The first chart below is a daily four-block of the major U.S. equity index futures relative to their 18-day simple moving averages. Without exception each daily price is currently above "the line in the sand".
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| US Equity Futures vs the "Line in the Sand" |
As Ira Epstein likes to say, this means the current daily bias in the equity market is to the upside. And that bias is up until it isn't. Now, without getting too complicated, we know that major moving averages (such as a 100-day or 200-day) or upper daily Bollinger Bands are just overhead of the markets - depending on the particular index studied - and these will likely offer resistance. Readers of this blog should plot those out for themselves to see how close to resistance we might be for the indexes that interest them. As far as I can tell, the NQ has the daily slow stochastic embedded, the ES needs another day to embed, and the Dow and the Russell are not close, yet.
The NQ has clearly been the powerhouse and is closest to it former pre-March high. Still, it is worth looking at the wave count on a couple of stocks. I decided not to show you these until I felt the wave counts were getting quite mature. The first is Amazon - which is over it's pre-March high.
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| AMZN - Daily - Nearing or Completed Five-waves Up |
In AMZN, wave minute ((i)), circle-i, appears to be a contracting leading diagonal which led to the large wave three rally that contains the central gap in the "third-of-the-third". Wave ((iv)) was a very clear flat wave to alternate with the short sharp for wave ((ii)). The stock is either clearly in or has finished it's fifth wave up. Within the fifth wave ((v)), there is not yet an overlapping wave down. It is 'possible' for wave ((v)) to become as long as wave ((i)). That is a typical Elliott wave expectation. The point is - as an Elliott wave structure - it is getting quite mature.
The next stock is MSFT.
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| MSFT - Daily - Potential Diagonal |
The length relationships in this name allow it to be counted as a partial diagonal. It may have a few days to run yet, but the same conclusion: the count on the waves is getting mature. Should some of these stocks begin to sell off in the upcoming days and weeks, it may be possible to get that Minor B wave down.
And, yes, there could be good sell-offs, particularly in the overnight, but until shown differently, the upward bias remains in the charts. So what other clues do we have?
If we look at the daily VIX, we see that price has not yet contacted the lower daily Bollinger Band. It may be that the large "Smart Money" put-writers are waiting to solidly contact that band before executing their larger strategies that can help move prices.
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| VIX - Daily - Nearing Lower Bollinger Band |
Still, the bands are narrowing in on even them, and it may only be a day or two until contact with the lower band occurs. So, we continue to be patient, flexible and calm awaiting what might be a turning point for the short term, at least.
Have an excellent rest of the holiday weekend.
TraderJoe
Once again, thank you for all the hard work you put into your analysis to make it easy to understand. You're spoiling us. Have a great holiday weekend. Cheers
ReplyDelete..welcome, Andy. You as well!
Deletehttps://www.zerohedge.com/markets/hedge-funds-have-never-been-more-concentrated-same-handful-stocks
ReplyDeleteAs per Friday's end-of-day comments, the ES has surpassed 2,960.50 - making the 1-2-i-ii count of the fifth wave the most likely, as a diagonal has invalidated.
ReplyDeleteYes that count seems the most obvious. However I have learnt to be most cautious around significant turns in the market when it comes to the most obvious count simply because the most obvious is there for all to see and all can't be correct. In fact the majority are generally wrong. Furthermore in this case part of wave 3 (i.e. ii of 3) has broken below the 0-2 line.
DeleteWith ES reaching 2969.50 early in this new week that works to be a 4th lower high in succession:
Delete2976.25
2975.75
2973.50
2973.00
2969.50
On that basis I've been searching for possibility of an expanding diagonal pointing downward and currently in wave iv. This count would require wave iv to surpass 2969.50 and move to at least 2971.00 but not higher than wave ii (i.e. 2975.75). But even in this scenario I am not of the internals of wave iii in particular where a flat may exist and thus potentially ruling out this downward diagonal scenario.
Another possibility is (if this is a 5th higher) an upward expanding diagonal. Wave 1 would be 2903.75 to 2945.75 (i.e. 42.00 pts). Wave 2 would be 2945.75 to 2928.25 (i.e. 17.50 pts). Wave iii would still need to be in progress and climb above 2969.50 and also 2970.25 to be longer than wave 1. Wave 4 would then need to pull back and overlap wave 1 below 2945.75. The final "5th of a 5th" upward would follow thereafter and could potentially target the 2990-3000 area.
On the possibility of the upward expanding diagonal for the final 5th wave it should be noted 2969.50 only represents (iii of 3) of a of 3. Thus a higher high above 2969.50 would be needed to complete "only" a of 3. Thereafter we would still need:
Deleteb of 3
c of 3
a of 4
b of 4
c of 4
a of 5
b of 5
c of 5
This whole sequence could take a couple of more days or longer to play out and involve some decent size swings up and down. A key element would be the wave 4 overlap of wave 1. In other words the biggest decline needs to be wave 4 and it needs to drop below 2945.75 but stay above wave ii (i.e. either 2928.25 or 2928.75). Furthermore my earlier estimate of 2990-3000 may prove a little conservative with 3020 perhaps closer to the mark.
Joe happy holiday.
DeleteI can't remember in the last 2 years ever having you propose a 1 2 i ii count as preferred at any degree ... When was last time?
Thank you Joe for this post, useful for those of us who will never have the time to study and fully grasp EW.
ReplyDeleteKeeping it simple, I see lateral resistance in the 2980-3015 range, the new moon is just behind us, and the China/US cold war rumbles on. As the Hill Street Blues sergeant Phil used to say 'let's be careful out there'.
From here to 2,989.50 (according to these quotes) this wave counts acceptably as 'five-waves-up'. This could be the v of (a) in the ES daily chart.
ReplyDeletehttps://invst.ly/qx5s0
This local count invalidates above 2,989.75 and would require reconsideration that that point. Wave ((2)) in this count is a "running flat". Wave ((4)) is longer in time.
TJ
If this v of (a), then it will follow by v of (b) down, and then follow by v of (c) up. Once (a), (b), (c) finished, a big down wave starts. Right?
Delete..the best possibility I see at this time, David.
DeleteJoe,
DeleteAs always thank you very much. You have a very wonderful weekend and enjoy your holiday.
ES 2996.75 would be the 1.618 extension if this were still the 3rd wave moving up from Friday's low. Let's see what happens there.
ReplyDeleteA new post is started for the next day.
ReplyDelete