S&P 5000

Friday, the S&P500 closed above 5,000 for the first time. Shall we call it the S&P5000, now? Clearly, just joshing. Now, using OHLC prices, we look for the following Fibonacci confluence on the 2-weekly chart of the ES futures. That confluence is in the narrow band between 5,116 and 5,130. Price closed at 5,044 on Friday.

The confluence results from the 0.618 extension on wave (1), and the 1.236 external retrace on wave (2). Will such a confluence hold? Well, the daily Bollinger Bands are still above the market and will likely be there on Monday, too. Further if you examine the chart at this LINK, the seasonal tendency for the month of February tends to be that the market is soft beginning around Feb 12 - 13.

Despite the "feel" of a third wave - which is why it is labeled as a "three" - the divergence on the Elliott Wave Oscillator on this time frame is still holding. If it seems like forever for those who monitor the markets daily one must remember that these are two-weekly candles!

The best alternate for this count would be: (1) = V, (2) = (A) and (3) = (B). But there is no need to invoke the alternate just now. Price is not to targets yet. If there is a fourth wave, (4), then there should almost certainly be overlap with wave (1). And sometimes, the fourth wave breaks the 0 - (2) trend line in order to create enough bearishness for wave (5).

Again, this two-weekly diagonal count is favored because there has not yet been a proven significant ending sequence (like a triangle or diagonal) on the weekly time frame unless one counts 2018 - 2022 as an expanding triangle. This is possible, but it also may just be an expanded flat, then giving rise to the diagonal above. Whereas, if that period 'was' a triangle, it should have been quickly retraced after the thrust out of the triangle. That did not happen.

As before, caution, patience and flexibility remain the requirements of the week. If a mass of traders goes with the seasonality ("past history is no guarantee of future returns...") then it could look like the turn is coming out of nowhere - even though we have shown how mature the daily count is. Three points must be emphasized on the daily chart below.

First, there is not even a trend line break of the most recent three-touch trend line. Neither is there an attempt to back-test the line nor a failure of that back-test. Second, there is not so much as a true signal candle let alone a follow-through candle to the downside. A true signal candle could be an evening star or a bearish engulfing or a spinning top. None of those are seen. Rather, what we have is a 'stub' candle. Now, to be fair other red bars after stub candles are shown at the blue down arrows. So, a top could happen in this manner, it is just less likely. And third, there is not yet a lower low on the daily RSI indicator.

So, it is all true that sentiment is overblown. The daily put-call ratio is down to 0.48 as of Friday - a recent low. The percent bullishness is quite high. The CNN Fear & Greed Index is back in "Extreme Greed". The NYSE advance-decline line is not at new all-time-highs while major indexes are. The widely followed McClellan Oscillator has been diverging for weeks. And High-Yield-Bonds (HYG) have an unprecedented weekly divergence. Yes, all of that is true. So, we are on alert. But that is different than doing anything in a disciplined manner.

Have an excellent rest of the weekend.

TraderJoe