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.
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| 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
Thoughts on the 4hr -
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Since you mention first-of-the-month pension funds and investment plans, etc, I'll bring up that, according to estimates by Goldman and JPMorgan, November was supposed to have $36 billion in equity selling as part of pension plan rebalancing based on the huge move up in the stock market since the start of the month. This pension rebalancing with $36 billion sell-side in equities is the the largest sell estimate since 2000. From what I know, pensions funds can now, as opposed to back in the day, choose to sell sooner than the last day of the month. That'd make sense with the lack of liquidity in the market the last few years. But I haven't seen true signs of large-scale selling last week...or all month...are they all saving a dump for Monday? Or is it all a ruse? $36 billion is nothing to sneeze at, but perhaps I'm a penny pincher in the land of Big McBucks.
ReplyDeleteI also saw that story and agree there has not been any selling pressure. Considering the source, perhaps a grain of salt is in order.
DeleteWhy sell end of the month....
DeleteA grain of salt could be in order Tachyon, and always goes along with my reading material, good point. Why sell end of the month? I am no expert, but highly common pension plans and investment plans (for example 50/50 equity/bonds plan) rebalance monthly. Equities have been massively run up this month so any plan that needs to rebalance will sell equities and buy bonds this month, if that is indeed what "should" or "is" happening. I think that the effect of the equity selling is dampened by the fact that it hits the wire several days in advance and it happens every month to the sell or buy side. The notable part about this month being it is a record sell-side figure going back to 2000 and it is a lower volume month. Perhaps many plans have sold already and have gotten absorbed by buyers, but I wanted to mention it nonetheless.
DeleteThe comments by Goldman and JPM sounded like propaganda, as we know fund managers like to "window-dress" with winners.
DeleteFrom TheMarketEar today:
DeleteMaybe the rebal-flow waited until the last day...
Remember the month-end rebalance flow? Normally it gets pre-traded and many were inclined to believe that it was already "out" before Thank-giving despite very limited flow trace signs. Maybe they for once just waited until the last day of the month. To recap:
1. Pension fund rebalancing into month-end (street estimates vary from -$30B to -$60B)
and add to that potential more supply:
2. robust capital markets calendar into early December (IPO + secondary + converts + lock-ups + blocks = >$100B)
3. historical bias to take down gross into year-end (MS PB Content has HF gross in the 100th %-tile).
https://themarketear.com/posts/ceAq-YUYbo
Weekly and monthly ES-mini S&P 500 above upper bb.
ReplyDeleteSentiment is frothy and you usually get a pullback from this extreme level. Although that gap in the VIX is still there and will get closed at some point.
ReplyDeleteLooks like they tried to close it Friday but no cigar. Perhaps next week as a five up completes.
DeleteCurrent Put/Call and mov. avg. - (daily)
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Tj few days back you posted a chart of appl and your point point was an overlap between 4 and 1. Given how market has reacted since then could it have been 12 i ii instead of overlap. Thks
ReplyDeleteNo..because ii would be longer in price and time than 2; and that is a degree violation.
DeleteThe move down doesn't look impulsive or ld type any idea what's going on. Thks
DeleteImpulsive moves in this market have been rare!
DeleteCould it be that wave 2 is much shorter in time then wave 4?
ReplyDeleteThanks a lot.
ES traded under 3605.25 level in overnight trading by a few points, quite interesting for the last day of the month.
ReplyDeleteI was watching with great curiosity to see if 3600 would hold, and it did. That for me is probative. While the vast majority of gaps higher remain open, the occasional gap fill has been bullish, with higher prices following.
DeleteGood point. More time needs to be had today to determine the new probable waves - I didn't mean to imply that bullish wave count is out of the question, I am having trouble myself counting recent movement. Supplementary viewpoints VIX and DXY can help determine sentiment, with VIX having a good move up already this morning. DXY has a "false breakdown" feel to it with new lows today. EURUSD did not actually make a new high (yet).
DeleteI really admire analysts trying to make sense of the price action these days. I have never seen more whipsaw chaos. The number of open gaps posted in November is historic, and the call for a third wave underway my many good EW analysts, while I cannot dispute their count, is still remarkable, coming under such overbought conditions.
Delete"third wave by many good EW analysts" is an oxymoron. If someone calls this third wave is not even close to EW analyst not to mention good.
DeleteI will make a guess the same "good EW analysts" were calling 2019 third wave too:)
Not taking a position on a 3rd wave but interestingly enough at the market close today the SPX will have embedded on a monthly basis.
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DeleteThe problem is many analysts will publish a count that although it does not break EW rules, may have some issues when considering other technical developments. I have seen one count with a third wave on deck at SIX degrees of trend! The supporting evidence is new ATHs in the A/D line and bullish signals from MACD and OBV. I have learned over the years to avoid dismissive commentary on the work of others. This market has made fools of too many who thought they knew what Mr. Market 'had" to do next! Lol! I personally think the defense of 3600 means an uptrend remains intact, fwiw...
DeleteUpdate to Friday's 4hr chart -
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I don't have as much confidence in volatility as a useful gauge as I once did but we are seeing bullish divergence with VIX into the close...
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