Gap 'N Go ?

Yesterday we said it was very possible we had only made a non-overlapping fourth wave up into earnings reports for APPL and AMZN (see the post at this LINK, if needed). Amazon, as you probably know by now, made a mess of things and sent the first wave of overnight prices lower. Others followed. This resulted on the ES daily chart, below, in one of the slightly more rare events - a gap in the ES contract itself, and not just cash, at least the way TradingView is showing it. Granted some of the gap is created by the crazy settlement times versus the times the contracts stop trading. In fact, broker quotes don't show this gap for the ES at all.

ES Futures - Daily Chart - Likely into a Fifth Wave Lower

Regardless, prices continued to head lower. We counted an initial :5, down, and then a very short :3, up. Then another :5 down to the lower daily Bollinger Band and slightly beyond. In the process, the ES futures undercut the 15 March lows, but they have not yet exceeded the February low. It is getting more likely that will happen.

Because the down wave may be incomplete with just 5-3-5 lower, so far, it is possible that Monday will see more downside. Right now on the ES 30-min chart, the intraday bias ended lower to agree with the daily bias ending lower. Near the end of the session, price was trying to close inside of the lower band rather than outside of it.

The big question for wave-counters is this: the current down wave from the March high is shorter in both price & time than the down wave from the all-time high. Will it remain so & qualify as a sub-wave from a degree labeling standpoint? If so, we might reduce the degree labels on this wave.

And, with price having contacted the lower band today, we don't wish to get too negative on the price structure, because, as Ira says, "this is a place where the Smart Money is likely taking at least some of their profits". So, shorter term some caution and review of the sentiment indicators is warranted.

Have an excellent start to your evening & weekend.

TraderJoe

No Overlap Yet

As long as there is no upward overlap on the ES 4-Hr chart, the black count, below is preferred. Looking at the RSI, the lowest low would be on minute ((iii)) of Minor 3.  And minute ((v)) of 3 is on the divergence.

So, today could have still been a fourth wave, which would be failing around the 9-day EMA (roughly the half-cycle of the 18-day SMA).

The alternate is also shown. It is the red count finishing at the low. If so, then this wave up would be all or part of a second wave up. We'll deal with that alternate if and when there is evidence for it.

Have a good start to the evening.

TraderJoe

Inside Day - Consolidation

Officially the ES futures had an inside day, representing some consolidation. Overnight the futures were volatile and trend less and pretty much remained that way today, whipping around quite a bit with some higher highs, then the lower lows, and then staying in a range. This makes several possibilities from a wave counting perspective. The idea below is just one of them we discussed in the comments today. The reason it is being shown in the futures is that the cash market has a decided 'three-wave' look to the last wave down.

We counted five-waves-down in the futures very well, and it is shown in red. The count is legal and it works. But because some waves were not made in the cash market, we are on alert for the possibility of either a running triangle or a diagonal fifth wave. Part of the rationale here is that the NQ futures and the Russell 2000 (RTY) futures have already exceeded their FEB/MAR lows. The ES futures have not and may be playing catch-up to the down side.

If they do, a running triangle is one way to accomplish that. A second way is with a diagonal fifth wave. So, IFF the wave to green (b) / alt:v is really a three wave sequence (and not a five) in cash, then the wave would fit with the idea of a triangle or possibly with a diagonal. Of course, lower lows are still needed for a diagonal to play out. Thus, with all of the volatility surrounding tech earnings, we are on watch for the running triangle, too.

So, if an up wave occurs tomorrow and stalls out around 4,270-80 basis the ES, it might give the triangle idea a little more credibility. Meanwhile, as you can see the RSI is sort-of stuck in the middle.

Have a good start to your evening.

TraderJoe

Outside Range Day Down

Yesterday, we gave some options for yesterday's spirited reversal upward. We said an overlap did not have to happen (but it could), a triangle could form, or the wave could just fail. It did fail, and today created an outside range day down (ORDD). In doing so, we can count most or all of five-waves-down. Below is the ES daily chart.

Wave (iii) is a longer wave than wave (i) and wave (v) occurred today in part or in whole. Since wave (iii) is longer than wave (i), then wave (v) is not limited in length. It is likely the prior daily low in February will be exceeded lower.

Today, one daily gap on the SPY near the lows was filled. A second wave not. Note that the 18-day SMA is still pointed lower, and the lower Bollinger Band is bending lower.

So far, the best I can tell, all degree requirements of the waves have been met in good form.

On a side note, I have been monitoring the Dollar Index (DX) futures and the Eur/USD futures looking for signs of a reversal bar, as most-or-all of five-up can be counted in the DX. So far, there is no sign of it, so stay tuned.

Have an excellent start to the evening.

TraderJoe

From S1 to P

Overnight ES futures were moderately lower. Then the very sideways consolidation wave was reminiscent of the second wave ii. On the intraday-counting-screen, prices got down to the S1 pivot support level in a wedge. We said it could be a fifth wave at that location, and placed a wave-counting-stop over ES 4,250. Prices then broke that level higher and headed 46+ points higher than that, nearing the Daily Pivot Point (P), below.

ES Futures - 30 min - Intraday Wave Counting Screen

The fourth wave, iv, and the second wave, ii, are very similar in overall size in terms of points traveled. The fourth wave is messy, overlapping and hard to count but it is overall longer in time than the second wave. The fifth wave is a mere stub in this case - a lower low that just barely fits the bill.

It is a shame this wave ended where it did. On the daily chart, it is below the 78.6% retrace level of the upward wave. But on the four-hourly chart, there are only three-waves-down to today's low. So, we have to play the game of whether the upward wave will overlap or not as in the chart below.

ES Futures - 4 Hr - Overlap Game

Prices do not have to overlap; they do not have to make a diagonal. They could overlap, or they could triangle in a fourth, or just fall. We'll see.

Have a good start to the evening.

TraderJoe

Follow the Procedures

Given the break lower of the last daily down (red) fractal under the alligator indicator (Bill Williams), it is time to propose the base channel downward and suggest that as long as price remains in the channel, it is bearish. The count uses the "awful" five count I suggested previously. In that count, wave 2 down from the January high is a Flat wave, so there is no overlap between waves 4 and 1.

The "five up" in late March converts easily to the Minor C wave of Intermediate (B)/(2).

There is acceleration noted in the count, the EWO has again turned below the zero line. The alligator has curled lower. The degree labels are consistent. The next daily fractal break lower is not until under the Minor B wave low.  If the lower parallel is significantly broken lower, then the labels will likely revert to (1)/(2) from (A)/(B). Right now there is no proof that a larger diagonal isn't being formed lower.

Please keep in mind that back in this post on January 15th - more than three months ago - I presented a count that could explain a top at that location. (See this LINK.) Therefore, literally nothing to the downside will be surprising from a wave-counting standpoint. By contrast, any new higher high must prove itself by getting over the current wave Minor 2 fractal.

The first down leg to Intermediate (1) is/was very messy. The second down wave to Minor 1 was also very messy. Perhaps this down wave will count cleaner. We shall see.

If we are going to make an Intermediate wave (3) lower, then more than likely the EWO need to make a new lower low than the January low. The wave labels on the right-hand-side are place-holders only. They are not intended to indicate extent or locations of the ends of waves at this time. Certainly, a downward wave of equality or 1.618 would not be out of the ordinary.

There was an earlier post on Friday, if you have not seen it. Have an excellent rest of the weekend.

TraderJoe

Grrr .. might have missed a triangle

Sometimes things bug you, so you keep looking. If you're an Elliott analyst you look for the count that might explain a wave. I could not find a legal downward count from 29 March literally for days. So I kept looking. I tried numerous types of impulses and both contracting & expanding diagonals. Everyone of them seemed to have a problem with either a length violation - particularly for the diagonals - or a flat wave where there shouldn't be one, or even a degree violation. So, I kept looking & looking. Finally today, I was able to parse out this count on the ES 4-Hr chart.

What I think I missed was the wave iv triangle that would not overlap with wave i. While a portion of the triangle does indeed overlap, the ((E)) wave of such a triangle would not, making the count barely legal, but legal and perhaps better than the others. Wave iii is also just barely longer than wave i. It is satisfying enough now that I can move on from that wave.

Wave (ii)/(b) can be a large Expanded Flat wave as the b wave down takes less time and price than the initial (a) wave lower - making it acceptable from a degree labeling standpoint. And wave c of that wave is just slightly over the 1.618 measurement of the a wave subtracted from the b wave - a fairly common relationship.

Given yesterday and today's action, it clearly seems likely we are in a third wave of some type - either a (c) wave or a wave (iii) both of which would likely be as yet incomplete.

Overnight, the retrace of yesterday's down wave was less than 23.6% of the down wave. That may have some implications for the style of this down wave. Right now, the down wave is longer in price than the wave we are showing as (a)/(i). This likely means that yesterday's down wave is a sub-wave i, and today's down is a sub-wave iii or a portion of it. This agrees with the RSI on the four hour chart.

But, as we said yesterday, the daily bias is still down and the intraday bias is still down. They are until they are not. On the daily chart, price did close below the lower daily Bollinger Band.

Have an excellent start to the evening.

TraderJoe

Outside Day Down

Yesterday, we clearly stated that an up move that out higher could whip around again and become part of a larger flat correction, lower. We also said that the ES 4-Hr channel could be back-tested low (prior days). Both of those happened today with a higher high that hit the 100-day SMA, and then reversed fully lower to make an outside day down. So, it is hard to say that today was completely unexpected. It wasn't. The daily chart is below. I encourage the reader to plot the ES 4-hr chart again, and see exactly where price is relative to the position of the parallel that was shown.

For the moment now, the daily bias is lower, and the intraday bias is lower (ES 30-min chart, with daily Bollinger Bands & pivot points). The outside day down only creates as trap for the bears if it is exceeded higher within the next two trading days. It's a heck of a range!

So, the wave count now depends on whether the low from 17 April is exceeded lower or not. It is now at high risk of being defeated lower.  If it is, it is still possible that the downward movement is still a correction of the up wave from 14 March. This down wave never made it to 62%, downward.

The problem is that the downward from 29 March is exceptionally difficult to count in the ES. I have tried several impulses and several diagonals downward: no luck because of all the truncations along the way. That leaves me with the (w)-(x)-(y) count which seems valid. But again, downward movement is dependent on taking out the prior low. One needs only to look back to 15 March and other prior corrections on the chart to find lows that are much deeper than 62% and yet new highs are made.

So, we remain flexible & patient, and we use Elliott Wave logic as it is. From a trading standpoint, it would be against the paraphrase of Ira Epstein's trading guidelines to be long below the 18-day SMA (and likely by extension below the 18-period SMA on the ES 30-min intraday timeframe).

Price has to recycle upward, first, so that bias is in favor of such actions. There were no candles at the end of the day that acted as reversal candles, yet.

Have an excellent start to your evening.

TraderJoe

Five Waves Up and Correction or Start of It

Below is the SPY cash 15-minute chart. Today, we rationalized cash and futures (see prior post's comments) and can count five-up in each. The cash chart shows it most clearly.

SPY - 15 min - Five Up & Correction (or Part of It)

After today's initial down wave, both of the up waves came within 90% of the high which qualifies for either a flat or a zigzag (most likely, the flat). After the (c) wave and the upward overlap, we drew this blue, dashed potential trend line. Such a trend line does not need to hold, but it could.

From this structure, it is possible to go up into the third wave of the move. If that occurs, then it is likely that the third wave would be shorter than the first. That is because the current retrace is shorter than 38.2%.

But there are ways the correction can extend if it wants to. We'll remind you that a flat can easily - but more rarely - become a double flat, or a flat-x-zigzag or a flat-x-triangle. However, bear in mind that only the first two can extend the price further lower as the flat-x-triangle would only be sideways from here. So, we just need to be flexible and make sure proper attention is being paid. 

Meanwhile, just so it's been said, one needs to be aware that a 'measured move' if it occurs could get price over the prior all-time-high (ATH) again, as per the daily chart, below.

ES Futures - Daily - Measured Move Projection

In subsequent days, we will need to resolve the degree labels on the current up wave. It is very possible that they need to be reduced one degree to sub-minuette from minuet, that is from (i), (ii) to i, ii. We will evaluate that as time goes on.

Have an excellent start to the evening.

TraderJoe

Messy Bottom & Break of Upper Parallel

ES futures broke the upper parallel trend today on the 4-Hr chart, as below. In doing so, price got over the (e) wave of the prior triangle, and during the day briefly also broke the (a) wave of that same triangle upward.

ES Futures - 4 Hr - Upward Break

If there is truly another minor truncation at the low, then the level of the low should not be exceeded lower before there is a new all-time high.

At the end of the day, the futures were giving some indications of a retrace having been started, but the hard part is to know what type and style of retrace would occur, and how low it will go. Certainly, the parallel can be back-tested. That would be an event to watch for. And certainly a retrace can include a flat wave that goes over the high, yet again.

Remember, a new all-time higher-high would be needed to start counting a diagonal fifth wave upward. We don't have that yet. So the March high is 1/A, and if the April low (yesterday) holds, it is 2/B.

Have a good start to the evening.

TraderJoe

Multiple & Divergent Bottom @ 4,360

We don't know for sure what's next. But today the ES futures made multiple bottoms today between 4,355 and 4,360. Why that should be so might be a clue. There is also divergence on the ES 4-Hr RSI, as below. The EWO diverges as well but is not as crisp.

ES Futures - 4 Hr - B Wave?

If the downward wave is over, the count is so messy that it might be a B wave. The best thing one can do is to look to see which trend line of the parallel is broken - upper or lower - and see if it back-tested or not. Since this is a 4-Hr chart, that might take some time.

Earnings are swinging into gear and this is a location for quite a bit of volatility.

Have an excellent start to the evening.

TraderJoe

Equality in Time and Parallel Established

In the prior post, we said the correction of the prior up wave was nearing equality in time, and we noted prices were not yet tracking a parallel. In a follow-up chart, we note that both conditions are now met. The down wave is now likely longer in time, and a parallel became more defined.

ES Futures - 4 Hr - DZZ in Parallel

 

It's not that the conditions had to be met, but it is most often the case that a double-zigzag travels in a rather definite parallel. The reason we said the condition of a parallel did not have to be met is because there is clearly a case when it does not: and that's when the second zigzag is part of an overall diagonal wave - either contracting or expanding. And it is often the case that second waves or B waves take more time than their 1, or A waves. That has now occurred. So, this tends to make the down wave less impulsive than the up wave.

Clearly, a second factor in the ES is that the blue b waves upwardly overlap their prior waves.

On the one-hour chart, a potential triangle for the recent blue b wave was being sketched out. It has not strictly invalidated and may yet play out. But it does not need to. It is possible the blue b wave above is just a failure wave. Perhaps the minute ((y)) wave has the 62% retracement level on its mind. See the chart below.

ES Futures - 1 Hr - Potential Triangle

In either case, this (4 Hr) down wave looks like it is occurring on a divergence of the Elliott Wave Oscillator (EWO). We'll see if that holds. 

The primary case for a much larger down wave I can see in the ES at this point would be if the minute ((y)) wave became longer in price than the minute ((w)) wave and travelled below the lower parallel. Then, a significant up wave would have to occur for the fourth wave of an expanding diagonal. But that is all in the future at this point, and accordingly must just be considered an alternate in the event of a collapse in recent prices. If the recent (4 Hr ) down wave is truly less impulsive, then at some point the up trend might resume. We just can't start formally counting it until or unless the high of the first blue b is exceeded higher. And - at this point - trading full candles over the upper parallel would be a sign of strength, and doing the same under the lower parallel would be a sign of weakness.

Have an excellent start to the holiday.

TraderJoe

Nearing Equality in 'Time'

If you enjoy volatility, you are getting it. So far, there is one way to count a completed wave in the downward direction. It is as a double zigzag as shown below on the ES 4-Hr chart.

ES Futures - 4 Hr - Double Zigzag

Yesterday, we said the downward wave count was incomplete. It was. Today made lower lows and attacked the 50% retrace level - which is also the lower daily Bollinger Band. In doing so, the downward wave is 'almost' as long in time as the upward wave was. Maybe it has more to go. So, as the double zigzag, the count has a key element which is the (x) wave overlapping the first a wave so that the count can not be considered impulsive.

Is the wave count done to the downside? It does not have to be. A double zigzag can become a triple zigzag or a diagonal, yet (given the correct measurements). It is worth noting that price is not exactly hitting the boundaries of a parallel, and that might be a clue worth watching. Why isn't it?

At this time we can only say that trading up over the upper parallel trend channel with full candles would likely indicate more up side to prices, perhaps going over the top again.

One has to look at today's round trip in prices on the CPI report (good news, then bad news? huh?) and shake their head with wonder - unless they are an Elliott analyst and understand how the various patterns are made. It's fun, but it is also thought-provoking.

Have an excellent start to your evening.

TraderJoe

Falling Parallel or Wedge

On the cash SPY 2-Hr chart, at the moment, we either have a falling parallel or wedge as illustrated below.

SPY - 2 Hr - Parallel or Wedge

The wave count is incomplete. It could be a portion of a double-zigzag as we noted. Or it could be the start of an as yet incomplete diagonal. There aren't enough waves to say. Regardless, we continue to count downward as best we can. At the moment, the down wave has not quite taken as much time as the up wave. So, we remain flexible and patient until we see a count that completes. Note that the 2 Hr RSI is not now on a divergence.

Today, in the comments we again showed the best alternate count for a wave that does not go over the prior 29 March high, and you can view it at this LINK.

Have a good start to the evening.

TraderJoe

Differences

We spent most of the day doing some short-term wave counts which are in the comments section for the prior post. Today, near the end of the day we wanted to highlight the difference between two markets and how they acted towards the close. Below are the daily charts of the NQ versus the ES futures.

NQ versus ES Futures - Daily

Notice that the NQ futures made a full-on outside-day-down (ODD), while the ES futures only made a higher high day (HHD).

The ES futures, in particular, appear to be having "the battle at the 18-day SMA".  There seems to be something different going on with them: two minutes before the cash close, they were down approximately -18 points. Then, nearly on the cash close they were only down -8. It is something to keep in mind as it turned the volume spike in the SPY at the end of the day from red to green on the intraday chart (5 min).

You will also note from above that the NQ futures have no overlap on their last two most recent bars with the down bar on 1 Apr. Clearly, on the other hand, the ES futures last two days do indeed overlap with the down bar on 1 Apr. 

These are things one should keep in mind when counting waves. The stocks included in each index are different in both their number and their composition. At times, the different indexes act very differently. Not convinced? You might like to do a side-by-side on the Russell 2000 futures.

Have an excellent start to the evening.

TraderJoe

Double-Bottom at the 38.2% level?

Yesterday, I provided this SPY hourly chart, and noted the gap that closed at the the 38.2% Fibonacci retrace level of the up wave from 15 March 22.

We also noted that the bottom formed on an RSI divergence. Meanwhile, the NQ 100 futures this morning made a lower low at the point marked (c) on the chart above. Then, cash and futures made a wave that can be counted as five-waves-up from the morning low (it could also be counted as three waves up, and a flat fourth wave, to make a higher high if it doesn't overlap downward first.)

If it is a true double-bottom, which it appears it is at the moment, then the implication is that there is some strength in the ES futures. So, once again, we need to see tomorrow if this bottom holds. If it does, it is possible to get another wave up. If the 29 Mar wave is ((i)) or ((a)), then the down wave might be ((ii)) or ((b)). Yet, we have no way of knowing - if the entire up wave is to be a fifth wave - whether it will impulse, diagonal or if it will truncate.

There is also a possibility for this correction to extend as a double zigzag if the current low is defeated, but that seems to be lower priority for today or else what was the purpose of the double-bottom?

Have an excellent start to the evening.

TraderJoe

Back to 100-DMA

The ES futures broke the upward parallel we pointed out yesterday and headed lower back to the 100-day Moving Average, as below, (see the green-dotted line).

ES Futures - Daily - Back to 100 DMA

In the process, the daily slow stochastic seemed to have lost its embedded status. If this continues to be the case, then a return visit to the 18-day SMA or lower seems possible.

So far, during the day, we could only count three waves down on the cash 15-minute SPY. So, we need to monitor the overnight and open tomorrow to see if the fourth wave of an impulse forms properly or if an expanded diagonal wave forms (although that needs a 'longer' wave iii than i, yet, which it does not have.) Remember, at the moment we are looking for an (a), (b), (c) down. Here is the LINK to the intraday chart.

Have a good start to the evening,

TraderJoe

Futures Near 62% at End of Day

The ES futures (2 hr) neared the 62% retracement level, as per the chart below. We said, we were looking for the (b) wave up of a correction. There is one way to consider it as complete; there is a second way in which only the 'a' wave of the (b) wave is formed yet.

ES Futures - 2 Hr - Nearing 62%

We are currently taking this latter more conservative view. It is possible that the (b) wave will travel within the upward parallel shown. It 'could' reach the 78.6% retrace, but it does not have to. A lot depends on whether one is tracking futures or cash at the moment. Cash would only appear to have a :5 up. And the futures 'could' be counted in a more complex w-x-y, but they could also extend to make a triple zigzag if they wish.

So, we will monitor the correction and the parallel carefully and suggest that full bars below the new upward parallel might suggest that the (c) wave lower could be in progress.

Have an excellent start to the evening.

TraderJoe

What It Looks Like, So Far

If the 14 March low is the truncation low (see *, below), as we were one of the first websites to suggest, then this is what the up count looks like, so far.

SPY - 1 Hr - Recent Count

This count is the (v) = (i) count, and it looks like we are making an (a) wave down. This count does not consider the March 9th up wave as part of the count. If that up wave were considered as part of the count than the larger up wave might be considered a third wave, but it is significantly out of range of a 2.618 upward extension which tends to rule it out at this point in time.

The working hypothesis is that the down wave is currently part of a minuet (a) wave in five fives, or a minute (a)-3 wave in three waves. We won't know without more structure present.

The next consideration is that we don't know whether the up wave is the minute ((i)) wave of an impulse, or the minute ((a)) wave of a diagonal fifth wave.

These are all considerations that stem from the same basic question: would a wave Intermediate (5), below, up be an impulse or a diagonal? We don't know just yet.

Here is what is proposed for the Primary ((C)) wave of the cycle b wave from the prior weekend video.

ES Futures - Weekly Close - Primary ((C))?

TraderJoe