Over the last two days, we suggested two ways prices could head lower. The first manner of decline did not work out and a slightly higher high was made. We called the count plausible because we could also see the possibility of an upward wave continuing. It did for a while.
The second plausible count worked out fine and met some really quite exact Fibonacci ratios which were shown. No wave analyst gets every wave call correct. There are simply too many waves for that. Thus, we suggested patience, calm and flexibility. Now, with today's decline the price bias has shifted to lower as today's close was below the 18-day SMA (using only the front-month December contract, and not the roll-over continuation of the September contract). The daily chart of the ES futures - as of shortly after the cash close - is below.
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| ES (Dec) Futures - Daily - Bias Moves to Lower |
The outside reversal bar actually took out the low of the last two trading days and closed lower. There was very little retrace on the day, and there still could be a large retrace on Sunday night or Monday. But if the low of 07 Sep (shown with the down fractal or red triangle) is exceeded lower, then it possibly opens the door to the lower Bollinger Band and/or the 100-day SMA, shown as green crosses. And IFF this should wind up being a crash wave - which now seems possible for the first time - prices might go much lower.
The interesting thing about today is how unexpected it was for many. Some were still counting upward because of the positions of daily moving averages. Some were analyzing volume profile gaps and also seeing that upside was possible. Few people were noting the extreme difference in value between the cash S&P and the December futures. It is possible that speculation is running rampant in a number of different ways.
For our part, we will continue to remain calm, flexible and patient: crash wave or not. Again, nothing will surprise us to the downside. Today's price moves (op-ex related or not) suggest that buying stocks or futures naked long is fraught with risk - much more so than in previous wave structures. Yes, if it's a bear market there will be sharp rallies. There might also be moments when stocks gap amazingly lower, perhaps to levels that trigger market circuit-breakers - remember those?
Have an excellent start to the evening and the weekend.
TraderJoe
Thanks TJ. Most people are aware that the market advances since March of this year has been led by the magnificent 7. This can be seen clearly in comparison charts of SPY vs RSP or IWM. I think the proposed third wave will need to be led by the magnificent 7. Can you provide a high level POV on which of these 7 are likely to lead the way, not looking for detailed EW analysis. For example, AAPL looks to be teetering on the edge, while GOOG is wedging to 52 week highs with waning momentum.
ReplyDeletePlaying a bit of devils advocate. As I look around the web (Avi Gilburt and his analysts, YouTube channels, retail comments on StockTwits, etc) I'm finding lots of calls for crashes and wave 3s. I'm curious on yours and others' thoughts on the psychology here. A wave 3/C is typically right before bullish sentiment is high and market participants are caught flat footed the wrong way. Is this time different, or is there some other dynamic? Or maybe my observations confirming bearish sentiment are incorrect.
Thanks and have a good weekend. This week should be telling!
Just my take - the problems are showing up in the banking system (KRE) and has little to do with the magnificent seven, yet. It has shown a third wave already on a weekly basis, and 'might' make an extended fifth wave.
Deletehttps://www.tradingview.com/x/Ve2MW8h7/
Next will come companies that have to refinance their low interest business operating loans and much higher rates (think manufacturer's, commercial real estate, etc.). The companies that have huge operating hordes (think APPL with $115 billion net cash) will buffer well.
Regarding bullish sentiment, did you miss the CNN Fear & Greed Index being over 80 for the longest period 'ever' in it's history at the beginning of July. Here is link and click on 'Timeline'.
https://www.cnn.com/markets/fear-and-greed?utm_source=business_ribbon
TJ
Also,
DeleteLot of people calling for down wave, but how many aggressive positions?
TJ has to be correct on this one as most people would have given up shorting on such nasty upwaves.
@all .. it's not a question of 'who' is right. Try to keep all egos out of the equation. It is simply a question of whether five-waves is occurring in the down direction or the up direction, and whether Elliott Wave theory correctly indicates that the five-wave-direction is the direction of the major trend. TJ.
DeleteGreat point. Interesting how vituperation often accompanies disagreement around EW counts, particularly strange since ambiguity can legitimately exist. There are are clearly some charlatans out there, but good analysts are still calling an impulse up underway to a new ATH. I happen to differ btw ..😊
Delete@tachy .. it, an impulse higher, must remain an option at this point. It just fights the local technicals. Things can change, until/unless overlap happens, so one must be mentally prepared, flexible and calm. As long as price remains below the 18-day on a closing basis, the bias just remains down. TJ.
Deletedaily bb and weekly 18 around 4400, with the mid time frame RSI already very low. Should get there by Wednesday
ReplyDeleteTJ, any bullish alternate count on DOW since march lows?
ReplyDeleteI can´t find any valid impulse...
On the DOW in terms of 'alternates', one has to put 1) a diagonal, 2) and a 'b' wave in play.
Deletehttps://invst.ly/11f7-e
There are two problems with the diagonal; a) 'usually' diagonals form over their prior high to indicate their character as motive waves, unless they are leading diagonals from a market low, b) the 'time signature' of wave 3 in such a diagonal is longer than the time signature for wave 1 in the diagonal. So, for now it is just the alternate.
Still, a "B" wave could form at the 90% level made up of three-zigzags, looking like a diagonal. But, again, new highs are needed to put any of these counts on the table. New highs are 'not' impossible. They just fight the current local technicals; that is they have lower odds. It's always 'odds' or 'probability'.
TJ
SPY 5-min: lower low this morning, and some possible measurements for a Flat wave.
ReplyDeletehttps://www.tradingview.com/x/pZ8c8d0V/
TJ
SPY 5-min: nearing the prior high, after a 1.382 down wave. Measurements adjusted.
Deletehttps://www.tradingview.com/x/dv90fQdY/
TJ
SPY 5-min: prior high exceeded. Bare 'minimum' expectation for a 'running flat' met. Still can go higher but not if the low is exceeded. (i.e. this might only be ii of c-5, up). Watch the low.
Deletehttps://www.tradingview.com/x/sNMPdlxU/
TJ
CL 30-min: first even-remote possibility for a top in Crude.
ReplyDeletehttps://www.tradingview.com/x/i0f2E5TU/
TJ
P.S. note how the diagonal formed 'over' the prior high. TJ.
DeleteSPY 5-min: now up and over the a-3 wave. Do your measurements.
ReplyDeletehttps://www.tradingview.com/x/Pw4xK1So/
TJ
CL 30-min: there are now double topping-tails, and CL is trading back inside the wedge. The high allowed for this count is 92.53 which provides a tight 'wave-counting-stop'.
ReplyDeletehttps://www.tradingview.com/x/6ow71N5l/
I'd watch the low of wave (4) below 92.40 for better confirmation.
TJ
SPY 5-min: as best I can tell wave ③ is longer than wave ①, but it's already getting ugly. Doesn't mean five can't travel. Just be careful.
ReplyDeletehttps://www.tradingview.com/x/hjwdqxmq/
TJ
There is now a new high for wave ⑤. It definitely can go higher, but the 'minimum' expanded flat requirement has been met.
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TJ
CL-30 min: now below 91.40 for better confirmation. Looking impulsive for now to the downside. Good luck all. TJ.
ReplyDeleteHere is a later chart on CL (futures charts are always behind). This one shows the nice trend line break, and break below wave (4). Next wave marker would be below wave (2) at 90.94.
Deletehttps://www.tradingview.com/x/lcSDwVMH/
TJ
CL now below wave (2) at 90.82. TJ.
DeleteSPY 5-min: overlap warning has been triggered after c-5 = 2 x a-3.
ReplyDeletehttps://www.tradingview.com/x/rWc7y6JN/
TJ
A new post is started for the next day.
ReplyDeleteTJ