Monday, February 22, 2021

H&S Activated

Over the weekend, a couple of us made the case for a potential head & shoulders pattern on the ES 4-Hr chart, and we indicated that breaking the fractals at 3,880 might set it off. Today, the market broken those fractals below the four-hour alligator indicator, and - as well - the following observation is to be noted on the daily chart.

ES Futures - Daily - Lost Embedded Stochastic
 

As you can see, the daily slow stochastic lost its embedded status, and price immediately and price went down to contact the 18-day SMA, 'the line in the sand'. This may well set up 'the battle for the 18-day SMA'. I will also note that price overlapped the prior January high on the futures.

On the cash chart, the best pattern we are able to count is that of a potential contracting diagonal. If it completes properly tomorrow, there could be a rebound in prices following it, and then lower lows. Here is the cash chart as we counted it, so far, including the proviso that such a pattern 'must' complete properly to be valid.


From an EW perspective, it almost seems as if there is someone purposely trying to make the waves a difficult as possible to count. I mean this wave starts out with a leading diagonal micro ((A)) wave which was itself a real bear to count. I know why this is happening. The powers that be have a vested interest in not letting anyone else know that a turn is possibly coming. They are trying every strategy possible to hide a 'five-wave-structure'. So be it.

Patience, calm and flexibility are still required as we attempt to detect if there is pattern completion, and a retrace that remains below the all-time-high.

Have a good start to the evening. 

TraderJoe

29 comments:

  1. Joe thanks
    Why are you counting cash given all your reasons started in prior posts that it's not the full picture?

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    Replies
    1. ..because a lot of these patterns were developed on the cash charts circa 1950's - 1980's (Elliott, Bolton, Prechter, Neely) and so they should still show up there, if valid. Futures might count differently to have cash count as it does.

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    2. My hunch is the cash will be harder to find impulses

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  2. As to to your comment on the purposeful confounding of the waves, frankly I have harbored that suspicion for quite some time! One often recurring subterfuge is apparent fourth waves that continue to bolt higher leaving many a hapless trader forlorn awaiting a fifth wave low...lol!

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  3. A few add'l observations on 30min cash -

    https://funkyimg.com/i/3b2Dm.png

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  4. I just have to shake my head at the news article I read today talking about how semiconductor stocks will continue to go up due to a chip storage. Did they forget about the 170% rally in the semiconductor ETF from last March until now? I believe semi stocks made the last all-time high and it’s game over for the bulls.

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    1. I alluded a few times to the remarkable violent negation of bearish market signals in recent years, and wondered aloud about the possibility of actually seeing a top attended by bullish technicals. I am seeing frequent references NYAD new ATHs and the absence of a Hindenburg Omen on the clock, to support the idea that any current market decline will necessarily be corrective. It would be the ultimate irony were that NOT the case...

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  5. Good morning all. There is now one way in which the contracting diagonal may have completed (or be nearly completed) on the hourly futures. The completion count is shown below. It may be hanging around for cash to open - perhaps to make it's lower low, also.

    https://www.tradingview.com/x/4sdTVOQR/

    For the 'one more wave down' count, move wave iv one peak to the right at .b of v, as a truncated zigzag. This seems the best alternate at the moment.

    TJ

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    Replies
    1. ..futures can allow prices down to 3,831.50; cash much higher at 3,847.25
      TJ

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  6. With the 10 year yield on the move and in the news I thought it was time to look for a trend change with TLT.
    https://www.tradingview.com/x/NYzvYcTx/

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    1. Bill - here's another way you might view it

      https://funkyimg.com/i/3b3qs.png

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    2. Fib levels. 1.56% - 1.88% - 2.20%. Open gap around 1.46%

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  7. SPX cash ..has broken below 3,847.22 and requires reassessment.

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  8. So, on ES 4-hr; must assume we are in retrace mode OR that the low will be taken out.

    https://invst.ly/txp5c

    Not a good way to tell at this point.
    TJ

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    Replies
    1. It has the feel of a 3rd wave? If we get the VIX above 33, I’d be looking to back the truck up.

      https://schrts.co/kXtqWKIx

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  9. Here is the H&S target of 3,800 vs 3,804 obtained. There are 'signs' of a third wave, but trading is very choppy. This is primarily a note of caution about those wave 'failures'. Something different is going on.

    https://www.tradingview.com/x/gzjDySsk/

    TJ

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  10. NQ (4hr) - 3rd?

    https://funkyimg.com/i/3b3vd.png

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  11. Cash 30min - H&S met its MM target area -

    https://funkyimg.com/i/3b3xf.png

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  12. Ordinarily the size of the tail on that hammer in NDX would be fairly conclusive. Are we about to see role reversals when it comes to signal negation?

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  13. Perhaps fourth underway with a C of four just ahead...

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  14. bravo - target hit! but no hourly divergences makes me think this may go on for a while.

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  15. TJ - could you see this possible exp. flat? Thanks!

    https://funkyimg.com/i/3b3PA.png

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  16. If so, looks like C not done with some kind of fourth wave underway. A fifth down should see a lower VIX high.

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

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