How Long can they String this Out

With 126 daily candles on the chart of the cash Dow Jones Industrial Average, the count appears to be getting quite mature, but maybe just not quite there ... yet. According to The Eight-Fold-Path-Method for Counting an Impulse (see featured post in the upper right-hand-corner of the main blog page) we should now be in a fifth wave.

DJIA Cash - Daily - In the Fifth Wave

I'll mostly let you ponder over this chart, but as we noted earlier, this week was the first in which the Dow cash and futures both made a new all-time "intraday" high above the May high. That is what is supposed to happen in a contracting ending diagonal. Waves (i) & (iii) usually make new all-time highs to express their motive character. So far, a wave (i) would have. And if it is truly the ending diagonal pattern, then wave (iii) must, by rule, also make the new slight higher high. Only wave (v) in such a pattern is allowed to fail, but, it too, is generally expected to make a new high.

We must note that most of the earlier work on wave counting was done on the Dow - and other cash indexes - before the invention of stock index futures. So, it might be that this chart becomes the easier one to follow in the next several days/weeks.

We will also note the Dow may have tipped its hand on a smaller intraday time-frame, as well. See the chart below.

 

DJIA Cash - 30 Minutes - Lower Low

 

Note that on this intraday chart, the Dow made a new lower low - which the ES futures did not. That tends to rule out a triangle count for the Dow cash. So, this means the Dow has a slightly higher odds of not going over the high on Monday - not for sure - just higher odds.

This is the second post this weekend, and if you have not seen the first one yet, you might like to view it now.

Have an excellent rest of the weekend.

TraderJoe

Chop, Chop - 3

Today was the last day of the month. We supposed because of 'window-dressing' it could be sloppy. It was. With Monday being the first day of the new month - with the possible inflows from sources covered yesterday - it is probable that higher local (if not all-time) highs await. The ES down wave certainly looks impulsive. It may not be.

 

ES Futures - 30 Minutes - Retrace

For that reason, if a second wave, up, does not hold the high, then we suspect the (b) wave might be (or have been) a triangle. We said repeatedly such was possible. For that reason, the alternate labels on the chart refer to that potential triangle. Otherwise, a double-zigzag upward would do nicely for a potential wave ii of a larger (b) wave downward.

That is all.

Have a good start to the evening and to the weekend.

TraderJoe

Chop, Chop - 2

Did today make a believer in the up side out of you? Most of the comments from the previous post indicate it did not. But it sure did one person. He sent me some very 'timely' advice (..not!!..).  During the day prices got up to the 4,423 level and we had pointed out the R2 daily pivot point was at the 4,424 level. Because of the higher high, we eliminated i/ii down option from the chart, and the down wave became the a-3 wave more indicated by the futures than by the cash chart. Prices later fell to 4,395+ in the after hours, and all relevant up waves have been overlapped. This chart only shows the decline to 4,405.

ES Futures - 1 Hr - The Harassment Apparently won't Stop

 

This is just a reminder that tomorrow is the last day of the month, which often, not always, sees some sloppiness in the form of portfolio "window-dressing". And then Monday is the first trading day of the month which often, not always, sees inflows in the form of 401k's, company bonus plans, pension funds, dividend roll-over schemes and the like. Be good, be kind to each other. Have fun, but respect boundaries.

Have a good start to the evening.

TraderJoe

Chop, Chop

Our count remains unchanged - see yesterday's post for the hourly count. We pointed out that a "b" wave could be located nearer the high (..or over it). That is still the case.

Yesterday, we point out that the 'risks were to the high, and the risks were to the low'. We meant that, and while some higher and lower prices resulted, neither the all-time-high nor the recent 27 July low were exceeded in either direction. For those paying attention, today's price movement in the ES futures is still clearly choppy and and clearly in a relatively shallow up channel.

ES Futures - 30 min - In a Channel

In essence, all the market did was 'widen-out-the-risk' today with the green (up) fractal and red (down) fractal showing the market's new likely decision points.  

In a situation like this, again it helps not to forget the many styles of "b" wave that can occur. If it looks choppy down, and choppy up, then it might turn out we are in a triangle. And, it might turn out we are in a flat. Or even, it might turn out we are in a multiple zigzag lower. 

"B" waves are pretty gnarly characters. And, if I am expecting a "B" wave down, that also means that at this time I am also further expecting a higher move up to a new high at some point (..the caveat is unless this wave invalidates on the hourly .. which it is nowhere near close to at this time).

Have a good start to the evening.

TraderJoe

The Inevitable

After counting five waves up to what we think and thought was an (a) wave up, it was likely - based on that and timing studies shown yesterday - that today could be a turn day. Turn-around Tuesday as they call it. The overnight waves were a little intractable, but when cash made a low around mid-day we think we got a handle on it, as per the SPY 15-minute chart below.

SPY Cash - 15 Minute - "Looks like" Five Down

After the 'five-down' price took off to the upside in a nice 62% retracement - so far. It could go farther and take a bit longer if it wants. Still the inevitable happened - just as people were trolling the usefulness of wave counts again.

And, as per the hourly ES chart, below, so far we have gotten only a 23.6% retrace - which seems very substandard and very short in time.

ES Futures - Hourly - Trend Line Break

So, "B" waves of any degree are extremely difficult to count. And while SPY sure "looks like" and "can be" counted like a five - there is some plausibility looking at the futures in particular that the down move is only a "three" and not a "five". Therefore, when counting "B" waves we have to be ready for almost any corrective sequence from a zigzag or multiple zigzag, to a flat, to a combination, to a triangle. And while 23.6% seems small, we recently counted down a zigzag in the form a-b-c where 'a' was a diagonal and 'b' was only a 5% wave! And we know it had to be a three because price exceeded it higher.

Therefore, all we can say is that from here to the high is risk, and from here to the low is risk. The only way we will know for certain whether further movement lower might occur is if the low is actually broken, and even then if only three waves lower are made, then a flat overall could result - or a triangle. And the only way we know about further movement higher is if the high is broken.

Price is still over the 18-day SMA, so the price bias is still up. There are two days now that can count toward the ES futures possibly embedding. And, most importantly, tomorrow is FED day.

So, have an excellent start to the evening.

TraderJoe

Dow Higher High

Today the Dow and its futures finally made that higher high wave upward to a new intraday high. Yay (for some reason)!  Meanwhile, back at the ES futures we were expecting a fourth wave down and a fifth wave up on the hourly chart, and we think we've gotten that. Here out of interest is a two-day chart of the ES futures with some potential Fibonacci timing points.

Tomorrow is Tuesday. No telling whether it will bring the fabled turn-around or not. Meanwhile, back at the daily ES chart (below), prices again hit the upper daily Bollinger Band at 4,414 (this morning) and pushed it out to 4,419 so it didn't hit it at the close.

ES Futures - Daily - Overbought

Meanwhile the daily slow stochastic is in over-bought territory and is not embedded. Again, to paraphrase Ira Epstein (a futures broker), "this is often a place where the so-called Smart Money takes some off the table. And new longs are not recommended over the upper band because the probability of staying outside of that band is about 5%, and the slow stochastic is not embedded".

The above is not trading or investment advice, just a paraphrase of what one commodities broker teaches. 

One can also see that price has again slammed into the upper resistance line from current rallies. I've been doing a little thinking about where the next foo-bah might come from in this market. Something that is relatively new is the concept of a sovereign wealth fund. Here is a definition.

What is the purpose of sovereign wealth funds?

The primary functions of a sovereign wealth fund are to stabilize the country's economy through diversification and to generate wealth for future generations. The emergence of sovereign wealth funds is an important development for international investing.

 

Here are five of the largest (source Wikipedia).

 

China                2.2 Trillion

UAE                  1.4 Trillion

Japan                1.4 Trillion

Norway               1.3 Trillion

Singapore            1.0 Trillion

That's roughly about $7 Trillion; isn't that 'about' the size of the FED's balance sheet? According to Barron's the FED's balance sheet this past week stood at $8.26 Trillion. As the Church-Lady would say, "isn't that convenient?!"

Have a good start to the evening.

TraderJoe

Larger Wedge

Yesterday, I posted the hourly wedge. I clearly stated that "right now" there are only three-waves-up, and, yet, the market could easily make it five-waves-up with some higher highs. Transferring that over the ES Daily chart, below, the price structure is just now at the point where the larger daily contracting diagonal I referred to earlier might be able to be visualized. I said at the time, "downward overlap was needed" before I would post that alternate, and that was obtained earlier in the week.

Right now - as it stands - wave ((iii)) is not only shorter in price, but also, shorter in time than wave ((i)) as you can see from the two 46 bar time rulers. Wave ((iii)) occurs on a lower peak of the MACD. Wave ((iv)) is shorter in price than wave ((ii)) but it nicely overlaps wave ((i)).

We said in yesterday's post from the hourly structure this up wave currently counts like a "three", but it could still easily turn into a 'five'. If that occurs, then it would make a good (a) wave, up, and it's correction might be the (b) wave down of ((v)), up.

If you suggest otherwise counts, you need to tell me what you are going to do with that middle (a) wave? As it stands right now, it is very long in time, but still meets the requirements of a sub-wave of ((iii)) because it is shorter in price & time than all of wave ((i)), the previous higher degree wave in the same direction. Further, the wave after it not only overlaps wave ((i)), it overlaps that wave (a). How does your suggested count get around those two issues?

If price makes an (a), (b), (c) up from here then it might be the wave that provides the typical 'over-throw' for the daily wedge - which the price pattern is clearly in. Divergences with the NYSE adv-dec line still remain. The Dow is still diverging from the transports. The VIX is still diverging from the S&P500 with a higher low at this time. And, check out the $cpce - for some reason there is a "whole lot of put-buying going on" at this market high instead of call buying.

This additional chart was added on Sunday morning, after much of the discussion in the comments, below. It is of HYG, the High Yield Bond ETF which is often taken as a measure of "risk on".

HYG - Daily Line Chart - Diagonal

 

The last time I saw such a structure across this many days, weeks and months was back in February of 2015, before calling the May 2015 top. Many web-sites were calling for a very large wave "three" at this point, not five to end a move. Their 'three' didn't materialize then. Will it now? We can not be certain but the pattern is probabilistic.

This chart of Crude Oil was also added on Sunday morning. The two day chart shows another "wave in a wedge."

The first wave actually starts from the craziness of when Crude Oil futures dropped below the $0 mark and traded below the -$35 to -$40 range. Thus, it appears the first wave is the extended wave in the sequence. The second wave retrace is much, much less than a 23% retrace after the oil-shock low. After a lower third wave peak, the EWO got within about 10% of the zero line signifying a fourth wave, and has since made a lower peak. Most recently, price has fallen off in a larger wave than those shown in wave four, and the EWO is red and declining. It is possible that five-waves-up are completed, and this may coincide with the introduction of the micro-Crude Oil futures on the CME.

Again, nothing here is to be taken as trading or investment advice. This is a description of a potential Elliott Wave pattern which has a probability only.

This is the second post this weekend, and it builds on yesterday's notes so you may want to read them now.

Have a good rest of the weekend.

TraderJoe

Someone Help the Dow ... Please

For the second time in two months (granted the month is not over), the Dow Jones Industrial Average, could not yet make a new high. Probably it needs to so that it could truly be said to diverge from the Dow Jones Transportation Average. We have been saying for weeks this could happen. It just hasn't .. yet.

Meanwhile, back at the S&P, the ES futures had no trouble making a new all-time high, and hitting their upper daily Bollinger Band. The count on the one-hour futures remains in a wedge. The up move last night and today pushed out the upper wedge line, a bit.

ES Futures - 1 Hr - Wedge

If the markets were never opened again, I'd have to say there were only three waves up to this point from the low. The count remains troubling because the amount of retrace at that lowest valley in the middle of the Elliott Wave Oscillator was only a scant 14.2%. Yet, there it is. There isn't a good reason yet why a fourth and fifth wave, up, couldn't form for the minuet a wave of the larger diagonal. Again, this might occur with the Dow making that higher high or closer to it. But there are other options.

There was a doji hourly candle to close the cash session, but there is still no power in the down waves. That could change. Again, an impulsive break of the lower wedge line, followed by a back-test and failure would be a first sign. That is not on the charts yet, price is over the 18-day SMA and the Elliott Wave Oscillator is currently rising, so the daily bias remains up until something different appears on the charts.

Have a good start to the evening, and to the weekend. Comments remain on moderation for the same reasons as before. 

TraderJoe

Upward Larger Diagonal Became More Probable

On the hourly chart below, last night we counted out the five-waves-up to ES 4,361 which was followed by only three waves down. As you see below.

ES Futures - 1 Hr - Impulse Plus Flat

During the day, we noted the level at which one should look for a Flat wave, not a downward move. That level was exceeded higher. The down wave was extremely short in both price & time. It measured to only 14.2%. It is possible that is all there is to a correction? Yes, possible but it would also be extremely rare.

We think we have the impulse labeled correctly because it's wave iv is located at the 38.2% retrace marker. A better possibility might be that the wave makes an expanded flat wave to provide more form and balance. A return to the 38.2% Fibonacci level can not be ruled out.

However, with the higher high after the impulse (b-3 wave or not) the upward diagonal count gains significantly in probability. This probably would also help the Dow to get over it's all time high which we said was entirely possible.

Two higher highs have been made on hourly MACD divergence. The daily price bias is currently higher because price is up over the 18-day SMA. And the daily slow stochastic is up in over-bought territory and is not yet embedded.

Comments remain on moderation. People were trying to issue "buy" signals today because of the VIX  - not down at 4,227 where we pointed out the 62% retracement level. This is just one of the many reasons why buy and sell signals are not permitted on this blog. When some people figure out how to behave here, then the comments might return to free-form. Once again a few people can spoil it for the rest. No skin off my back. I have other things to do.

Have a good start to your evening.

TraderJoe

Top or Diagonal ?? - 2

Same chart options as yesterday. We said we could see 'five up'. It appears we are getting that. This morning we said this impulse 'could' go to 4,350 to 4,360. We are in that range now. For charts, see yesterday's post.

Have a good start to the evening.

TraderJoe

Top or Diagonal ??

Based on the internal wave counts today, it is possible that we will make a local five wave sequence higher. I will post that chart in a minute. But, if we are to make a diagonal wave out of the top, then wave (iii) must both go over the top and stay shorter than wave (i). A chart of that possibility is shown on the ES 4-hr chart, below.

A higher high, tonight or tomorrow is likely needed for the 'a' wave. This is how we counted it internally today. You are encouraged to read today's comments to understand what all went on today and to understand how the count was developed.

So, if wave iv largely just travels sideways to slightly lower in the overnight, followed by a higher high, it would lend to a count that is 'five waves up'. That 'could be an 'a' wave up. So, we have now placed it, the potential diagonal, on the table. 

Is there a way the market could fake us out and just drop lower? Why yes there is! On the first chart above, look at the portion of the expanding diagonal down wave, labeled a,b and awful stuff. Here is another way to count with five-up if that occurs tomorrow.

This count would consider than the little tiny (a) wave is not a full on b wave as in the four-hour count. This count says, "hey, that wave was just plain too small to correct anything!" Further, this count is one of the very few that is made possible because minuet (b) at the bottom is just smaller in price and a lot smaller in time than the diagonal downward as the larger degree minute ((i)). The Fibonacci ruler shows how and why that base was hammered out where it was. Thus, there is no degree violation in price or time. Wave minute (b) is smaller than it's larger degree counterpart minute ((i)), pure & simple.

So this is what they mean, "It's not over 'till it's over." Neither wave count is proven or disproved at this point, and we will just have to wait and see. But I don't think you'll find rational analysis of the pros & cons at too many sites.

Have a good start to the evening.

TraderJoe

Elliott Wave Degree-by-Degree

As far as I can tell, the weekly chart below has no degree violations. I have explained it many times in many posts, so I'll spare the words here, except to say that a weekly trend line has again been broken lower. Nothing says the uptrend is definitely over. But signs are pointing that it might probably be over.

SP500 Cash Index - Weekly - From SuperCycle (III) High

 

Below is the shorter-term ES 8-Hr chart, with the chart notes from yesterday updated. There were lots of buyers at the 62% retrace. That was today's lower daily Bollinger Band, and we made readers aware of that at the time.

ES Futures - 8 Hr - Down to 62%

A key question will be whether that level holds. Another question is whether 4,125 will hold. These are open questions. Therefore, we have added notes, that it is possible for the up wave to form a slightly larger diagonal, with the high as (i), and today's low (or a slightly lower overnight low) as (ii). Remember, for a true diagonal to form, then wave (iii) 'must' go higher than wave (i).

After diverging, the MACD on this time scale did go below the zero line, although the signal line has not yet.

Have a good start to the evening.

TraderJoe

Avoiding Confirmation Bias

The dictionary defines confirmation bias as, "the tendency to interpret new evidence as confirmation of one's existing beliefs or theories.". So, in other words, one uses new evidence (...prices going lower Friday...) to confirm that belief or theory, "that the market has topped". I said on Friday's post that with the minute ((v)) = ((i)), for the time being, the discussion of alternates needed to be put on hold. That is still the case. Yet, in an effort to show readers a more unbiased or neutral approach, below is the ES 8-Hr chart with just some chart notes on it.

ES Futures - 8 Hr - Chart Notes

The first note, in blue, shows the new trend line of interest with currently five touches on it, and a recent break on Friday, counted as an expanding diagonal. If the expanding diagonal retrace holds the top, it could be (i) or (a), down.

The second note is in red in the volume panel. The down (red) volume is increasing, and that is to be respected for the time being. 

The third chart note is down in the MACD indicator panel. The MACD has diverged with the local top, is declining, and the histogram bars are currently lower. This, too, is to be respected. Still the MACD has not gone below the zero line, yet, as a contrary indication. 

The fourth chart note is in brown below the 0% level of the Fibonacci ruler. In order to start a move much lower, or a diagonal wave of reasonable proportions, this level of 4,279 must be exceeded lower. (With regard to an upward diagonal, that is because a larger diagonal on this scale should typically have retrace waves that are 66 - 81%. We are nowhere near that level now.)

The fifth chart note is actually the Fibonacci ruler itself. It shows that the most recent up movement was only about 40% of the up move prior to that. That is a very odd proportion for the waves, as simply another contrary indication.  While it remains possible to count a top, even as an upward diagonal fifth wave, one could surmise that the two up waves are only a & c of an overall a,b,c of wave (i) of a contracting ending diagonal. Still, if this is only a wave (i), then the whole discussion of a diagonal is premature until or unless there is a new all-time-high for a wave (iii).

The sixth chart note is in black near the top, that the recent blue trend line can be back-tested at any time. There could be a further drop Sunday night, and then a retrace could start. Or there could be a retrace right out of the gate Sunday. This is very difficult to tell.

The seventh chart note is in orange in the lower left. Any movement below 4,126 would invalidate the idea of a continuation of the up move as a diagonal wave. So, watch the level carefully.

And, the Fibonacci eighth chart note was shown yesterday. It is the placement of the Bollinger Bands, and the 18-day SMA. Sometimes, those levels are respected enough by the trading algorithms to provide some decent temporary support and resistance.

Again, the primary purpose of this post is simply to let readers know that I try to avoid drinking the Cool-aid in either direction, and stay neutral of mindset until we see a good series of lower lows and lower highs on the daily swing line, with daily price bias below the 18-day SMA, with some price length in the waves.

This is the second post this weekend, and if you have not seen the first one, yet, you may wish to review it now.

Have a good rest of the weekend.

TraderJoe

Rejection - 3

The third time was the charm and it all happened at once. I cautioned two days ago about what happens when everyone sees the need to head to the exits at once. I cautioned yesterday at length about the complacency. I cautioned about both the daily MACD and the daily slow stochastic possibly rolling over. And today all of that happened. With the embedded slow stochastic lost, price made a run at the 18-day SMA, and missed it by only 1.5 points!

ES Futures - Daily - Minute ((v)) = Minute ((i))

More importantly from an Elliott Wave counting perspective this turn is occurring at the level of minute ((v)) = minute ((i)) to within just a few ticks, shown by the magenta boxes which are exact copies. That's what we should expect. That's where there should be a turn. There was. For this reason, I don't think it productive at the moment to hem & haw about possible alternates.

For avid readers of the blog, here is how the down wave was counted out live and in real time in the comments section of yesterday's post on the 15-minute SPY.  If you are interested in the real time count and the methods used to obtain it, you can read it sequentially in the comments of yesterday's post and of the day before. It took some head-scratching to synchronize the cash with the futures. But, it worked.

SPY - 15 Minutes - Expanding Diagonal

This Elliott Wave pattern is called the Expanding Diagonal. This pattern requires that wave v be longer than wave iii, that wave iii be longer than wave i, that wave iv be longer than wave ii, and that wave iv overlap wave i without traveling beyond the end of wave ii. Further, each of the waves is required to be a zigzag. Wave ii and iv are not allowed to be flat waves in a diagonal. You can check from the chart above that each of these requirements are met. Usually - most often - in an expanding diagonal each of waves v, iii, and i are longer than their prior waves in time. You can also verify that these characteristics are obtained in the above chart, above, too. For wave iv being longer in time than wave ii you have to verify this on the futures, because the gap in wave iv doesn't let you know how much time elapsed.

Further, the Elliott Wave Principle by Frost and Prechter states that the waves a diagonal often retrace between 66 - 81%. These waves are just bang on with each of wave ii and wave iv retracing over 70%.

So, rather than deal with alternates at this time, let's just explain that if this wave is to function as a Leading Diagonal, then the high of it's origin may not be exceeded. If the pattern is to function as an Ending Diagonal, then the high of it's origin 'must' be exceeded.

This is just like any impulse wave if you think of it. For the five-waves of a regular impulse down to be meaningful, then the high of the origin of the impulse wave must not be exceeded higher. Conversely, the five waves down of an impulse wave could also just be the C wave of a fourth wave flat or expanded flat. Even though it is five-waves-down - in this latter case - it is an ending pattern, and the high of origin of the impulse will be exceeded higher.

And herein lies the problem. The question becomes how deep does the retrace need to be? Well, first let's state it can be any depth up to 99.9% of the entire wave. But, usually, the retrace levels are less. If this wave were to be a larger first wave (i), down, then the diagonal could retrace to between waves ii and iv. But, if this wave is to be an (a) wave down, as in an (a)-(b)-(c) correction, then the retrace could be less. How much less? Well, Neely indicates that for waves in general 30-38% is a typical minimum to be considered as a wave of the same degree, meaning like a (b) wave corresponding to an (a) wave: those two waves would be of the same degree. So, we'll go with that understanding for now. 

Should that not work out, I will highlight it in the comments on Monday.

Meanwhile, have a good start to your evening and to your weekend.

TraderJoe

Rejection - 2

Yeccchh! Just another wedge. Yup, nothing I can do about it. As I have said before, "they can wedge the wedge until the wedge won't wedge." So, what does that mean? It mostly means to "control one's emotions and just count waves" as best you can. And what does 'controlling one's emotions mean?' It means if the wedge breaks up, don't get perturbed. If the wedge breaks down, don't get disturbed. And if price does virtually nothing for a day, don't get stressed. Recognize that - just like you enjoy some time off - the market might like a little summer vacation, too.

ES Futures - Daily - Wedge Again

And controlling one's emotions also means not betting the farm on trying to make a round number like 4,400, even though that's possible. And it also means not trying to rush short positions while the market is above the 18-day SMA or while the swing-line is not in a trend. If you don't know the rationale behind this trading technique, I encourage you to read or re-read my paraphrase of Ira Epstein's guidelines for trading - which you can find at this LINK. 

Still, there are some objective things we can say. 1) The daily MACD has the prospect of rolling over. But, it hasn't done it yet. 2) The daily slow stochastic has the prospect of curling below the 80 level (or 79 if you wish), but it hasn't done that yet, either. 3) The DOW still hasn't made it's new high, yet. 4) There are some (many) divergences showing. None has mattered 'much', yet. Some. Not much.

With regard to the wedge, there is both an up count for it, and a down count for it. Tomorrow is Friday. Often, that has resulted in the high of the week. An up count could be a diagonal. A down count could be that the wedge itself is just the 'b' wave of a flat - not a true diagonal. Still, when it comes to trading wedges, some decent advice I've seen is to look for an impulsive break of the wedge followed by a back test. (If the wedge breaks up, the back test is down; if the wedge breaks down, the back test is up). Then, see if there is upward follow-through or downward failure.

But, that is just a suggestion I've received. You must do what you see fit. It's never fool-proof, and you must make your own decisions at your own risk. Certainly, Ira Epstein recommends no sales above the 18-day SMA. You might say, "that's wasting time". Ira probably has a lot more clients than you or I do because he has heeded this advice - which he teaches.

One difficult item to deal with is the trading algorithms. Many trading houses use a "news-reading algorithm" that parses the words in headlines and stories and trades in nanoseconds off of them. Thus, these news bots can fire off trades and get an edge before the retail trader can possibly even react or press a button. And what is there a real lack of right now? Market moving news.

Yes, there's a little news on higher inflation, and on good economic recovery. And there is some news on human achievements - like Branson and Besos going to space. (Are these top signs?). And there is news on having to cancel crowds at the Olympics for the Covid status. But, what is missing is the usual hedge-fund crash, foreign country currency crisis, or other perhaps derivative-related crunch in the money markets.

So, Chair Powell got to sit poker-faced and smiling before both the Senate and the House committees, as they asked questions, like (paraphrase) "what signs do you need to see to start tapering?", and he can sit there and just patently refuse to provide them a real answer. He just grins behind his grey hair, and provides no information to them or to the public.

To me, it sounds like a massive dose of complacency. And that is typically what tops are made of - eventually, of course.

Have a good start to the evening.

TraderJoe

Rejection

None of us like it that much. The stock market as measured by the ES futures, made a marginal new high by 1+ points, then got some rejection. That is one heck of a breakout (not!). We counted that minor high as part of a triangle fourth wave. If we've counted the triangle correctly, then we might already be in a last wave up - at least of a wave series. If you are interested in the triangle count, be sure to review yesterday's post, as we posted it as the second chart in the main post as it was proposed. So far, it has come to fruition.

ES Futures - Daily - Breakneck

A higher high could follow the triangle, provided the low of 4,350 is not taken out first. Today's candle looks like a spinning top candle. You can find several others of them on the daily chart. Several of them precede more significant drops. Yes, sometimes they are slightly exceeded higher first.

But, note, the daily bias is still up as price remains over the 18-day SMA, and the daily slow stochastic is still embedded higher. Keep your eye on the slow stochastic. IFF it crosses below the 80 level, then possibly price will make a run for the 18-day SMA.

Have an excellent start to the evening.

TraderJoe

We Have All Been Here Before

Daily ES prices are bumping into the upper parallel trend line. We are getting close, very close, if we are not there already.

ES Futures - Daily - Trend Channel

While it's possible to count a completion, it is also possible the market wants to make either a smaller scale or larger scale diagonal to drag this out even more in time. IFF we get downward overlap, then I may show the potential larger scale diagonal. Right now that is a ways away.

While the daily MACD has not called a turn, yet, at some point - a little like today - we're going run out of upside, and remaining long is gonna sting a bit. What's that famous market axiom about "everyone running for the exits..."?

This chart was added in the morning. I wanted to see if the recent down leg would make 78.6% of the former up leg in the futures.

ES Futures - 1 Hr - Potential Triangle and It's Alternate

This count may be a way to get the Dow futures over their top, as well. I will not rush the count even though completion may be counted. If the Dow futures get over the top, it may be 1) a way to end the count, 2) a way to look for a larger diagonal playing out. The above wave could also be a "(c)" wave in such a diagonal.

Have an excellent start to the evening.

TraderJoe

Since 21 June

This is what has been counted, so far. The Dow futures (YM) almost eeked out a new high. Maybe they will overnight. Nothing says the new wave ((5)) in the second segment is done just yet. It has more room if it wants.

One reason for counting this way is that the correction in the middle (the :3) is much deeper than all the corrections preceding it. It was very short in time. If a downward correction of this up wave were to begin, would it be shorter in time than the correction labeled :3 which lasted only one day?

Yet, the first five-wave sequence up, predicted a second five-wave sequence up to follow it.

Have a good start to the evening.

TraderJoe

A Proposal in GOLD

I've been looking over the GOLD count several times. It is very compressed, seemingly incomprehensible movement in terms of impulse waves and their corrections. In fact, in one portion of the count - the first portion - there is an impulse and a triangle, which should end a move lower, and yet it continues. This is one clue that the wave downward might be a diagonal of some sort. Looking over the lengths of the wave, provides this possible count.

GOLD (GC) Futures - 2 Day - Plausible Diagonal

Most recently, there has been an impulse wave downward - including a third wave gap. Since it did not make a new low, this suggests that it may be an ((a)) wave. If so, it is possible that perhaps the whole structure will form an expanding diagonal - and perhaps a leading one.

Such a count might occur whether SuperCycle (IV) in Gold is a Flat or a Triangle. I thought of it most in conjunction with a triangle because of the very hesitating nature of the decline so far. Often, not always, such hesitating action is only an (A) wave, and not a larger (1) wave, down. But, that is putting the cart before the horse. 

The first things to see are a) whether a new low beyond wave 3 is made; b) whether wave 5 becomes longer than wave 3 in price, and c) whether wave 5 becomes longer than wave 3 in time. Most importantly, for the down count to succeed, the current upward ((b)) wave - while it might fill the gap - should not exceed the wave 4 high. 

And, there you have it, another potential EW count with a 'clear' invalidation point that can be monitored. So what are the negatives?

First, and most importantly, diagonals - and especially expanding diagonals - are low probability patterns that must play out properly in every detail. Secondly in the negative column, some of the ((a)) waves look like three's because they might have short fourth waves. Yet, they might - in fact - be fives because there are lower lows after them.

All-in-all, the pattern might continue to be whippy and difficult to trade. Such is the nature of diagonals. But, IFF a diagonal pattern forms properly, and a retrace subsequently holds the all-time-high, then a nice impulse lower might follow the completed pattern, if valid. That wave might be more tradeable than this one.

This is the second post this weekend, and if you have not seen the first one, yet, you might want to view it now.

Have an excellent rest of the weekend.

TraderJoe

Tilt - 2

Yesterday, I wrote that the odds were favoring count completion. I still see that to be the case. I wrote that there were still "head-scratching ways" to eek out higher highs. It was clear the Dow futures had not made their higher highs yet. I said it was possible that they would. Here is the daily Dow chart in line form.

One of the two most likely targets for the Dow is ((v)) = ((i)). That target is shown here. If that target is exceeded (and you should use the OHLC version to figure it), then the next most likely target is ((v)) = 0.618 x [Net of ((i))-through-((iii))]. I was clear about where wave ((iv)) was on the Dow. It is likely the S&P had it's fourth wave in the same location.

I used the line version of this chart so you can focus on the form of the wave, and the way the Elliott Wave Oscillator perfectly went below the zero line for the fourth wave. Notice, too, the alternation in time between the short wave ((ii)), and the very long in time wave ((iv)).

Will wave ((v)) finish as an impulse or a diagonal? I can't tell you for sure. But either is possible. For the diagonal version I would like to see 62% internal retrace waves within wave ((v)). But, again, a diagonal is not required. Possible, not required.

In yesterday's opening comments, I said "daily bias is still up. Intraday bias is still up." I did that for a reason - as a reminder of where we are. We are still in that position. I also said I had a personal preference to wait to see if the opening gap filled before counting downward. That did not occur.

So, we are either in c of (i) of a diagonal ((v)), or we are in a simple (iii) of ((v)). Either way, there should be a reaction when (v) of ((v)) is obtained.

The advance-decline line is diverging. It can do that a while. The Dow Transports are diverging. They can do that a while too. There is still room for Intermediate (Y) = (W) if the market wants to pursue it. The S&P 500 is more that 78% of the way there.

Have a good start to the weekend.

TraderJoe

Tilt

Elliott Wave is an analytical tool designed to help determine the rough odds of a market movement in one direction or another. We have been tracking the count below since 21 March 2020. It is Intermediate (W), (X), (Y) of a Primary ((B)) wave higher, as shown, on the ES 2-Day chart below.

ES Futures - 2 Day - Potential Completion

Today the odds tilted a bit in favor of wave completion. Why? There are five key reasons:

1.  There are five waves that can be counted from B to (Y). That would be the minor C wave.
2.  Per the Elliott Wave Oscillator, there is no signature that represents an third extended wave.
3.  Time requirements from the low of the Primary ((A)) wave have been met.
4.  The (X) wave is the longest correction in price and time.
5.  If the wave got much longer in price length, it would be harder to justify a ((B)) wave.

So, we don't know for sure. Elliott Wave doesn't work that way. There are still other head-scratching waves that might occur. For example, the DOW might make a higher high, without the S&P. That doesn't have to happen, but it is a possibility.  Another possibility is the formation of an ending diagonal that doesn't take overall price that much higher but wastes more time. Again, this might happen, but it does not need to. Other contributors to this site, and I, have commented on the wavering advance-decline line, the over-blown complacency, and numerous other technical indicators indicating that the rubber-band is very, very stretched.

Adding it all together, it poses a significant argument for a top. I do not think another Intermediate (X), and or Intermediate (Z) wave are needed because the time expectation has already been met, being longer in time than the Intermediate (B), upward, to the February 2020 high.

Have an excellent start to the evening.

TraderJoe

Pop, Drop and then Compression

The counts have not changed. It is 'possible' with today's marginally higher highs to see a wave (v) top nearing, and in the same breadth it is possible to have only the b wave of a potential triangle.

SPY - 1 Hr - Wedging Again

After this morning's initial drop in three waves, the rest of the day was spent in very compressed price movement upward. Earlier in the day, we showed four hourly gaps still open even on this hourly chart. One of the total five gaps has filled. 

The up move again occurred on more declining than advancing issues - and markedly more so - on the NASDAQ. Declining volume also outweighed up volume by a fair bit. We have not been able to talk about these internal-type divergences in more than a year.

Have an excellent rest of the evening.

TraderJoe

Larger Wave Down

Relative to previous corrections in the hourly up swing since 21 June, today's correction was relatively deeper. The ES futures made a higher high in the overnight. And, as often occurs, this higher high does not show up in the cash counterpart.

SPY Cash - 1 Hr -  Fourth or Triangle

 

The deeper wave suggests that if this morning was not the bottom of the fourth wave (iv), then a triangle might be forming to better equalize wave fourth and wave two. The deeper wave also suggests  the market may be getting a tad tired.

P.S. The NQ futures did invalidate the always potential contracting diagonal as we warned over the weekend. Again, this just better confirms the Intermediate (W)-(X)-(Y) count of Primary ((B)) as is being counted in the S&P500 and the Dow.

Have a good start to the evening.

TraderJoe

Watch for Possible 'Length Violation'

We have been counting primary equity market indexes (such as the S&P500 and the Dow) as Intermediate (W), (X), and (Y) of a Primary ((B)) wave, upward. We still are. Yet, on 18 May we posted an "Interim Report" saying that one index that 'could be' counted as a contracting diagonal - according to the rules - was the NQ 100 futures. An updated chart for that count is below.

NQ Futures - 2 Day - Nearing Length Violation

It is now time to watch this chart very closely, because, if the level of 14,772 is broken higher, then the wave (5) location would become longer in price than the wave (3) location. And, that would be a violation of the rules for contracting diagonals. Wave (5) must - in a contracting diagonal - remain shorter than wave (3). So, IFF that violation happens, we think that the NQ 100 would better confirm the count on the other indexes. So, let's say that happens. Let's say the NQ futures exceed 14,772. Then, we think the next count - as shown in the chart below - is the one that reverts to the same as the S&P and the Dow.

NQ Futures - 2 Day - IFF length violation occurs

 

To avoid a degree violation in time, it is possible that the second Minor B wave in March 2021 ended where shown. That makes B shorter in price and time that wave (X) - the larger preceding down wave. But, I can not rule out entirely that there may be a triangle B wave (shown in red) in the pattern. That triangle ends the first week of June 2021. So, let's see if 14,772 is exceeded next week or not.

This is the second post this weekend, and if you have not read the first one yet, you may wish to read it now.

Have an excellent rest of the weekend and holiday.

TraderJoe

Modification to Up Count

The Dow futures have not made a new all-time-yet. We suggested they could. Today cash Dow made a new closing high, but not a new all time high either.  The daily Dow futures (YM) chart is below.

Dow Futures (YM) - Daily - Working on all-time-high

In the ES futures, we have been counting upward. We have done that since price again crossed up and over the 18-day SMA. Today, we ran into a length violation which requires a slight modification to the up count. First, we want to show the intraday ES 30-minute chart, below, with the RSI indicator.

ES Futures - 30 min - Channel

The RSI is clearly suggestive that a third wave is in progress. Prices did attain the level of iii = 1.618 x i, and perhaps overnight Sunday and into Monday a series of waves will wrap up wave iii, and a non-overlapping fourth wave iv would then follow.

Back to the ES 2-Hr chart, because of the length violation, the chart modification looks like this.

So, we maintain because wave ii was so shallow, then wave xi was the extended first wave in the sequence. And now, because wave (ii) is so shallow, it suggests that wave x(i) is the extended wave in the sequence, also. That means that wave (iii) is likely to remain shorter than (i), but it should form a full five waves upward - even if only in overnight sequences. Clearly, here too, the RSI is showing a third wave signature - and a partial one at that.

There is one alternate I can think of, and that is that prices are forming a-b-c of a diagonal (i), instead, but it is much too early to consider such. We will keep it in mind, particularly if or when the Dow goes over the high.

Have an excellent start to the weekend and the holiday if you are celebrating in the USA.

TraderJoe

Same Count - Possible wave v in Progress

This count includes the proposal by contributor Greywaver of how the fifth wave could be forming. The overall proposal of the first wave being the extended wave remains as it was.

ES  Futures - 2 Hr - Wave v in Progress?

Greywaver's proposed expanding diagonal follows the rules in all of their details. And, as he says, if it is truly an ending diagonal, it should be retraced in less time than it took to form.

Tomorrow is the Payroll Employment report, followed by the fourth of July holiday in the U.S.

Have a great start to your evening.

TraderJoe