With all apologies to the movie title, the market gapped down this morning, potentially activating the bull trap from the daily chart - with the lower daily low after the outside reversal day up - and then had no follow-though lower in the cash session. Prices then traded in an approximate 50 point range after that from 3913 to 3963. The slowness and choppiness of this hourly decline suggested the following intraday count on the hourly chart of the ES futures, below.
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| ES Futures - Hourly - Expanding Pattern Again |
We don't know for sure, but the Elliott Wave Oscillator again suggests an expanding diagonal lower. The wave labels on this chart are just for relative reference they do not yet reflect the degree of the decline. But the EWO is on a low which suggests a wave 3, and the 62% zigzag for wave 2 is compatible with a diagonal. There appears to be an impulse ((a)) wave, up, which started out as an expanding diagonal itself, and then converted to an impulse wave. And by the end of the day, the low held so either there is a ((b)) wave down, or just the beginning of a ((b)) wave down. Either the ((b)) wave or the ((c)) wave, up of a wave 4 could take more time so that all of wave 4 takes more time than all of wave 2. Then, a rocky fifth wave down might occur. It should also consist of a zigzag if an when it were to occur.
Like any expanding diagonal wave 4 is not allowed above the high of wave 2 or it would invalidate. If the upward wave does invalidate, alternate count is shown in red below the chart. There would just be two zigzags down, so far, labeled as w-x-y.
The time signature of the wave is almost certain to frustrate. It's whippy and trading entries and exits have to be carefully considered. And in this environment - just like buying or selling is a strategy - just standing aside until a recognizable wave occurs can work well, too. For example, it is very difficult to tell if that ((b)) wave is done yet or not.
From the daily chart, one item of note is that downward price movement ended after price contacted the 100-day SMA again. But, there was still a lower close on the day.
Have an excellent start to the evening.
TraderJoe
Fractal city, a rally from here can wipe out 2 expanding diagonals of different degrees.
ReplyDelete"If the bears have Thanksgiving, then the bulls will have Christmas 🎄 dinner.". Or so the saying goes .... TJ
DeleteAssuming that your wave model is correct, what are the odds that wave 5 is longer / deeper than wave 3? What do you consider to try to figure out in advance what wave 5 will look like?
ReplyDeleteIf the pattern is an expanding diagonal then wave 5 'must' be longer than 3 and 'must' be a zigzag. Then, too, it is 'most often' longer in time than wave 3;. But the 5's can get very, very aggressive in their 'c' wave component of the zigzag.
DeleteTJ
Thanks. I did some thinking while doing the dishes this evening. (Thinking is hard. : >) ) Realized that I had asked a dumb question. If, in fact, we are dealing with an expanding diagonal, then 5 > 3 > 1.
DeleteYou added some color re the zigzag and an aggressive 'c' sub-wave.
And the expanding diagonal would be signaled by the lines through the troughs of the declining waves 1 and 3 and the peaks of the corrective waves 2 and 4.
Seems like there should be some additional fallout from the FTX crypto collapse. That was like a good, old-fashioned (pre-FDIC) run on a big bank. Waiting for a few more shoes to drop!
Hello Tj,
ReplyDeleteThis does not feel like ((c)) wave down yet.
every downmove is being retraced fully and higher, that does not look like C wave down in nature. All might change in 1 trading session, but as of now not happened.
C wave down is fast and furious?? cant see any signs of that !!
I don't normally reply to people who drone on regarding a single topic like this, but I will give it a try and see if does any good (get my drift?!). Zigzags come in two flavors: 1) slow A, fast C, and 2) fast A and slow C. See diagram in the link below.
Deletehttps://www.tradingview.com/x/3ltspy1O/
But THEN, C waves themselves come in THREE flavors: 1) impulse, 2) contracting diagonal, and 3) expanding diagonal. Also shown in the diagram. The 'Smart' analyst learns to work with all these flavors and does not make a pre-determined emotional judgement.
TJ
ES 1-Hr: our job as an Elliott analyst is now simplified. We simply ask the question, "does the 3-to-((b)) dashed trend line break, back-test & fail before a fourth wave, 4, invalidates?"
ReplyDeletehttps://www.tradingview.com/x/7ygA7x1K/
Everything else about this pattern is acceptable including the fact that potential wave 4 is longer in time than potential wave 2. Further, all numbered waves are on opposite sides of the EMA-34 for good form and balance. The EWO also shows the expanding pattern of momentum.
"We simply can NOT 'assume' upward wave movement is over. Better confidence is obtained by the dotted trend line break, back-test & failure IF & when it occurs. The actual job of the analyst at this point is to 'WAIT'.
What the 'trader' does is entirely up to the trader. But I know what I'm doing, and it starts with the capital letter 'W'.
TJ
..and I will add all of this comes after correctly predicting which direction (up/down) this morning's very wave decided to go in. That is the job of the 'analyst'. What the trader does with it is up to them. TJ.
DeleteSPY cash 30-min: here is the equivalent in the cash market - so maybe we can follow it in real time - with two gaps open currently. The prior red gap did not fill all the way.
ReplyDeletehttps://www.tradingview.com/x/ZRWUDcra/
TJ
reminder: economic data at the top of the hour. TJ.
Deletereminder: don't lose sight of the alternate. TJ.
Deletecorrection: three gaps currently open; also the one on the 16th.
Deletehttps://www.tradingview.com/x/vwSoQudp/
TJ
Existing home sales down -5.9%, according to FXStreet Econ Calendar. TJ.
ReplyDeleteSPY 30-min: has just closed today's cash gap, and the one prior to it. Bulls can't be too happy about that.
ReplyDeletehttps://www.tradingview.com/x/f6hMWeRB/
TJ
..the ((a)) wave up of 4 (see the futures chart) has also now been overlapped downward. It's not fatal, but it is a warning and things can still get whippy. TJ.
DeleteSPY 30-min: as of the bottom of the hour, SPY has a lower low and has approached the dashed up trend line.
ReplyDeletehttps://www.tradingview.com/x/3xF1ZZ74/
TJ
SPY 2-min: is this going to be a diagonal 'C' wave to end a flat on the SPY 2-min?
ReplyDeletehttps://www.tradingview.com/x/UWb0McaC/
TJ
SPY 2-min: the 'minimum' for this upward diagonal has been reached. Diagonal validated. Can go further if it wants.
Deletehttps://www.tradingview.com/x/bBusA6YV/
TJ
This is exactly 'why' the analyst waits for the trend line on the larger time-frame chart to be broken, back-tested, and fail (if it does).
DeleteTJ
..just saying, this is now 'countable'.
Deletehttps://www.tradingview.com/x/xBGo3oVj/
TJ
Thanks TJ
Delete..and one extension; aggressive little buggers, aren't they? But then, back inside of expanding pattern.
Deletehttps://www.tradingview.com/x/sC4Q9XiH/
TJ
A new post is started for the next day.
ReplyDeleteTJ