Tuesday, May 5, 2020

In A Hurry

The market was in a hurry to get back to the 62% retracement of the down wave. It did that, then stalled for much of the mid-day, then sold off. So far, this wave action is consistent with two counts in a couple of forms. The first count is that of this potential triangle in the cash S&P500 index.

SP500 Cash Index - 2 Hr - Potential Triangle

This is the first form of a potential triangle, the second form would have a slightly larger minute wave ((d)).

The second count that is currently compatible with these waves are that after making the minute wave ((b)), up, and the recent a-b-c waves down into yesterday morning, we could be making a larger (probably expanding) diagonal down for a larger and deeper minute ((c)) wave lower.

Because there are two very good options (actually three if you consider both forms of the triangle) the potential triangle pattern is shown with dotted lines only.

One of the problems is that yesterday & today's up pattern in the futures is completely ambiguous. It can be counted as fives-waves-up (to a in black), or it can be counted as three waves up, as a-b-c in red, both without degree violations. Here is the chart.

ES Futures - 15 Min - Three Waves or Five

The explanation for the above chart can be found in the prior post and comments. It is essential in the futures that the overnight wave at 03:30 ET to the 2,865 level be viewed as the first or the "a" wave or else degree violations result. Please note that the cash market at ((5)) or c did exceed the prior high.

Obviously, from the first chart the triangle would invalidate with any movement below the minute ((a)) wave. But, the expanding diagonal almost certainly must travel below that ((a)) wave.

Clearly, the market-making algorithms want their freedom to swing prices around in the high volatility and try to vacuum up the retail customer's accounts. So, more than ever, this is a time for high flexibility, calmness and patience.

Although I personally prefer the downward diagonal because it would give more downward length to the Minor B wave, I have to be flexible, too. So we'll try to update this situation as it becomes clearer.

Have a very good start to your evening.
TraderJoe

19 comments:

  1. Gap fill day today from friday and yesterday am. A look around at different inices paints a somewhat different picture. DAX gapped below it ascending wedge on monday and now mostly filled the gap while retesting the broken trendline. Same for the BKX. NDX gapped from its ascending wedge friday and today filled the gap, while also testing the underside of the broken line, and forming divergences on rsi, macd etc. i think the door is open for moves to begin.

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    1. Thanks, I noticed the same with SMH gap fill too. I'm betting on a big down move over the next week.

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  2. It's going to look suspicious if the market goes up on Friday with an unemployment print over 15%. I'm very interested to see if the gap fills at 2540. the move up today filled the down gap from Monday. If it does fill, I have it occurring by next Friday May 15th. This will setup for a nice rally this summer back to fill the 3000 gap by August.

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  3. Good morning. Currently trading sideways with a "deep retrace" after the open. Market keeping a number of patterns on the table. Higher highs are needed for a larger diagonal C wave upward (a new red c in the chart above).

    https://invst.ly/qp9mh

    Or, there are 'five-waves-up' to a possible red c truncation in the triangle count or expanding diagonal count, lower. But, then in the case of the diagonal, lower lows are needed and the evidence doesn't exist for that yet.

    TJ

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  4. Not possible a triangle today on ES? https://invst.ly/qpa0i

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  5. One the very, very short term there is this one-minute diagonal. One might want to see if the high is exceeded or the low is exceeded.

    https://invst.ly/qpas9

    TJ

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    1. IF the low holds, then the diagonal is followed by yet another FLAT to extend the correction in time.

      https://invst.ly/qpb5e

      If the low doesn't hold, it's a-b-c up to the wave after the diagonal.

      TJ

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    2. So .. we had the diagonal, the flat which allowed a deep retrace without breaking the lows, and now we have this parallel. Over or under the parallel and we might get somewhere.

      https://invst.ly/qpb-n

      TJ

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    3. ..now under the parallel, and a break of the 2,856 low

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    4. ..so the whole parallel (with the diagonal) is a-b-c, up.

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  6. I'm watching the intra-day pattern of XLF over the past 10 days, which might - should - have broader implications to Dow and SP. Since the high last Wednesday, seems like 5 waves down, followed by a three-step rebound Monday/Tuesday, retest - sight break of low - today, which might be A-B of an A-B-C rebound. If so, we should be a significant C wave rally over the next couple of days to complete the rebound. Not sure how that would alter the count of the SP and Industrials, but something to watch for. Note the markets love to prove me wrong, so watch for that too!

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  7. after the a-b-c up, the ES prior low was exceeded lower. Below 2,847 now.

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    1. ES 15-min ..now .. overnight low exceeded lower.

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  8. Reminder that at 15:50 ET or in about 2-min, the Interactive Brokers clients must post full margin. We have seen moves of 10 - 30 points in one minute at that time. Can be up or down, or both.

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

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