NBC = Nothing But Chaos

Famed trader Bill Williams titled his book, "Trading Chaos". Today was a good reason why. Although we were counting waves upward, the local count invalidated over a prior high. Here is an intraday snapshot of the ES daily chart taken about 1 PM ET.

Sometimes the chaos the market makes is somewhat predictable - sometimes it is much less so. This morning was one of the latter cases and a good reason I urged patience and caution in front of large news reports coming out this week.

Some of the reasons for the market chaos may be due to the increased speed of information flow in modern times. We know that our current situation is vastly different than that in which Nathan Rothschild made a fortune in British bonds after receiving messages from the Waterloo battlefield by carrier pigeon.

Here, all traders new the CPI report was coming at 8:30 am ET, and they quickly received the results of the report in a similar manner. But, what added to the chaos were some commodities brokers who informed their clients only an hour before the report that full margins would be enforced. Then, after the report came out, they relaxed back to day-trading margins. Seriously?!! They knew the report would be released at a certain day and time. They couldn't tell us the night before that they would have this policy?

What is going on here? No, this chaos is being generated by the market-makers themselves. Obviously, they will say it is "to protect them and their clients". Really? OK. So what about if I were (and I wasn't) in my car on the way to work when they issued the email saying they were implementing the full margin requirement? How does that protect the client that is driving to work, or busy at a meeting at work if the person did have to meet the new margin requirements? 

If you look into it, you will note that the futures spiked about 35 points in the five-minutes ahead of the report. Was that driven by the new margin requirements? Did it start the upward spike in itself. This is sheer craziness.

Maybe it's one reason to continue to be very, very cautious ahead of all major reports. Maybe another is whether the Smart Money just wanted a really swell shorting-opportunity ahead of the FED meeting. They certainly got one, whether it sticks or not. But perhaps another reason is that as Bill Williams indicates maybe the market just makes and breaks fractals on various time frames as people respond to the chaos in various waves. "And - between any two fractals - is always, always an Elliott Wave of some degree." Our task is to try to figure them out.

In terms of the wave count, a local second wave up was invalidated. But a minute ((b)) wave up in the ES futures has not yet been. The day isn't over. The lower parallel trend line was not broken and back-tested with a resulting failure of the back-test. And I indicated there would be nothing to the down side until or unless that occurred. It didn't.

Have an excellent rest of the day.

TraderJoe