Don't Argue - GOLD

Sometimes the market looks you in the face and says, "Don't Argue". Such it is with the Elliott Wave count in monthly GOLD futures, below.

From the Fibonacci ratio of (3) = 2.618 x (1), to the exact 50% retrace of wave (4) on wave (3); from the peak of the RSI on wave (3), to the lack of overlap between (4) and (1), to the current monthly divergence of the RSI on wave (5). The market says, "Don't argue". But in addition, we note there IS a kind of alternation in this count. Wave (2) is a "Running Flat" - in which case "running waves" argue for "Great Strength" to follow the wave. There was great strength following that wave (2); a 2.618 wave (3). And, to alternate, wave (4) was a "Regular Flat" - not as much alternation as one would like, but some. From the Fibonacci ruler on the left, price has now touched 1.382 x wave ③ which is a common target for either "B" waves or fifth waves.

Next, when we look at wave (5), we see it did make a higher high. And the "breakout" now has everyone extolling GOLD's virtues. Now? Not in 2016 - a Fibonacci eight years ago - when GOLD bottomed??!!

OK. So, let's do a real time experiment. IF we are in a wave (5), then the three most likely Fibonacci ratios for this wave are a, (5) = (1), b, (5) = 0.618 x [net (1)-to-(3)], and c, (5) = (3). So now let's draw a blank chart of GOLD and see what we get when we add a Fibonacci ruler.

First, the reader should verify that price is already past (5) = (1). Second, the chart above shows the relationship of 0.618 x net [(1)-to-(3)] comes in at 2,263. Meanwhile the price high last week was 2,257. Hmm. That is awfully close. OK. 

The problem for alert readers is this. Although there 'may be' an ending diagonal in formation, there is no proof of a turn yet.  So let's look at a weekly chart in Gold. And now the problem should become a bit more clear.

One could make the case that since wave 3 is at least 0.618 x 1, the diagonal may be ending. Granted. But also, we see that wave 4 was not a clear zigzag. It may have truncated being an omen of strength. OK. But neither does 3 exceed the length of 1, yet. So, keep in mind the measurement - which readers should perform - that, if 5 in the black count exceeds 2,325 then the fifth wave may not be forming a diagonal.

On a fundamental note, we note that GOLD's price has been rising in the face of FED's interest rate hikes. Is that the way it supposed to work? Paying no dividends, GOLD carries storage charges and costs of ownership. The higher interest rates are supposed to dissuade one from owning Gold. Any number of people are now saying that Gold will skyrocket when the FED begins to lower interest rates. Really? Doesn't that fly in the face of what just happened? Word has it that this rise in GOLD has been on the backs of (other) Central Banks themselves buying unprecedented amounts of Gold in order to fight off sanctions from the U.S. and other countries if things should begin to deteriorate. Charts do show that CB's have been heavy purchasers of Gold. Well, that's the story, anyway.

In any case, the patterns are intriguing but one should not argue with the measurements.

Have an excellent rest of the day, and the long weekend.

TraderJoe

Computer Geniuses

Today was a whippy day on the SPY/SPX/ES equity markets. SPY did wind up going over the prior high. ES did not yet. We showed ways it could. Market participants are expecting the PCE report out tomorrow with the markets closed. Below is a 1-minute chart of just part of today's movements on SPY.

Because there were some indications we were possibly in a fourth wave, FLAT wave structure could not be ruled out so - while I was fully prepared for an end of day sell-off - the chart above shows what the computer geniuses did in the last one minute of cash trading today.

One has to laugh. And the purpose is? Yes, there remains a way to count a top. And as the comments for the prior post show, there is also a way we might be in diagonal fifth wave. The structure is unclear so flexibility, patience, calmness, and a wry smile are the tools at hand.

Have a good start to the evening and to the long weekend.

TraderJoe

Strains Credulity

Yesterday's post said further up movement is possible, but it would strain the "right look" for a channel count. Today's upward movement progressed far enough to suggest a fifth wave in progress in a widening wedge rather than in a channel on the four-hour chart.

There's no overlap to call a diagonal. And there is no higher high, yet. There doesn't need to be, but there easily could be. There would not be a problem with a ⑤ = ① wave. The bottom line is that there is a new ②-to-④ trend line, and a downward trend would not start until/unless that trend line is broken in less time than the ⑤th wave takes to form. There needs to be a wave of both speed and power.

Remember, since there is no trading on Friday, tomorrow is the last trading day of the month. Word has it that some of today's up movement was due to quarterly rebalancing.

Have a good start to the evening,

TraderJoe

A Top is 'Possible'

A countable top is 'possible' based on the thrust of out a triangle. Further continuation upward is possible but strains the 'right look' of a channel wave upward - as we showed yesterday. Whether a top is here or not, caution, patience and flexibility are the by-words as most people know the market has not had a substantial correction yet.

SPX Cash Index - Hourly - Possible Thrust from Triangle

Below, the daily chart of ES futures closes is wedging and has broken the line of lows several times. This indicates waning momentum. However, an acceptable length for Intermediate (3) has been reached.

ES Futures - Daily Close - Narrowing Wedge

Further, the daily RSI has quadruple negative divergence. So, it bears watching that lower trend line again. Here's wishing you all the best because if the fourth wave Intermediate (4) starts downward, it is likely to be a very messy affair. There may well be late buyers at the 20-period SMA or at the 50 period SMA - these would like be people who do not know of or just want to ignore possible diagonal structure. (In other words, they might think the down wave is a second wave.)

In any event, comments for this blog are currently on moderation. Because of continued harassment, only valid EW comments will be published. There might be a delay in publication, or they might not be published, at all. I'll decide when to release moderation as I continue to decide whether to report the harassing individual.

Have an excellent start to the evening,

TraderJoe

Nothing Has Invalidated - 2

The ES 4-Hr futures tried all day to make the 38.2% retracement level of a third wave, as below. As of the cash close they had not yet as the Fibonacci ruler, below, shows.

Although nothing has invalidated, the count remains situational until there are waves long enough to make a difference. As far as I can tell, any price movement below ② or (e) would greatly slant the odds to the downside.

Have an excellent start to the evening,

TraderJoe

Nothing Has Invalidated

It is usually price length that will actually invalidate a count. Thus far, nothing has invalidated the price lengths, upward. The ES/SPX hourly triangle count we were working may have played out in this fashion. As you can see - even yet - the typical technical target for the triangle pattern still isn't achieved. That typical technical target for a contracting triangle is the widest width of the triangle added to the breakout point.  It comes into play around 5,300 or before.

Even though the above count may be playing out well, below is a very reasonable alternate which has a similar end objective in mind. It considers that the b wave structure, above, is actually a five-wave-sequence as below, re-labeled as iii.

That leaves wave iv as a slightly truncated flat, with an impulse following. It is very hard for me to tell the difference between these two counts, although the triangle is slightly preferred because the timing was exceptionally close to accommodate the FOMC meeting results.

But, from everything I can see since Thursday, nothing in this index/futures count has had a length invalidation yet.

Have an excellent rest of the weekend.

TraderJoe

Still on the Table - 2

Today we made c above a within Ⓓ. It could go further. Tomorrow is the FOMC result and Chair Powell's press conference.

The invalidation for wave Ⓔ is shown.

Have an excellent start to the evening,

TraderJoe

Still on the Table

In the ES (a little more likely than the NQ) the potential triangle we have showed for a few days now is still on the table. The ES 1-Hr chart is below in line fashion to make it a bit easier on those eyeballs.

The waves are getting "stupid silly". By Fibonacci ratio, Friday may have been c = a downward to a larger Ⓒ wave, with the diagonal we showed at the outset on the 11th as a leading diagonal and only a very minor truncation in the c wave. Today is possibly an a wave, up, and a b wave down.

Remember, if the triangle invalidates, then it is likely the inverse - some kind of 1-2 down. But, for now, there is no evidence of that.

Have an excellent rest of the evening,

TraderJoe

Weekend Video - ES, NQ & NDX

Here's a video exploring some simple, current Fibonacci ratios in the March contracts that just went off the board. Feel free to full-screen the video using the icon in the lower right for the best result.

If you have any questions or comments, please leave them below the video.

Have an excellent rest of the weekend.

TraderJoe

Not Easy

I have written often about what I called "The Fourth Wave Conundrum". That is the fact that there are approximately 13 different valid Elliott Wave patterns by which fourth & fifth waves can form starting with an initial three-waves-down. So, your odds of calling such a pattern by random chance are 1:13 or roughly 7 - 8%. Those are not great odds. Last night, the ES 2-Hr futures did not go over the prior high. That made life a little worse as it didn't rule out anything. And, this morning, price went down under what I previously referred to as the "Center Line" of a potential triangle. Here is the ES 2-Hr chart showing the center-line cross.

By crossing back under the center line, there is a potentially valid triangle forming - shown in green. If it does, so be it. It might be the last pattern before a fifth wave upward. But there are two things not to like about this triangle. First, the Ⓔ wave is forming nowhere near the apex of a triangle. Second, it currently looks somewhat impulsive.

Now, triangles can be elusive things and can get more complicated, so we must be calm and patient. But I also want to note that literally by the skin-of-its-teeth, the count can be the inverse of the triangle which is a diagonal down and a deep retrace shown as ①, ②. Personally, I'm not married to either count. A true knowledge of the odds simply won't let me be. 

The one thing that can be said, objectively, is that a contracting triangle invalidates below the Ⓐ wave.

Finally, it must be said that if prices go over the prior high again - which is certainly possible - then one cannot rule out an upwardly pointing diagonal - as the note in blue says - either. But we are not there, yet, at present. So, keep an open mind and let's see how this goes.

Have an excellent rest of the day,

TraderJoe

Still Waiting - 2

Below is the ES 1-Hr chart. We previously indicated that we were looking for a retrace wave that did not go over the top. We are still waiting.

We also said we might have made an hourly contracting diagonal downward. If that is so, the retrace could be quite deep. The CPI report is tomorrow.

Have a good start to the evening.

TraderJoe

With Roll

Here are the current measurements of the ES continuous contract, even including the level of the current contract roll over. Y = W to within 5 points.

The blue line at 5,600 at the top of the chart would be (3) = 0.786 x (1) where we think the proportions of the contracting diagonal would start to lose their 'right look'. Price is not close, yet. So far, so good.

Friday's daily candle on the roll-over contract was a "spinning top" candle. As with all potential candle formations, a substantial closing lower, in this case, candle would be needed as confirmation.

Sentiment levels have gotten even more bullish (contrary indicator) as the AAII Sentiment level crosses the 51% level.

Have an excellent start to the weekend,

TraderJoe

Another Horror-Story of a Contract Roll

Below is a daily side-by-side comparison of the roll-over ES futures contract versus the current month only. It's another horror-story of a contract roll-over with fully 60+ points premium in the new contract versus just the current month contract.

The red arrows show the opening price for the next day. Regardless of the Elliott-Wave count, this is a bonkers situation which really needs investigation as it is largely unexplained and getting worse as the months progress. The prior roll-over on this platform was in excess of 55+ points. A typical roll-over in prior years was 12 - 15 points.

Have a good start to the evening,

TraderJoe

Still Waiting

The ES hourly futures are shown below in the chart since the most recent high. The cash market says only three-waves-down. So, for now, that is the count. We are still waiting for a wave in which price retraces but does not go over the prior high. There is currently a 62% retrace, and a lower low bar after that.

ES Futures - Hourly - Retrace

The upward count 'can be' complete. But the downward count - if it is three waves - might only be a diagonal of some type. A further upward count might also be a diagonal, but it might also be possible to form a triangle here. So, we look for clues. A lower low today than yesterday would tend to rule out further upward movement.

FOMC Chair Powell is expected to speak before Congress at around 10 AM ET today and again tomorrow. Let's see how things go. 

Have an excellent start to the day.

TraderJoe

One Chart - Another Detail

On the ES hourly chart, we are clearly in a smaller degree channel, with five-waves countable or nearly just.

Price is starting to get some overlaps which will become difficult to count. Because price went virtually nowhere in the overnight, perhaps the real time market will make a triangle or a diagonal to end the wave. It doesn't have to. It could just 'fail' in a fifth-of-a-fifth which would not be a failure to make its overall wave count.

Still, since full-on reversals are more common on Tuesdays than on Mondays, we need to let this thing swing around a bit and see how it wants to finish. Looking at the channel, though, we'd have to suggest that if the EMA-13 crosses under the EMA-34 on this hourly time scale it may prove to be the end of the overall move, upward. At least that is what the wave count is saying at this time.

As always, caution, patience and flexibility are needed as price again strikes at or near the upper daily Bollinger Band.

Have an excellent rest of the day and evening,

TraderJoe

One Chart - Two Details

The overall count on the SPY is of a contracting ending diagonal Primary ⑤th wave. We are nowhere near completed. If the current up wave feels like a third wave, it's because it IS. It very well may Intermediate (3) of this count as the chart below shows. So, the wave number agrees with the 'feel' of the wave.

As I said, we are nowhere near complete. These waves can take a very long time - perhaps into the new election and beyond. But eventually it should come down. Yes, it is possible for wave (3) to be a double zigzag. Prechter has commented on such many years ago. It is also possible for wave (4) to contain an interior triangle like the Minor B wave section - when we get there. Here is the detail section on that Minor W-X-Y wave up to Intermediate (3).

The reason the chart is labeled this way is that there is overlap at X, pure and simple - cash & futures - and X is longer in price than ⓑ in March 2023. So, it should be of higher degree, and it is labeled that way. Price is now throwing over the upper wedge line, and everyone is getting exceptionally bullish (the CNN Fear & Greed Index is pegged in Extreme Greed). So, how does the current up wave count? Detail # 2 shows the count from minute ⓑ to minute ⓒ in the chart below.

This chart shows the most likely count from the minute ⓑ wave. Most people will get it wrong. I, myself, initially labeled the ⓑ wave differently at the outset, putting it back at the (w) wave location. The problem is that if you do this, then the first wave up of the third wave is too long for correct degree labeling as a lower degree sub-wave. If you look closely in this wave, now, all the degrees expand properly with lower degree waves actually being shorter in price and time as they should be. I know, I get it. No one cares much about the degree labeling. Trust me. It is helpful.

Note that (ii) - a smaller degree wave - is shorter in price and time than ⓑ. So is (iv). But then note in the next wave ② is smaller than the larger degree (iv), and so is the smaller degree ④.

Then note how getting the degrees right also helps put the gaps in the right location, especially the most recent gap which may eventually also be responsible for an island reversal pattern. Time will tell.

From my perspective, wave-counting is not an art - as some people suggest. It is a process of making measurements and matching those measurements with degree labels. Few people do it correctly. I often get it wrong, myself. But I am very, very aware that I can initially make mistakes in this manner, and I take every effort to correct them.

Have an excellent rest of the weekend.

TraderJoe