Unparalleled 100+ Year Fractal Catalog

In his books, Ralph Nelson Elliott essentially laid out a theory of "parallel" market movements. He gave explicit instructions for how to draw them: what tools to use to construct them, which points to connect as parallel & when, and whether to use log format or arithmetic format if inflation was involved. As you can see from the first chart of the catalog, a parallel has not fully formed yet.

DJIA Cash Index - Yearly - Larger Parallel

Here you can see it is possible to construct a large parallel the lower extreme of which has not been tested yet. This chart is at the SuperCycle and Cycle Degree Level. In the lower left is a "running second wave" which I think the failure to recognize is the downfall of most professional Elliott analysts. First, the "running wave" is an omen of the very, very large SuperCycle wave x[III] to follow.

This shows the upward bias of the market following the depression, and it is the only way that the Cycle wave corrections are shorter-in-time than the next larger degree correction in the same direction. For example, Cycle IV is a full nine-years in length from 2000 to 2009. So, the correction of the larger SuperCycle [II] must be longer in time to meet degree definitions. I have written about this at length before and I have written Elliott Wave International about it to no avail. So now, the chart suggests we are in the SuperCycle [III]'d wave: the wonder-to-behold, the extended third wave, and, although we are still above the EMA-34, this wave is diverging on the PPO Oscillator, the equivalent of the MACD for very long-term charts.

The parallel is rising. It is currently at a level above the high of SuperCycle [I], and therefore one might expect that if prices head lower, they will not overlap wave [I]. Further, there has been no wave yet to come back and test the fourth wave of one prior degree. IF SuperCycle wave [IV] forms, then it might come back to the parallel to test the level of Cycle wave IV, one degree lower.

The next chart in the catalog is the quarterly wave set from 2000, as below. It shows the construction of Cycle wave IV as a Flat wave, and the subsequent Cycle wave V in five waves, with alternation. 

Here you can see also the five primary waves from the 2009 low. And that each primary wave lies on an opposite side of the EMA-34 for form & balance. Note, too, the third wave is the extended wave in the sequence. There is also some recent divergence on the PPO. This wave is also in a parallel, but one that expanded to capture the 2009 low and the 2020 low. It was a smaller parallel before the extent of Primary ④ was known.

The next chart in the catalog is the monthly chart from the 2018 top of Primary ③ to the present. The construction of Primary ④ as a Flat can be seen. Then one can loosely sketch in a parallel. (Warning: this wave has alternates). So far, to the best of my ability, I think it is an extended fifth wave under construction, and it may be at or nearing completion. If this numbering does not satisfy the count, then the next most likely would be an expanding diagonal. We'll deal with that later.

DJIA Cash - Monthly - Primary ⑤

These waves are at Intermediate degree. At present, the rationale for this count was the extraordinary "FED pivot" for the Covid-19 episode and this shortened the duration of wave Intermediate (2) and lengthened the time of Intermediate (4) when interest rates were increased in an unprecedented manner. Price is now down to the mid-channel line.

Next, the chart below is the two-weekly chart from the 2021 top to present. It shows the current Minor degree waves from the Intermediate wave (4), low. Again, this is an attempt to count-by-five with alternation. Here there is a long Minor 2 and short Minor 4, alternating in time and depth. And the chart ends with an expanding diagonal for Minor wave 5. Here, too, a loose parallel has been drawn around the waves. It is likely that if this parallel breaks it will signal something important.

DJIA Cash Index - 2 Wk - Intermediate (5)

Finally, the last chart is the weekly chart, down one level lower and showing the construction of the waves down to minute degree.

Here the expanding diagonal - which a couple of us noted in the blog - is shown in its simplicity. But perhaps that simple megaphone shape is ultimately the most ominous. Currently, there is weekly divergence and a turn down in PPO. If the lower diagonal trend line gives way, it could signal the entire diagonal will be retraced in less time than the diagonal took to build. IF that occurs, it could signal a top for many, many years.

We thought you'd be interested to see a logical progression of the wave degrees from SuperCycle to Minute degree. Whether the market tops here or not is up to the market. The charts suggest it has a higher likelihood than ever. IF it tops, it might occur in such a short amount of time that the FED is caught off-guard, and rate decreases would be next-to-useless given the trillions of dollars in capital lost merely due to market price declines and the reversal of leverage in the system.

Regardless, the attempt to count the waves by five, with alternation, will continue until the market makes its message clearer.

Have an excellent rest of the weekend, and holiday week if you are celebrating.

TraderJoe

A Yen for Yen ?

How come no one is talking about the Yen carry-trade now? Why have all the news stories gone now about how this will disrupt the stock market? Yet back in my Aug18th post which you can view at this LINK, I said it was possible the Japanese Yen was making a contracting ending diagonal, and it may not have finished yet. Here is an update of that chart.

Yen (6J) Futures - Two-Weekly - Contracting Diagonal

As you can see, a wave 4 did form that remained less in price than the corresponding wave 2.  And now the only questions are: 1) will a new low form to perfect the diagonal, and 2) will it travel low enough to make a new low without becoming longer than the length of wave 3 in price? Certainly, with over 100 candles on the chart, the Elliott Wave Oscillator (EWO) is sketching out the typical diverging bottom waves. That is wonderful to see.

Time will tell, but the title of this post really refers to the fact that the currencies tend to trend well, and if a diagonal forms, it like means that an upward break may trend for quite a while. So, interested wave students should become familiar with measurements: how far is too far? What needs to break to consider the diagonal done?

Good questions for those interested.

Have an excellent start to the evening,

TraderJoe

A Compelling Case - Two Charts

With 170 candles on the daily chart (nicely meeting the guideline of 120 - 160 candles), the Elliott Wave Oscillator (EWO, or AO) paints the expanding diagonal pattern below on the DJI and its YM futures. We have commented on it here before. The EWO is currently red and declining. That doesn't mean there can't be more bounces. Yet price is still under the EMA-34.

Dow (YM) Futures - Daily - Pattern at 170 Candles

The chart, if correct, shows 3-3-3-3-3 ending diagonals at two degrees of trend. Overall, Minor wave 5 in its entirety would be an expanding ending diagonal. The trend lines and the apparent three-wave structures are just very compelling, even though, overall, the wave gives a 'five-count' in this configuration. It is just an overlapping one. Then, wave (c) of Ⓥ would also be an overlapping contracting diagonal five-wave-structure. Further notice, according to The Eight-Fold-Path Method that every significant numbered wave is on an opposite site of the EMA-34 for form and balance.

And continuing to count by "fives" here is how the Minor wave 5 would fit into the weekly picture.

Once again, this is a best attempt to count-by-five with alternation. The alternation from the bottom would be "short two, long four" at the minute level, and - just the opposite - "long two, short four" at the Minor level with the ending expanding diagonal as the Minor 5.

Additionally, I have done everything possible and literally bent-over-backwards to make the first wave off the bottom an impulse that fits with degree definitions. It works in the futures, where all the price excursions and open trading hours are available for examination. And only one modification is needed in the DJIA cash to make it work - wave circle-iv, ((iv)), off the bottom becomes a barrier triangle instead with a non-overlapping (e) wave.

Wave 3 is just longer than Wave 1. And wave 5 is just about as long as wave 3 but not quite. But that is of little significance because wave 3 is not the shortest wave.

Would I have liked a longer wave 4 in time? I personally would have, but the wave principle and the markets haven't provided as much, as yet.

You will note that wave Minor 5 is longer-in-time that Minor 3, so it likely should not be considered a lower degree "b" wave of a Flat, or it would again break degree labeling definitions. The two waves should likely be considered as the same degree.

In addition, this entire wave is a herky-jerky mishmash of overlaps off the bottom and overlaps near the top. It gives the impression that something is going on with the wave-count other than making impulses more characteristic of the middle of the trend. Is it the end of the trend? Time will tell, but the evidence is very compelling.

Have an excellent rest of the weekend,

TraderJoe

Relatively Simple

At this writing there is still no deal on whether the government will be open over the weekend or not. This is an important issue and may have an influence on whether prices go over the high again or not. Still, from a chart perspective our task is relatively simplified. We were able to count five-wave-up today with an extended first wave. So, the task now is to use The Principle of Equivalence to simply determine if we get three-waves up or five-waves up.

SPY Cash - 15 Minute - The Principle of Equivalence

I recommend using the SPY cash 15-min chart for this purpose, as above. The first item up for grabs is to see where the b/ii wave winds up on Monday morning. If price gets above and stays above the EMA-34, then it likely has more of a positive bias, temporarily.

The concern for a simple a,b,c wave, up, is that it would likely be shorter in time than the down wave. Not impossible, but then not the best corrective wave. One way to extend the time of the correction is to see if the c wave would become a diagonal, alternating with an a wave impulse. Another way to extend the time & frustration of a correction would be to make a double-zigzag. None of that is in evidence, yet.

If, on the other hand, this up wave in a channel becomes a five-wave sequence instead of remaining as a three then we need to question whether price will go over the high again as part of a larger diagonal that we showed at this LINK, before (see alternate red line). The down wave is just over 62%, and there is one way to count it as a-b-c down, but it is very non-proportional and is quite quick to be a larger diagonal second wave. Still, it might fit in a larger diagonal as a second wave.

So, just take it step-by-by step and see if we get a clear five-waves-up, Or, if this up wave remains a three or even a double zigzag. That's enough work to do over the holidays!

Have a good start to the evening and the weekend,

TraderJoe

Just a thought ...

It has been vexing over the last few hours to determine what the wave count is primarily because the ES futures gives a longer wave up from the 2022 high, while the cash provides still a shorter wave up. Clearly, this could be rectified if cash turned up and made a higher high. This is still possible by-the-way with an extended form of the contracting ending diagonal that I posted at this LINK as an alternate. See the red count. 

But what if the situation does not rectify itself? Is there a count that could explain both of these phenomena at this time? I submit there is. That count is below as the Extended Fifth Count (x5). Right now, this count is an alternate, but a viable one.

The reason this count is an alternate is that there is no conclusive evidence - such as an unquestioned overlap - that requires this count. 

Still, the Fibonacci ratios are intriguing: wave (3) is 1.272 x wave (1). Wave (4) is a very deep retrace on wave (3), and it does overlap wave (2) in this configuration, but not wave (1). And then the magic happens in this last wave up from Sep/Oct 2022. The wave x5 is 1.618 x wave (3), a very common relationship when the fifth wave is the extended wave. Note, too, there is good alternation between the second and the fourth waves, both in shape and in time.

If this is an extended fifth wave, as the top of a major sentiment peak, it could well represent the end of the Cycle, and the end of the SuperCycle. And such a wave can be retraced 62%, or fully, or more! However, the way wave patterns are best developed is by using the hard evidence that compels the pattern. There are still ways the downward waves could fail to form overlaps with consequence. And if they do not, we will use that evidence.

Note one other item, the above count preserves the move from March 2020 to Jan 2022 as a three-wave sequence, as we have in either the contracting or expanding diagonal count. All it does is raise the degree one level of the first wave sequence (1), up. I have not seen this count anywhere else. As far as I can tell, it is original with the author.

Have an excellent rest of the day,

TraderJoe

Gap Filler

Today's down wave in the ES March contract filled a number of gaps in the SPY cash index and the ES roll-over contract. The roll-over contract is shown in the chart below, unadjusted. The lengths of the waves remained valid for the count below, even with the roll-over considered. If there was a 'true' ending diagonal at the all-time-high (which does have fairly significant odds), then the entire diagonal from the wave iv location should be retraced in less time than the diagonal took to build.

Today's down wave was too long to consider it 'by the rules' to still be inside of the contracting diagonal. So, it may be a first wave down, ① or i. For the moment the degrees are being left relative and there will be more to say about the degree labels on the weekend.

Retraces of this wave can occur at any time. The next targets lower include wave ② and wave iv. We need to see if the market has the downward strength to delineate a trend change. This is a process called "post-pattern confirmation". The first step of that occurred today in that the wave ② to ④ trend line was exceeded lower in 'less time' than wave ⑤ took to build. The next step requires a solid close under the wave ii to iv trend line which we touched today.

Have an excellent rest of the evening,

TraderJoe

Yukkie, awful, stinkeroo!

This is what is in front of our eyes when one considers the ES rollover contract as an extension of the current December contract.

This is not the same as cash, but one has to wonder if there isn't a way (such as the triangle under consideration) by which the counts will synch up. 

In the roll-over contract, by passing through the 6,136.25 level, this wave up is now 'longer' in futures than the wave up from 2020 to 2021. This wavelength is also sufficient to activate the expanding diagonal count shown in the second chart in this November post. Again, IN FUTURES. Cash needs to be verified.

Elliott_Trader: Whether or Not ...

Have an excellent start to the day.

TraderJoe

Chart Only

ES Futures - Daily - EW Count

Have an excellent rest of the weekend,

TraderJoe

To Keep Us Guessing...

Today's down wave in the SPY cash 30-min chart, along with last night's stub of a down wave reached just over the 62.8% retrace level of yesterday's up wave as the Fibonacci ruler on the chart shows.

With this information and knowledge of the likely FOMC meeting next week these are the scenarios that one has to evaluate.

1. Down wave goes beyond wave a to make wave c of the larger ④th wave zigzag. 35%
2. A much larger in time b wave triangle forms waiting on the FOMC output. 35%
3. A new higher high immediately forms on fearless Friday. 15%
4. The down wave collapses to invalidate wave ④. 15%

I'd personally rate the probabilities of the first two options as slightly better than the last two options. Some suggested probabilities follow the bullet items. For the triangle, it would likely best form if the downward retrace stopped around the 78 - 85% level.

Between yesterday and today, there do look like five waves down in cash. So, that means five - or more - waves could easily follow lower. What complicates the analysis is the speed of these five waves is quite slow and did not themselves result in the new low below wave a. So, like a bad murder mystery, the market will have its way with our curiosity for the time being.

Have an excellent start to the evening,

TraderJoe

Overlap

The overlap needed to make the ES 8-hr chart below more intriguing as a contracting diagonal occurred today. We were finally able to count five-waves-down today with the new low and it appears to be just an a wave. 

On this time scale the MACD is still pointed lower after a divergence with the higher high. Today's wave stopped - at least temporarily - at the dotted iv-to-② trend line shown. This trend line should be adjusted within reason to become the ②-to-④ trend line, once the end of the wave ④ is known. Note that the invalidation of wave ④ in a contracting diagonal would occur below 5,913. Price is not close yet.

If a fourth wave forms successfully, then a fifth wave up must remain shorter than wave ③ in price length. While wave ③ was required to go over the high again, wave ⑤ is not required to, but is very likely to.

Have an excellent start to the evening,

TraderJoe

Three Waves Down (Could Extend)

Again, largely just for something more colorful and fun, the ES hourly chart below is presented in Ichimoku format. The price bars were skating along the combination of the Tenkan-sen (green line) and the Kijun-sen (blue line) until the cash opening this morning. At that time price broke down through a very thin cloud accompanied by a T-K cross (Tenkan-sen green crosses below Kijun-sen blue line).

ES Futures - Hourly - Ichimoku format

This price action also drove the brown lagging-line (the Chikou-span) below the candles which is a bearish indication. Further, after days of a green cloud, the price action has at least temporarily flipped the future cloud to red (though it is quite thin). Both the hourly MACD line and the signal line dropped below zero for now.

From an Elliott Wave perspective - if we hide the Ichimoku - it looks like there are only three waves down in a channel where the third wave is >2.0 x the first wave lower. The three waves down are either i,ii,iii or a,b,c to be counted equivalently until there is more information, like - for example - a fourth wave that does not overlap upward. See chart below.

ES Futures - Hourly - Three Waves in Channel

Time will tell, but the Ichimoku and MACD indications are weakly bearish at this time. So, we watch the channel and mind the high until there is more information.

Have a good start to the evening,

TraderJoe

No Clear Sign Yet

The count similar to the one below has already been shown for the daily ES futures roll-contract, and it has no conflicts or length violations. Today, I decided to look at the cash S&P500 to see if it fits the same bill. Bottom line: because of length differences, I think the cash index has to be counted as below because otherwise wave iii would become too short.

Given that the Neely 0 - ii trend line shows where the likely wave iv is, then there is no clear sign such as a triangle or diagonal that the count is definitely over. If a fifth wave, ⑤, does appear, then we'd have to see if wave ④ overlaps in diagonal fashion or not. Nothing requires it to. Yet, it could overlap and is even likely to overlap at this stage in the wave count. If it does overlap and forms a diagonal, then the target would be that wave iv would be exceeded lower in less time than the potential diagonal took to build.

So, the wave count currently remains on track in both cash & futures with this adjustment in cash, and we'll look to see what next week brings. Right now, the up wave from iv has a very three-wave look to it, and it suggests that a dip and then a new high remain possible. In any event, the same question as asked before remains: "is the large risk to the downside worth the likely minor upside gain?"

Have an excellent rest of the weekend.

TraderJoe

Whippy

The futures overnight started out lower. Then, by about 10 AM, they turned in a higher high. Then they turned around and made another one of those "two-tick" hourly bottoms which saw them turn around again to make a further higher high. Interestingly, this hourly higher high was a "two tick" top, instead of bottoming this time. Something really odd is going on there. And, you guessed it, they turned around lower again, to make a lower low. 

All-in-all the futures created the candle pattern known as a red "spinning top". This candle is a candle of indecision and is shown in the daily chart below.

Much like the green Doji day on 11 Nov, which also required a confirming candle lower, this indecision pattern too requires a confirming candle lower - or a new higher high to void it.

Tomorrow is the monthly Payroll Report at 08:30 AM ET, followed by the Consumer Sentiment Survey from the University of Michigan at 10:00 AM ET as they are currently scheduled. Unfortunately for me, tomorrow is a travel day, and I won't be able to follow markets except intermittently via the radio until I get home. Still, a lot of volatility might be created by the reports.

So, best wishes to each of you. The Elliott Wave count remains as it has been shown. Have an excellent evening, Friday, and start to the weekend.

TraderJoe

Things Remain on Track

The saying goes, "Bear markets die in a panic, bull markets die of boredom." Each day brings successive marginal highs with little-to-no reversal. This can generate a lot of complacency. The Elliott Wave count currently remains on track.

Some things to note on the above chart are:

1. The pattern includes a parallel channel, and the Neely 0 - ii trend line.
2. The pattern includes alternation between waves ii and iv
3. The oscillator goes below zero for waves ii and iv
4. The oscillator is currently diverging
5. The larger numbered waves are on opposite sides of the EMA-34 for form & balance

The market is taking its time. We'll have to see if capital-gains selling or tax-loss selling figures into the picture shortly, and then whether there is a year-end rally.

Have an excellent start to the evening.

TraderJoe

You Can't Count 'Zero' ..

In Elliott Wave analysis, one likes to think they can identify the starting and ending of wave terminals cleanly, so they can indicate the potential wave structure. But something has been increasingly happening in today's markets that makes that more & more difficult. A one-hour chart of the ES futures in Ichimoku format - just for some color and to show the overall hourly trend - is below.

Notice the number of times that a wave bottom has varied by zero, one or two ticks. This to me seems statistically highly unlikely at random and instead hints at some mechanism involved. What's operating might be as simple as "traders try to buy a double-bottom or sell a double-top". Maybe so.  Maybe not. It might be more nefarious, or it might be an artifact of machine trading.

This situation is not confined to the ES futures. It has been happening a lot in Crude Oil (CL) futures, too. And serious students might take some time to examine those instances as well.

Regardless, this situation creates a higher degree of uncertainty of the wave counts around the points indicated. Will price drop through the former low? Will it exceed an equal high? Who can say. But more importantly look at the sizes of either the second or third candle in the sequence for those noted. That upward candle is no slouch. Someone is playing this double-bottom game for real-zies. They appear to be using it as a trap & turn, so it seemed worthy of pointing it out.

From a wave counting perspective, of course, it makes it very difficult to say if the prior wave is truncated (as in a truncated 'c' wave), or whether the new equal or one/two tick higher low is actually the start of a new sequence.

In any event, the phenomenon is clearly leaving its tracks on the price charts, and it is likely significant turns will be noted by busting levels like that.

Have an excellent rest of the evening,

TraderJoe

Friday Did It ..

Friday finally allowed both the cash SPY and the ES futures to synch up with a new all-time higher high. This was the minimum requirement for suggesting a potential diagonal upward, as in the daily ES chart below.

This count can have some marginal extensions but doesn't need to. Regardless, with a near complete count - including alternation - the risks are getting quite high for further continuation to the upside. Meanwhile, the downside risks are increasingly dramatic.

Have an excellent rest of the weekend and start to the new week,

TraderJoe