Window Dressing and Front-Running

In our previous post, we cautioned that today could be a day of 'window-dressing' with its attendant sloppiness as portfolios are reconfigured the end of the month. As you can see from the intraday chart below, that is what occurred at the beginning of the session.

ES Futures - 5 min - Window Dressing Day

Prices declined - during the cash session - from approximately 3,632 to about 3,592 in the first 90 minutes of the session. After that, there was an attempt to buy-back the highs in a likely front-running of the 'first-of-the-month' money which typically enters the market. As soon as the cash market closed, the buying became more serious and continued into the after-hours, so far.

Over the last couple sessions there was downward overlap, preventing a five-wave impulse out of the triangle, so the larger wave count depends significantly on whether a all-time-high is made or not.

Meanwhile, in terms of another market, according to The Eight Fold Path Methodology, today the US Dollar Index confirmed its fifth Minor wave, down, Minor 5, and needs to begin to be monitored closely for a turn.

DX Futures - Daily - Five-Down

In this count, wave 2 is a (w)-(x)-triangle (y), and wave 4 is a Flat for alternation. Wave 5 may be a diagonal or part of one.

Have a good start to the evening.

TraderJoe

Closer Call Yet

From yesterday's post, we continue to look for five-waves-up with a non-overlapping fourth wave. The market made some whippy holiday-light moves, but nothing has invalidated yet. Here is the ES hourly chart, again.

While there was a slight tick downward below the 25 Nov low, there was not overlap with wave ((i)). The market then recovered this morning and made a slightly higher high than the 26 Nov high.

The proposed expanding leading diagonal we showed yesterday played out on the 5-minute chart in the overnight, and played out in the following fashion, having to increase the time-frame to the 15-minute chart to show the subsequent bars.

ES Futures - 15 Minutes - Subsequent to the Diagonal

 

Leading diagonals are often "A" waves. So, there was good reason to suspect this one was too. After, a diagonal - for reasons of alternation - the "C" wave that follows an "A" wave should be an impulse, and not a diagonal. Here you can see clearly labeled are five non-overlapping waves up, likely for the "C" wave, after a three-wave decline that just breeches the lower border of the diagonal.

I should just indicate, this is "as expected". One expects a diagonal followed by a not very deep retrace to be only part of an a-b-c sequence, as you see here.

So, back to the hourly chart. Price still needs to get above wave ((iii)) to confirm a fifth wave ((v)) in progress. But, I am wondering if the deep and long fourth wave, doesn't possibly mean the fifth wave might extend. Notice in the first chart that wave ((iii)) and wave ((i)) are very nearly at equality with each other, but wave ((iii)) is, indeed, the longer wave.

This is a reminder than Monday is the last trading day of November - with the potential for sloppiness due to 'window-dressing' - and that Tuesday is the first trading day of the new month with the subsequent potential inflows from pension funds, 401k's, company bonuses, dividend reinvestment plans, etc.

We'll see how it goes.

Have a very good rest of the holiday.

TJ

Close Call

With the invalidation yesterday of the downward expanding diagonal we showed in prior posts, and conversion of some of it's waves into triangle format, that left a count that we labeled yesterday tentatively as a 5-3-5 structure. On the ES hourly chart, we may now be working on that last -5 as shown in the chart below.

After the ((e)) wave of the triangle, there are currently three-waves up, and a fourth wave down if it doesn't invalidate. Readers should verify that all of wave ((iii)) in this count is above a line from wave ((e)) to wave ((ii)).  The ((e)) wave is the 'origin' or 0 point of the new upward wave. There is a Flat for wave ((ii)), and as it sits now, wave ((iv)) is a longer-in-time sharp wave for alternation - provided it does not invalidate. As it was, wave ((iv)) was so long that it created a 'close call' with overlap.

Intraday today, we showed the Classic Pivot Points, and the support at the low of the day on/near the Daily Pivot Point (PP). We then began counting upward on the ES 5-minute chart, as below.

It was an 'all-day-grind' with higher highs and higher lows which we suggested 'might be' an Expanding Diagonal. It was not until the start of the next session that we were able to verify that wave ((5)) had crossed 3,633 and thereby officially made wave ((5)) longer in price and time than wave ((3)), which was longer in price and time than wave ((1)). We had previously verified that wave ((4)) was longer in price and time than wave ((2)) - meeting all of the minimum the requirements for an expanding diagonal.

There is no guarantee that the upward movement is over. Sometimes wave ((5))'s get very aggressive. But, when the proposed diagonal has ended, then it must by rule stay above the origin of the pattern for a Leading Diagonal - otherwise it is ending.

Again, the ES keeps making these expanding patterns. It may have something to do with the Expansion of the money supply by the Fed. It may not. But, I'm not asking these patterns to be made - I'm just counting what I see according to the rules.

So, do have a good start to the holiday if you are celebrating it. I will be.

TraderJoe

Transition Invalidates Smaller Diagonal

Yesterday, we said there was a possibility of extending the flat wave (shown in the chart below) upward, to extend a correction in price and time. As a triple combination, though, we said the odds were quite low, as this is a fairly rare pattern. The overnight news that the GSA was going to allow the Biden transition to proceed was greeted well by the market, and prices did add another leg higher, but went so far as to invalidate the potential downward diagonal as shown in the ES hourly chart, below.

ES Futures - 1 Hr - Diagonal Invalidated

As you can see, prices went marginally over the high, but sufficient to invalidate the downward diagonal. So, the alternate pattern we showed at the time of the diagonal creation (w),(x),(y),(x), and (z) - the expanding triple zigzag - takes over the labels. Why this expanding type pattern has repeated on a number of occasions is interesting. First, triple zigzags are quite rare. Second, when triple zigzags occur they 'often' form in a strict channel. So, for the pattern not to be valid likely means it is part of a larger pattern - most likely a triangle. Right now the market is making patterns whose odds are quite low.

That being the case, then moving to the ES 4-Hr chart, below, suggests a 5-3-5 pattern may be in the making, as below. Yes, as a triangle, in the center of the pattern it's odds were fairly low too. But it is countable.

Such a pattern might be to Intermediate (Y) of the upward diagonal looking pattern or Minor B in the larger (X) wave pattern. Those patterns were posted at this LINK. Please have a look if not familiar.

With the holiday about to begin and typically strong stock market seasonal patterns just before this holiday, new highs are not out of the question.

Have a good start to the evening.

TraderJoe  

P.S. After the market closed and the data became available, I added this chart. I have shown it many times in the past.

CBOE Equity Only Put/Call Ratio - Daily - Pretty Low

Just 'be aware' of the string of highly speculative readings, and note where the indicator was at the prior market top in February. The 10/50 period moving averages have been lower, but not by much. 

Regards,

TJ

Overlapping Structure

It was indicated in prior posts that, after the five-wave diagonal lower, if the market wanted to spend more time in a second or a (b) wave, that the market could make a flat wave. Below, in the ES futures hourly chart, you can see the 'minimum' configuration for a flat wave.

The w, x,and y waves are exceedingly overlapping, and largely three-wave sequences with price held to a close range. The y wave of the flat exceeded the w wave such that there was not a truncation of the pattern.

Price needs to move out of the pattern for further analysis. The pattern shown is the minimum flat configuration, and amounts to a "double-three". Price could - by the rules - go still higher in a more rare triple-three, but the odds of that happening are somewhat lower. On the down side trading below the 'x' wave' in an impulsive fashion may otherwise end the upward correction.

In another development, the Russell 2000 futures marginally cracked the prior high. Other futures indexes such as the YM, NQ and ES have not, as yet.

Have a good start to the evening.

TraderJoe

Bull-Head

Catfish or bottom feeders. After the five-wave diagonal we counted downward in near real time, the market tried to mount a rally to the prior 38% high we pointed out yesterday. For the time being at least, it double topped there at 07:00 EST.

Intraday, we counted out a diagonal, and looked for clues from it. It did break lower but it took a lot of time to do it.

Towards the settlement, in whippy behavior the futures market again made a dive for the lows resembling bottom-feeding fish. While the low did not break by settlement, it could, if it wants in the after-hours tonight or Sunday. All-in-all, most will just see it as a poor close, and perhaps people just leaving the market in advance of the holiday week.

Cash SPX is not showing much, if any at all, of repeated retesting of the bottoms. That is sure interesting - more invisible waves.

The larger count remains as it was yesterday, until this smaller pattern is resolved.

Have a good start to the weekend,

TraderJoe

Diagonal Retraced 38% (So Far)

From a wave counting standpoint on the ES 4-Hr chart this is all I have, so far. One can only get so much information from the market. You can't squeeze blood from a stone.

ES Futures - 4 Hr - Downward Base Channel

As long as price remains in the downward sloping base channel, a decline is still indicated by the channel. (As always, this is not to be taken as trading or investment advice.) The downward expanding diagonal - which was counted out largely in real time - was retraced a bit more than 38% today. While that is sufficient, it can become longer in time or price by making a Flat wave if it wants. It does not have to.

Today's session was mostly a non-event until the after-hours where a larger candle with quite an upper tail is shaping up.

In this chart (a)/(i), and (b)/(ii) are on equal footing until they are not. Have a very good start to the evening.

TraderJoe

Sell-off Accelerates

Yesterday, we showed the possibilities for a triple zigzag, or expanding diagonal downward on the ES 15-minute chart. Today, the sell-off accelerated after the second (x) wave or wave (4) holding below the required level. Here is the updated chart on the 30-minute time frame to permit more bars. In this case, the term 'wave (4)' is the Submicro wave degree, not the Intermediate degree.

ES Futures - 30 minutes - Expanding Pattern

 

Wave (4) held below the level of wave (2), and took more time and more price than wave (2) did. Then, as the selling got more pronounced, the low of wave (y) or (3) was exceeded lower and a larger move - in terms of price - was made than wave (3). 

So now the down move has enough price length for a diagonal, but as a diagonal, wave (5) is shorter in time than wave (3). Further, today's down wave can be counted as a 'five'. That means it could just be the A wave (this is Minuscule A, not Minor A). A 'B' wave could head back up towards or over the ESA-34 shown.

Note that with about 112 bars on the chart, the Elliott Wave Oscillator shows the expanding pattern which does typically represent the expanding diagonal. 

With respect to another pattern I was following today, the Russell 2000 futures made a contracting wedge - which may be an ending diagonal (c) wave - after the futures had made the 90% Fibonacci retracement level shown on the chart below.

Russell 2000 (RTY) Futures - 4 Hr - Contracting Diagonal?

 

The pattern does suggest that if the diagonal is a valid one, that the low of the (b) wave should be exceeded lower in less time than the diagonal took to build. For those interested, today's down wave is already longer than wave ii by a few pips, and therefore, a larger diagonal can not be built at this time.

Have an excellent start to the evening.

TraderJoe

Market Stuck on Stupid

Over the last couple of days, we have asked blog readers to watch for a downward break of the ES hourly trend line, a re-test, and then a follow-through failure lower. That clearly occurred this morning. Then we asked readers in the comments to watch for a break of the ES 4-Hr trend line. That also occurred today, as below.

ES Futures - 4 Hr - Breach of Trend Line

 

The futures have tested the 78.6% level to the high, and have briefly turned away from it. The reason the title of this post is "Stuck on Stupid" is because of the drop from the most recent high, shown below. 

If one bothers to count out the wave in some detail, it seems to count best as an expanding double zigzag - well, so far. Why such patterns are being made (unless they are leading to an expanding diagonal, or expanding triple zigzag) is a bit of a mystery. Why doesn't the second zigzag more closely approximate the first zigzag in time?

Further, from this morning's 09:45 am EST low, we could count five-waves up to A, and then a possible B wave down to the 62% retracement level as an Expanded Flat. So, there could easily be an up wave following this, as the expanded flat B wave is at least temporarily bullish. 

If price goes over the (x) wave shown, then an expanding diagonal would not be valid. The market is truly acting like it is stuck on stupid. The retracement levels are not that deep yet, and it is possible and plausible for prices to go back over the high - perhaps in a larger zigzag on the ES 4-hr chart (..the down wave to Friday 'might' be a (b) wave, or the down wave may still be in progress).

The market is in a bit of a mish-mash from a wave counting perspective, and some new highs or lows are needed for some clarity.

Have a good start to the evening.

TraderJoe

For Those Seeking "Five-Up"

Make no mistake, there are a LOT of people on the Internet, amateurs and professionals alike - many of whom partially or completely ignore degree labeling - who are looking for a clean "five-up" from the 23 March low of this year. As you know, this site tries not to ignore enforcement of proper degree labels. With that in mind the close-only chart below shows what I believe to be the best chance for those who want to see "five-up" to get it.

ES Futures - Daily Close - Wave in a Wedge

The key to this analysis is that the Sep - Nov correction is the largest correction in price and time, as noted. There just is no disputing that measurement. So, with that in mind, and the fact that the Dow made a clean A-B-C down into the October low, this should mean that this correction is at least of the same degree as the first minor B wave down to the end of June, or it is of one larger degree. It is my considered opinion that since the first A wave down in September is longer in price than the Minor B wave down in June, and because the correction takes so much more time, that the wave is of a higher degree, an Intermediate degree wave.

As such, if the first three waves up are A,B,C to a (W) wave, then the down wave can be an Intermediate (X) wave. But, if the first three waves up are the very same A,B,C to an Intermediate (1) wave, then the correction to the October low could be three-waves down to an Intermediate (2) wave of a potential diagonal.

We have already cracked the high since once. This could be a Minor A wave of wave Intermediate (3) of such a diagonal or it could just as well be to Intermediate (Y) of a double or triple-zigzag. Before going on too far, it should be realized that one reason not to like the above count for a diagonal fifth wave is that "most-often", "typically", not always, diagonals have much larger retrace waves in the area of 50 - 85% retraces. This retrace is less than 38.2%! This is noted on the chart. 

Also, noted is that any downward wave must stay above the wave (2) or (X) low, for a diagonal not to be invalidated. It can not break it by even one tick in the futures market. Sorry, but this is a hard and fast rule. This is noted on the chart too. In such a chart, it might be difficult for some to distinguish between the triple zigzag count of a Primary ((B)) wave, or the three zigzags inside of an ending diagonal for a Primary ((5)) wave.

But now .. with sentiment having flipped very bullish most recently, what if the wedge breaks? Then there is an way for the Intermediate (X) wave to extend in price and time, as below.

ES Futures - Daily Close - Wave Breaks a Wedge

There are three roughly equal possible wave counts that would agree with degree labeling. Which will occur? Sentiment seems to favor the larger (X) wave, but we can not rule out the other two in the first chart. The only purpose behind this post is to correct what I think are incorrect degree labels by others studying the waves, and to provide a "face-saving" way to get the five-up with correct degree labeling.

So stay tuned, and ...

Have an excellent rest of the weekend.

TraderJoe

Recognizable Flat Wave, Upward

The hourly chart does contain a recognizable flat wave, upward, shown below, that we said was very possible after making the 90% bottom minuet (b) wave in both cash and futures, as shown below.

Today allowed the minute ((b)) wave of the Flat to reach upward to the 50% Fibonacci level. There is not yet confirmation that the upward wave is completed. The first step of confirmation would be trading below, and back-testing the current wave ii-to-iv trend line. The second step in confirmation would be trading below wave iv, and the first step in confirmation would be trading below wave (b).

If the up wave continues, the 0.618 and 0.786 retrace levels could be reasonable targets.

Have a good start to the evening.

TraderJoe

First Moderna, Then Pfizer

>>>>>>>

(CNBC 07/27/2020) Top executives at the biotech company Moderna have sold millions of dollars in stock this year as the company’s share price has skyrocketed on hopes it will produce a viable Covid-19 vaccine. Moderna CEO Stephane Bancel joins “Squawk Box” to address the concerns some investors have about the stock sales.

(CNBC 11/11/2020) Pfizer CEO sold $5.6 million of stock as company announced vaccine data that sent shares soaring.

>>>>>>>

Well, surprise, surprise. How come the articles don't read something like, "Dang. You know I sold my stock five days before this announcement and so I missed making a killing. Just call me a 'bad luck' CEO". Yeah, right. And remember, these sales are outside of their healthy executive salaries and bonuses. Personally, I have never believed in stock-based executive compensation for exactly this reason. While it may be legal as the law is currently defined, it certainly smacks of greed or even gluttony. And, what about the worker? What about their compensation?

So then you have the people who "bought on market open" on the vaccine news two days ago, over the upper daily Bollinger Band no-less, and who were likely greeted with some of these sales, making the long-tailed candle. Today was a second day the market spent trying to recover. The bias of prices remains up, yet the daily slow stochastic remains in over-bought territory. Assuming there were 'five-waves-up' from the October low, we are looking to see what depth of retracement wave occurs from the high. So far, on the hourly chart, it is nearly - but not quite - 38.2%. 

The wave counting is difficult and choppy at the moment. Intraday, we showed "three-waves-up" and then a downward overlap of the first wave up. But, there is nothing conclusive in such a pattern. It could form a double zigzag, a triple zigzag, or a diagonal. More waves are needed.

Have a good start to the evening.

TraderJoe

Challenging Wave Counts

In the downward direction, the Dow 30-minute futures, shown below, already have upward overlap as shown by the orange line. The ES 30-minute futures do not. One should approach this situation with a high degree of caution.

It is possible the Dow futures wish to make an expanding diagonal lower. They must prove it with a fifth wave that is longer in price than the third wave.

It is possible that the ES futures wish to make a "running triangle" fourth wave. They must prove it with a fifth wave lower to about the 3,500 mark or beyond.

While these are both realistic counts, they are also counts which have lower odds. The reason they are even considered is because cash does have a 1.618 wave, downward, but does not yet show signs of a fifth wave lower. So caution may be the best approach, using defined fractals as wave-markers.  The Dow count should not trade over the high of the second wave for a diagonal. For a triangle, the ES should not trade over the the 3,558 level.

Have a good start to the evening.

TraderJoe

Love 'em and Leave 'em

In the first real chance the markets had to react to the election news, as the results were finally projected by the news organizations, stocks made a modest move higher early on Sunday night. Then, early on Monday morning, Pfizer announced some results on a possible vaccine trial with stated 90% effectiveness against Covid-19, with two doses, and a 7-day waiting period for it to reach that rate of effectiveness. Stocks initially soared on the news. Here are the current daily bars on the YM, ES, and NQ futures.

YM, ES, and NQ Futures - Daily - Tails

 

The Dow and ES futures exceeded their prior all-time highs. The NQ futures did not. After the initial 15-minutes, or so, the market decided all this was too much good news, and began to sell off - putting in large candle tails, as above.

We had said on Friday that we could only count three waves up at that time, that the price bias was up, and price could hit the upper Daily Bollinger Band, but that the daily slow stochastic was already in over-bought territory.

So, with today's move, the market structure can be counted as five-waves-up, perhaps to A wave of Intermediate (Y) if the low is Intermediate (X). If that is the case, then the B wave should not take out the low. If the low is exceeded, perhaps the (X) wave is still in progress as a flat. We will be evaluating both cases over the next couple of days.

Some uncertainty exists in today's degree labels because there is a possibility of only minute wave ((i)) of Minor A, being recorded here. For me, the wave count is not locked in yet, and calm patience and flexibility are still needed in counting waves.

Have a good start to the evening.

TraderJoe

Trading in a Range

For the time being some things are undecided: a little thing like the election, for example. Price, as measured by the daily ES E-mini futures contract is still trading in a range, with the clear Elliott Wave count undecided.

ES Futures - Daily - In a Range

In the prior post, we presented the applicable Elliott Wave counts that could be represented in this range. You are encouraged to review that post if you haven't already.

Daily, price is still above the 18-day SMA and so has a positive bias. And while price could easily trade up to upper daily Bollinger Band, the daily slow stochastic is already up in over-bought territory.

So far, we can only count three-waves-up from the October low. This could change, but it hadn't by the end of the day and the end of the week.

Have a good start to the weekend.

TraderJoe

Up Day - 3

Many, many wave patterns can fit today's price action. It is probably best from a wave-counting perspective to remain flexible and not lock in on one just yet. First, here is the daily chart with the BollingerBands, 100-day SMA and Slow Stochastic.

ES Futures - Daily - Positive Bias

The futures this morning found support on the 100-day SMA, then rallied strongly over the 18-day SMA, leaving the price pattern with positive bias currently. Further, the daily slow stochastic has clearly turned up.

And here are some of the Elliott Wave Patterns  that work at least unless the high is exceeded.

ES Futures - Daily - Minute ((ii)) or circle-ii

The above count is possible because minute ((ii)), or circle-ii, is shorter in price and time than the Minor B wave, upward, in the same direction. Obviously, this count would invalidate over the high of Minor B. We should note, that if this count plays out, then a series of new lows would be expected below  the low of Minor A.

And this ..

ES Futures - Daily - Flat or Failed Flat B Wave

The above count is possible because minute ((b)), or circle-b, reached within 90% of the Minor A wave, down, as shown by the included Fibonacci ruler, and more so in the Dow. Also, minute ((b)) is shorter in price than Minor A, and may be the same or less in time.

And this ...

The above count is possible because the up wave can be counted as a zigzag, provided it doesn't extend again in the overnight or tomorrow. However, one thing not to like about this count - and the reason it is shown third - is that such a quick ((c)) wave would be uncharacteristic in a triangle. Usually, ((c)) waves in triangles are fairly long and complex.

And, yes, it is possible the (X) wave ended at the October low, but that still seems very, very short in price length.

If you are trying to count these waves, it is truly a difficult task, so I appreciate what you are going through.

Have a good start to the evening,

TraderJoe

Up Day - 2

Truly ugly waves and difficult to decipher for nearly anyone. It looks like the market left only three waves up, so far. So, a Flat, double-zigzag, or larger diagonal downward are all possibilities. I don't blame you if you get frustrated. Intraday, the waves are not being finished off well.

S&P500 Cash Index - Hourly - Ugly

For example, at the end of the day, the YM futures made a new high. The ES futures did not. Well, the most important thing is that IF you haven't voted yet, and are eligible, it would be truly awesome if you did.

Have a good start to the evening.

TraderJoe

Up Day

Yesterday, based on the two best chart configurations we could muster, it appeared today was going to be an up day. It was. Price came up very near to the upper parallel channel line shown previously.

So now with about 178 - 180 candles on the ES 2-Hr chart (of the recommended 120 - 160) there is a good possibility of wave (iv) being near wave iv. If you have reviewed The Eight-Fold-Path Methodology, which is the featured post of this blog in the upper right of the page, you can see a wave iii of (iii) which is at the lowest point of the Elliott Wave Oscillator, and wave (iii) is slightly beyond the 1.618 Fibonacci extension level, and on a divergence with the EWO. Next, we see that wave (iv) has the characteristic signature where the EWO comes to within a level of +10% to - 40% of the maximum trough of the down wave. It has done this, and the latest EWO histogram candles are red and declining. Within wave (iii), waves ii and iv have excellent alternation as a sharp and a flat.

If wave minuette (i) ended where red (i) is shown, then there is alternation between waves (ii) as a sharp, and wave (iv) as a flat, also.

If the wave is to impulse then a fifth wave down should be made on a further divergence of the EWO. If today, Monday, was an up day, then often, not always, Tuesday is a turn-around day and could result in downward movement.

If an impulse does finish as per The Eight Fold Path Method, then it would be minute ((i)) down, also designated as circle-i.

Have a good start to the evening.

TraderJoe