO one knew they were in a depression. I'm expecting the market to trick everyone again with this long rally over the summer.

    ReplyDelete
    Replies
    1. In '29, the first drop was almost 50%, this time closer to 35%.

      In '29, it took 5 months to recover half the drop, this time more than half recovered in less than a month.

      There are similarities, but big differences also. I suspect when this is done, that the flat wave at the end of March will have been a B or X, and the full rebound will be finished within a week.

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    2. To clarify, I'm saying the degree of the correction probably needs to be raised by one, i.e., the A wave looking to complete soon was actually completed on March 26.

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    3. That would make your potential B wave some kind of triangle it seems...

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    4. I leave the count open, it will be tricky as it has been.

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    5. JoeM, it was a 48% drop in 1929, vs a 39% drop this time. The Dow hit 24512 today, that now matches the one month rally in 1929 before the markets sold off 15%. I would never expect percentage declines/rallies to match up perfectly...but more interested in the timing aspect of this. The 1920-21 Great Recession was exactly 17 months in duration. The 2008-09 Great Recession was exactly 17 months in duration too. The decline in 1920-21 was 46% and the in 2008 to 2009 decline was around 54%.

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    6. Tim, maybe computerized trading makes price discovery faster?

      If you view it as retracement percentages:

      In '29, the first 1 month rally was .382 retrace. In 2020, that took 3 days.

      In '29, the 5 month rally retraced .5. In 2020, after 1 month it is near .618.

      So maybe it all happened a lot faster this time and the roll over comes a lot quicker?

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    7. The intervening decline to match the 15% selloff in '29 was the flat wave starting late March - nearly 10% decline.

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    8. I think a quicker rollover is possible as you mentioned...all we have to look at is oil to see how quickly things can unravel:)

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  2. The expanded flat is the most nefarious tool in Mr. Market's arsenal. The move past the A wave invariably serves to stoke bullish sentiment just before the onset of an unexpected C wave in the opposite direction. When Mr Market wants to befuddle the most, it seems that is his instrument of choice...lol!

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  3. This hourly ES chart is still compliant with 'degree labeling' because the second 'a' wave is smaller than the (w) wave of larger degree. Now back-testing the orange up trend line. Unfortunately, also by degree labeling, we can not say the degree has turned until there is a wave larger than (x).

    https://invst.ly/qlthm

    TJ

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    Replies
    1. ..since the low; "three waves up" and a >90% down wave.

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  4. Looks like we are in some kind triangle, possibly b of a ZZ down...?

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  5. Does anyone know the relative frequency of c = a vs 1.618 a for ZZs?

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  6. ES 5-min; up wave now longer in time than down wave, and 'minimum' FLAT expectation fulfilled. Watch out for extension in fifth wave, but not below 2,865.

    https://invst.ly/qlvn8

    TJ

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    Replies
    1. ..not sure wave ((5)) is done yet, but ((3)) and ((1)), up, very close in price. But, again, not below 2,865.

      https://invst.ly/qlvpl

      TJ

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  7. Upward flat for ES now looking more likely imo...

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  8. ES 5-min; There's a higher high. Looks like wave ((5)) extending in some manner.

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    Replies
    1. ..wave ((5)) extended a little, and now falling off. Down wave now too larger for a further diagonal.

      https://invst.ly/qlwg5

      TJ

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  9. ..just a reminder in about 10-min at 15:50 ET, Interactive Brokers requires all clients to "fully" margin. That time-frame sometimes sees moves of 10 - 20 S&P points in ONE minute. Also, GOOG, AMD report after the close, and FED tomorrow.

    TJ

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  10. fyi - 'possible' H&S here, has been activated.

    https://invst.ly/qlx0r

    TJ

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  11. Just noticed target met AFTER you posted chart..

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  12. ES just hit the .618 fib now with hourly bear divergence.

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  13. Good morning all. Price is still inside of minute ((b)) = 1.382 x ((a)) until 2,950. Meanwhile, one might watch for a triangle on the ES 5-min., subject to the usual triangle invalidation levels.

    https://invst.ly/qmat5

    TJ

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  14. Possible ED (1min) that just broke the bottom trend line.

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    Replies
    1. Also of note the futures have reached the upper BB line

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    2. With the new high the diagonal is invalidated

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  15. Or we completed 5 waves from march low today

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  16. With the slight higher high, downward overlap, and putting the wave in a slightly larger context, including Fibonacci, this count could work, as well.

    https://invst.ly/qmcne

    Bear in mind the "middle wave" shown as black "b" is too large for an impulse count upward and creates degree violations.

    TJ

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    Replies
    1. ..note that the second circle-1, ((1)), is smaller than 'a', and may therefore be a legitimate sub-wave.

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    2. ..also note that ((1)) and ((3)) are higher than their respective prior highs - which is the usual formation in a diagonal.

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    3. update ..

      https://invst.ly/qmcuo

      TJ

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  17. can it be impulse off march low without 1.618 wave? ewo looks right.
    or are we now at wxyxz as i alluded to given a further extension?

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    Replies
    1. The second one looks good. How do you read it from 2717?

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  18. Here's an update. A diagonal's lengths measurements have not broken yet. Time measurements are not ideal. One steep up trend line has been broken.

    https://invst.ly/qmehq

    Have to take this step-by-step.

    TJ

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    Replies
    1. ..need to watch for relevant overlaps; speed of any down move, etc.

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    2. It would be remarkable to see a move below 2926.38 followed by a new high if just a third done. That would certainly whipsaw a few folk....

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  19. Reminder: FOMC report at top of the hour; followed by a press conference I believe.

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  20. From what I can see, a larger diagonal would invalidate below 2,920. Not there yet. Currently at ~2,930.

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    Replies
    1. This would be the larger alternate diagonal, and it's invalidation.

      https://invst.ly/qmfb7

      TJ

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  21. Daily S&P 500 futures at the upper bb:https://invst.ly/qmfyu

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  22. Reminder: in about 5 min - at 15:50 ET - Interactive Brokers clients must post full margin, not day-trade margins. We have seen moves of 10 - 30 points in LESS than 1 minute in that time frame. Yesterday was down. Direction varies.

    ReplyDelete
    Replies
    1. ..there it is; ES 2945 to 35 in less than 1 minute,

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  23. Reminder: lots and lots of earnings after the close today, including MSFT, Samsung, FB, GE, Mastercard, Boeing, YUM, etc.

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  24. A new post is started for the next day.

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