EW Uncertainty

Here are some more thoughts to consider this weekend. Yesterday we showed a tentative channel, and only three-waves-up. This makes the local situation the most unclear it could be from an Elliott Wave perspective. That's why the most recent terminal points upward are currently labeled as a/i, b/ii..

Please consider that the future is currently invisible to us all. (If you know someone who says they can see it, please provide the reference). And, in that regard we should consider the Elliott Wave patterns that we 'can not yet currently see'.  For that reason, I have just made a little diagram, as below. The solid lines are the ones 'baked in the market'. The dotted ones are possible.

In the first diagram, if upward prices start with a big gap up on Sunday night, then a zigzag is possible, particularly if prices stop at the arrow and then reverse lower to overlap the first wave a/i, up. And, then, is a multiple zigzag possible?! Yes! But, with the same gap up, prices could continue on to form an impulse.

Still more insidious, prices could only travel over the high marginally, and begin to form a diagonal. 

But, supposing there is no gap up on Sunday night. What if the up wave needs to be corrected by a wave that takes more time? Then, even a flat is possible.

And, lastly, depending on circumstances, there are three waves up - and maybe a potential failure. Prices could reverse and head lower.

Yes, one can offer the trader's maxim, "the trend is your friend until it isn't", and maybe even "support at 3,440 holds until it doesn't", or even "Price is over the daily 18-day SMA, so the bias is likely up". But even those don't express the full range of possibilities. Not even Bill Williams' fractal breaks can provide assurance of follow-through prices higher or lower here.

Next, we can see from this daily chart of the ES futures that this week prices have bounced up off the trend line from the low.

What this tells us is, "the trend line is recognized", and the next most significant piece of information is whether this daily trend line is exceeded lower and back-tested higher with a subsequent failure swing lower OR whether prices exceed the September high, first. This doesn't have to occur this week. It could, but there are ways to stall it.

So, this is a time not to have the blinders on, and to see how things progress. It is a time for patience, calm and flexibility as the market maneuvers it's way to the next price levels.

Have an excellent rest of the weekend. This is the second post this weekend, and if you have not seen the first one yet, you may wish to review it.

TraderJoe