Thursday, July 23, 2020

Outside Key Reversal Day Down

Today the ES daily futures made an outside key reversal day down. It made the highest of the recovery, then, after touching the R1 pivot point and finding resistance at it, made a lower low than the prior day and closed lower. In doing so, price traveled down through the Daily Pivot, PP, and the S1 pivot, and tried to stretch down to the 3,210 S2 pivot but couldn't quite make it on this stab.

ES Futures - Daily - Outside Day

As shown on the chart, the preliminary advance and decline statistics were not that impressive for a down day - almost even on the NYSE and the NASDAQ couldn't quite get to even 1 to 2, advancing to declining. Some people say we are crashing. Yesterday, the NYSE advance-decline line made a new all-time high. In the news background, there was some bickering about how much free money to give away, and some regulatory concerns regarding Apple. At the futures settlement, they were still trading above the 18-day SMA, and the daily slow stochastic had not quite lost it's embedded status although it flirted with it all day.

Today's down wave overlapped the minute ((y)) wave of Minor B, but not the minute ((w)) wave yet. That step would be needed as the first step in a three-step confirmation of the Minor C wave of Intermediate (X) being underway. The confirmation process was covered in yesterday's post if you missed it. From an internal wave count perspective, this wave would look a lot better as a five-wave sequence if there is a lower low tomorrow.

Then, if that occurs, one should watch any retrace on this wave if it happens. In general, the high of an outside day up should not be taken out in the next two days or else it constitutes a trap for the bears.

Are we due for real turn lower? Today I produced this chart without wave labels, looking at cycles and Fibonacci number of trading days.

ES Futures - Daily - Cycles

Today was day 85 since the March 23rd low. It is getting very close to a Fibonacci 89 number of trading days. The cycles are not exact, it is likely the number of trading days won't be either. But it is something to be on the watch for.

Well, have a very good start to your evening.


  1. A question on confirmation.
    You mention three steps to confirm being in minor C. These occur well after the fact regarding the completion of ((z)).
    If the ((w-x-y-x-z)) scenario within minor B is correct, then it would seem we need only to confirm that ((z)) has ended. Can we not determine when ((z)) itself completes without waiting for (in this case) days or possibly weeks for three subsequent "tests" to be sure? Going further, has the ((z)) wave itself completed?
    If not, where are we within that wave currently?
    Sorry, thats a lot. Hopefully Ive asked this in an understandable manner.

    1. Technically, you can't prove a statement with a contingency. The contingency is "IF" the ((z)) wave scenario is correct...then..

      It is like saying, "IF the sky is blue now, then prove that it can't be green at sunset..". Doesn't logically work. Therefore, all I do is show you in the following link of a 2-hr chart of the ES ..

      1. A Fibonacci (c) = 0.786 x (a) within ((z)).
      2. All degrees OK because the subwaves of (c) are smaller than (a).
      3. The triangle at the end of the move, the pop out of it & reversal.
      4. The MACD divergence on the higher high.
      5. The break of a two-hour trend line.

      What you do with that information in your mind, now or in the future, is completely up to you. Again, I can't use the present to confirm the future.


    2. Thanks for taking time to post the count within ((z))! It appears that you do indeed see ((z)) as complete, thus the ((w-x-y-x-z)) then, by definition, is complete as well.
      Thanks again.

    3. A 5th down in the morning would go a long way.

    4. @Grey .. I just posted 'a' count. What I think is the 'most likely' count. Not the be-all-and-end-all end-of the conversation count. As you say, it 'appears'; and what if it is all one diagonal (a) wave up? Do you see what I mean? Kindly listen to the advice to seek post-pattern confirmation. Price 'at least'; has to get below (x) to rule that out.

      In the future I'm going to be cautious about answering so many questions on your behalf. You need to start learning to post the counts and to see what might be an alternate of what. I don't mean anything at all personal by it. I just mean 'you' need the learning experience to break the attempt to be 'certain' rather than 'probabilistic'.


    5. @Grey, please see also the next day's post.

  2. 1929 crash bottom in November to the 50% rally top in 1930 was five months and four days. Aug 23rd is five months. Either way, I'm just looking for that gap to fill at 3328 on the SPX. The Dow might not be so lucky to fill its gap at 28800.

  3. Elliot_Trader, thanks for the ongoing commentary.

    GreyWaver... Trading In The Zone by Mark Douglas discusses the 'probabilities' mindset.

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