Prices are not trading at the moment, so it's a good time to review where we are. Where we are is a very good time to remain on one's toes - with a lot of patience at the moment. Let's review the ES four-hour chart in what we think is or are the last wave(s) up.
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| ES Futures - 4 Hr - Looking for Last Waves |
Looking at the chart, we see a higher high after the wave identified as micro-((3)), and that wave might form a divergence with the RSI. The peak of RSI typically identifies a wave three structure. And we see that looking at the wave 0 - ((2)) trend line, we can find a wave ((3)) that is entirely above the dashed trend line. It is shorter than wave ((1)) so that makes wave ((1)) the extended wave in the sequence. That being the case, we should expect wave ((5)) to be shorter than wave ((3)).
I have only shown you this chart to ask - in your wave-counting style - do you have the patience to wait for that larger trend line break shown in red? Also, you can clearly see by the purple dotted line where the prior support might be expected. A trend line break might meet with temporary support there and be followed by a back-test of the trend line. Why patience?
Let's look at the ES 30-min chart next.
Here we can see the overnight waves have formed a longer in time c/iii wave which does not yet have divergence on the RSI. Clearly, the chart is in the area of the prior supply zone on this time frame, but the RSI shows no divergence yet. So, we could just have three-waves-up to a lower high. Or the waves could extend to make five-waves-up and a higher high. At this point in the analysis waves a/i, b/ii, and c/iii are equivalent until they are not.
What about that overlap warning? Well, if prices overlap a/i, then it is what it is - it is just a warning as a fifth of a fifth of a fifth could also overlap and form a final diagonal at this much smaller degree. We simply don't know. There is no way to know. One could only guess. And we're not trying to guess - we're trying to count waves.
That's why I ask if one has the patience to wait for that larger four-hour trend line break. This is the action that will signify that downward price movement has some sufficient power behind it that might allow for continuing waves lower.Where will "the news" come from that might accompany a drop? Remember, there are lots of large economies in the world that could have this news. It does not have to come from the U.S. FED. It could come from Europe, or China or South America for example.
But, for now, patience!
Have an excellent rest of the long weekend if you are celebrating the holiday in the U.S.
TraderJoe
On the 4hr, wouldn't the ((2))-((4)) TL be the one to watch?
ReplyDeleteThanks
Technically, yes. But that little difference misses the larger point. There needs to be a substantial, impulsive break of trend and failure after any back test.
DeleteI wonder if Evergrande might be the first hint of real trouble. (rhetorical)
ReplyDeleteES 30-min: there is now overlap on the a/i wave up. This likely means that if further highs were to be made, then it would likely come as a diagonal within wave ((5)) on the four-hour chart.
ReplyDeleteOf course, the cash market sees none of this, yet. Still time to stay on one's toes with a lot of patience.
TJ
While risk/reward considerations have me essentially market neutral on equities ( not volatility), it seems very obvious to me that price action remains in a pattern of sideways consolidation in an intact uptrend. Furthermore, its duration is imho starting to suggest a significant upward break. Of course, any upward break could be BOTH significant AND short-lived. A poweful outside reversal day would hardly be any surptise at this market juncture, and I for one expect one to signal a meaningful top is in.
ReplyDeleteA good, quick read. Item #5 is interesting as AAII has increased from 33.2% to 43.4% bulls in two weeks.
ReplyDeleteInvestors Ignore Parallels
TJ
NAIIM is also at the high end of its range and lower highs all year.
Deletehttps://schrts.co/ZqrBxVVW
Here a look at the ES 2-Hr before the open. There are still ways this can be post-poned and delayed, so patience, patience, patience. So far, there are only three-wave sequences.
ReplyDeletehttps://www.tradingview.com/x/bBg0C1KD/
TJ
ES 30-min; now has taken out the prior low. Larger triangle, larger flat to finish ((4)) or the up wave is done at the prior ES high, and now in a diagonal downward.
DeleteTJ
ES 30-min: just info for you. ES 4,511 is 38.2% of ((3)), and 4,502 is 50% of ((3)). Beyond there we get into overlap territory. Also, on the ES 4-hr we are getting the look of an impulse break of the trend line, but it needs a back test of the trend line, and a failure lower.
ReplyDeleteTJ
ES 30-min: price hit 4,512 and exceed the 31 AUG low. Odds growing to 50-50 that a top is "in". Will they (the big money, The Smart Money) stop the decline before overlap?
DeleteTJ
How would you currently resolve the DOW?
DeleteI'm counting on exactly that, and suspect it will be their last hurrah...Lol!
Delete@Roy: Dow is b wave of diagonal minute ((v)). If it doesn't make the higher high, then it's a 'failed' ending diagonal which is the most bearish of structures.
ReplyDeleteTJ
Thank you for that clarity TJ. I have my helmet at the standby.
DeleteSPY 5-min since this morning's low. You may have noticed it has left the up channel and has downward overlap.
ReplyDeletehttps://www.tradingview.com/x/oy731JUB/
This makes it extremely hard to support a further up count.
TJ
..from what I can see, one would now need an expanding diagonal upward, and those are extremely rare.
DeleteTJ