With all due apologies to Robert Palmer's smash hit, "Simply Irresistible", this post presents a Simply Hypothetical path the market might take in the near term. One line in the song should ring true with the recent level of speculation we pointed out with the lowest put-call ratio of 0.37 in years.
"..She's so fine, there's no telling where the money went."
As we know this week, those speculators were treated with a dose of reality and some may be asking where the money went. This first hypothetical path was shown in the comments section to the prior post.
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| ES Futures - Daily - Hypothetical |
The post suggests that perhaps just a better parallel is being made for a continued rise higher as a "running flat B wave", with a C wave up yet to follow. One reason for looking at this option is that if one were to count A,B,C to the recent high, then the very instructions for forming a zigzag can not be followed. These instructions - shown on the chart - are printed in the very book which is the foundation for a very large Elliott Wave service which is even now not following their own instructions. Are they right, or are they wrong? Only time will tell.
From a degree labeling standpoint, we know this up wave is already 'larger in time' than the most recent Intermediate wave decline to the March 23rd low. The question is whether it will also become larger in price to unquestionably be another Primary wave up as shown in my longer term chart posted HERE. (As I said before, I reserve the right to upgrade A,B,C to (A), (B), (C) - should it be required after further wave examination).
Again, the only requirement for a "running flat B wave" is that it overlap the A wave - at least in the futures. We're not there yet, but came close on Friday.
I said this is a first hypothetical path because there are other paths the market could take for which there just is insufficient evidence at this time - such as a triangle B wave. The evidence for the above count would be four-fold: 1) the breadth of the advance since the March 23rd low, 2) the $NYAD line having recently made a new high, 3) the NDX having made a new high, and 4) the current locations of the lower daily Bollinger Bands and the 100-day SMA.
So far, the market seems to be following this script. There was a first wave down, and then - instead of breaking loose lower on an overnight gap down on Friday - the market backed off a bit again, and may be making a second wave higher.
Have a good start to the weekend.
TraderJoe
Oh, it is a very good consideration and shows that you are thinking in accordance with the rules and degrees. Right now that possibility falls into the category I mentioned of paths that have insufficient evidence at this time. Often, diagonals have 62 - 88% retrace waves. That is not in evidence yet. Neither in evidence would be a higher third wave of such a diagonal. All of that may be considered in the future. Right now I have only shown what seems simplest for getting the B wave to be more proportional in 'time' to the A wave. So, don't hear that the idea is being dismissed because it definitely is not. Keep up the good work.
ReplyDeleteThere are lots of tools, and it sounds like you are having difficulty knowing which ones to use, and when, in order to make a decision. Your objective is to make a decision. For that reason, I suggest you read this relatively brief definition. Skip the math part, but try to really digest and appreciate what is being said in the first several paragraphs.
ReplyDeletehttps://en.wikipedia.org/wiki/Fuzzy_logic
Then, skip down to the Medical Diagnosis example, and anything else you care to read.
TJ
Just Hypothetical
ReplyDeletehttps://i.postimg.cc/hGq08PvX/2020-06-13-1305.png
..lousy count .. do you really think that five non-overlapping waves up are w-x-y-x-z? If they overlapped I'd have a different view. And what if your wave 2 down decides to retrace back up into the monthly candle some? Might that allow for market averages (which are NOT all JPM) to do different things?
DeleteHonestly TJ is there anything here to argue about? Without the banking index...were dead in the water and the Fed by this chart is powerless.
Deletehttps://i.postimg.cc/7Y5fNfBm/2020-06-13-1723.png
So I'm not opposed to a decline at all if that's where the evidence takes us. But, all you are doing here is citing a pet sector. Yes, this week it's the banking index, last week it was the Semi's, the week before it was weakness in housing, etc. etc. And, my hypothetical calls for a near term decline. It's what happens 'after' price hits the 50-day SMA that has me wondering.
DeleteSo, as an example of the "Fuzzification of Decision Making" let's take one chart with two tools which are possibly sending opposite Boolean logic signals, and see if by applying Fuzzy logic (in a much simplified manner) we can make some sense. Here is the chart. (Nothing in the example is trading or investment advice).
ReplyDeletehttps://invst.ly/r4crp
So, the Boolean interpretation of the EMA-34 is that "If price is over it, one is long". That is Boolean Logic; true or false. Right or wrong.
The next Boolean interpretation is that of "Day Count". Here the Boolean interpretation is "Prices have been rising since March 23, without a confirmed lower swing low. This is bullish, prices are 'going to the moon'. This is just a correction. As Cramer would say, "buy, buy, buy". Again, this is Boolean logic. Either since the bottom there is a confirmed swing low, or there isn't. It's zero or 1, true or false, right or wrong."
While these two tools are aligned with each other, it is clear they are at odds with your candle interpretation. "What am I to do here? How is a reasonable person supposed to make sense out of this stuff? This technical analysis stuff is gibberish."
Here is what a fuzzy logic system might say, first regarding the EMA-34.
On a percentage basis this is the 'HIGHEST PERCENTAGE' of price being over the moving average since the March 23rd low. Out of the past 100 years of stock market history, this percentage ranks 93% in the set of over-bought readings that leads to a correction. Yellow light 90-95%, Red light 95% - 99+%. Yellow light.
Now with regards to day count. This one we can make near exact. The last Fibonacci day count was 34 to the top of 'C' wave of the flat correction. The next Fibonacci day count is 55. That means that each day past 34, of the 21 to 55 gets lower odds of not having a correction happen. Day 35 is 1/21 = 5% chance of being included in the correction set. Getting to day 39 is 5/21 = 24% odds of being included in the correction set. While day 54 = 20/21 = 95% odds of being included in the correction set. 90 - 95% = Yellow light. 95 - 110% = Red light. Why 110%? Because there are some times when the decline starts "the day after" the Fibonacci number. Only Fuzzy logic can handle this interpretation.
So, next is your candle pattern. A weekly gravestone doji "must lead to complete reversal of the count". This is Boolean logic. It is "either, or; true false, yes or not".
The fuzzification of that variable is like the following, "Weekly gravestone doji have happened 43 times in history, yet the stock market has always recovered and gone up." Still, in the 43 times they have occurred 37 of them - made up numbers - or 86% of them have led to a correction of 10% or more". 85 - 90% Yellow light. 90 - 100% Red light.
Please answer with a reply as to whether or not you can see how the Fuzzy Logic differs from the Boolean logic, and how market analysis can be "integrated" into a "dashboard" by which decisions might facilitated. Further, please let me know how you can now see why any Elliott wave pattern has what most people only a "probability" of being true. That is still quite different than how I think of it. I think of it as the following:
Given the evidence, what is the Fuzzy Logic value of this wave being included in the "impulse" set? Given the evidence, what is the Fuzzy Logic value of this wave being included in the "diagonal" set. Given the evidence, what is the Fuzzy Logic value of this wave being included in the "triangle" set, etc.
I won't do the work for you.
Look I'm not trying to be a jerk here. There is just a lot of reasons to think wave 5 ended in 2018,but it did not as many stock either completed a wave E or B top in Jan. or Feb. 2020 or completed a EDT wave 5 Thursday. Both scenarios upon completion produced a thrust down. I expect a gap down Monday and there is a lot of evidence to support that view, in the minority though. But EWT in my opinion says it should. Maybe...maybe not. Thanks TJ
ReplyDeleteHere is AMZN
https://i.postimg.cc/KvLrNG8S/2020-06-13-1808.png
Thanks TJ
DeleteWith this evening's lower low, it is 'possible' to count five-waves-down using the principles of degree labeling as a contracting diagonal.
ReplyDeletehttps://invst.ly/r4lk3
The pattern should make a new higher high above wave ((4)) of the diagonal, before a low of 2,930 is breached or the pattern would have to be evaluated for invalidation.
The large gaps in the futures 'tend' to fill more quickly than those in cash. But nothing here is to be taken as trading or investment advice.
TJ
Looks like you dropped Friday's w-x-y-x-z and went to 3 waves up. 👍
DeleteAt the current time, neither YM nor NQ have made lower lows (but that could certainly change).
ReplyDeleteAt this point in time, over night S & P 500 futures very close to overlapping the A wave high in the hypothetical scenario above.
ReplyDeleteThinking the overnight low was 3 of a contracting diagonal.
ReplyDeleteThere has been overlap in the futures of the Minor A wave, so the bare 'minimum' target of the downward wave has been attained. It can go lower, but that remains to be seen. The internals are being monitored.
ReplyDeletehttps://invst.ly/r4vve
TJ
It should be noted that SPX, SPY and NQ have not overlapped at this time.
DeleteWe would be at 4 of contracting diagonal now.
ReplyDeletelooks like 4 > 2
Deletejoske
Yep, Invalidated.
DeleteExpanded flat developing nicely. SPX low on Thursday (2999.5) to Friday's high (3088.4) was 88.9 pts. 3088.4 to today's low (2965.7) is 122.7 pts. That's a perfect b = a x 1.38. For ES the same ratio comes in at 1.68, also perfectly okay for an expanded flat. DOW & NDX have the same structure that fits an expanded b wave. Would suit as a 4th wave counting from the top currently in wave c. Wave a (3088.4) was a 38% retrace of the main drop (wave 3?). Therefore a retest of 3088.4 and double top for c of 4 should be on the short list of options.
ReplyDeleteJust a reminder there is nothing 'sacred' about the shape of B. It can be complex or even a triangle - though without overlap in cash, the triangle option seems less likely than the 'complex' at this time. The minute ((y)) wave would be a diagonal 'a' to where I identified 'five waves down', followed by a triangle 'b', followed by a short 'c' wave down to 2,925 to make ((y)).
ReplyDeletehttps://invst.ly/r4z16
TJ
Usual drill .. with 160 candles on the ES 5-min chart, the EWO has now gone below the zero line. This 'looks like' the fourth wave, iv, but is currently shorter in time than the second wave, ii. So, it wouldn't be surprising if the fourth wave became more complex.
Deletehttps://invst.ly/r5050
TJ
A new post is started for the next day.
ReplyDeleteI was looking at that same idea. Do you have a chart? I'm still trying to figure out where the 1 down developed exactly. Since it's going higher right now, it might go to the 200% of extension of the a wave which happens to be around the same as the 50% retracement of the entire down move from Monday to Thursday.
ReplyDelete