Still Some Odds

Tonight, I wanted to briefly cover another alternative I thought of which says that the decline is not quite over, yet. Previously, I have showed you ways I think the market could go higher (see post at this LINK). Here is one where I show you a way that the market could go lower. The is on the ES 8-hr chart and it is response to the question, "What if the market is in a smaller, not a larger, triangle?"

If I reconfigure the decline as five minute-degree waves, with an extended fifth wave shown as xⓥ, then that could be the Minor A wave, down. The smaller triangle could be a Minor B wave up. And this could be followed by a Minor C wave down to overlap the 2022 high - which hasn't happened yet.

So far, we have one zigzag up - shown as (a), (b), (c) to ⓐ of B. So, a lot more market churn could happen in the news if this scenario were to play out before the Minor C wave down got underway.

To be fair, the B wave could also be "any three", such as a double-zigzag so it could play out that the level of B is higher - more near the prior minute fourth wave - which is often a target for B waves.

And then, under this scenario the C wave could be either an impulse or a tough-on-the-nerves diagonal.

All, this is just an option at this time. IF we trade above ⓐ of the triangle, and significantly above the minute fourth wave, circle-iv, then the option simply becomes lower odds.

The problem at the moment is we are in no-one's land, and we still need to count locally until the larger structure becomes more clear.

Have an excellent rest of the evening and the weekend,

TraderJoe

Whip on Wednesday

Yesterday, we clearly warned that price was four consecutive days closing below the lower daily Bollinger Band. We even clearly titled the post, "Day Four". Today, in a whippy day, we probably closed inside the band (as this is written, there is about 20-minutes of futures trading yet). Here is the ES daily chart as of this time.

After the daily slow stochastic was over-sold, only, and not embedded, price made an outside reversal bar up. And there would not be much to speak about immediately to the downside unless the low of today's bar is taken out lower in the next two trading sessions.

A day like today is what was anticipated IF the longer-range triangle scenario, posted on March 29th were to come to pass (see LINK here).

So, it is pretty clear we have only three-waves down off the high. The speed of the move and depth of the move indicates it could still be the Minor A wave - but of a triangle OR, it is just three-waves down of a downward diagonal.

So let me be clear about these two scenarios:

1. The only way down from here is by diagonal.
2. The ways UP could be by impulse, diagonal or triangle.

So, it's a mess-and-a-half but as an Elliott analyst one has to keep the larger potential patterns in mind while one is counting locally.

The problem at present is that the market is almost wholly captive to the news. That often results in triangle patterns and decreased trading volumes. But being captive to the news is exactly the way the Smart Money wants it. That is because they own the news-reading algorithms that can take instantaneous advantage of the news. How easy is to write a computer program that says, essentially, if you see the words "Tariff postponed", "Tariff delayed", "China Tariff reduced", etc. in a news story, then BUY.

And because the Smart Money is involved, it would not surprise me at all if the news stories were being coordinated so that the appropriate people who are responsible for making these stories get their commensurate kickbacks. This is America, after all, home to some of the greatest corruption on the planet. And in every situation where large sums are involved, there almost inevitably follow the news stories of who was on the take. We shall see if history rhymes again.

Have an excellent start to the evening,

TraderJoe

Day Four

On the ES daily chart, today is the fourth consecutive close below the lower daily Bollinger Band, as shown. This drops the odds to about 2 - 4% of another close below the band. This does not mean that another close below the band is impossible. It just means the odds are dropping considerably.

The regular calculation of the daily slow stochastic is not embedded. It is over-sold. But both the %K and the %D lines are below the 20 level for the second day. So, the third day needs to be watched to see if the embedded status is obtained.

Intraday we made a new high over yesterday in a false breakout. Then we spent about 6 hours in a down trend that we can count as five-waves. So, we may need to spend several hours retracing that move if it is over.

From April 6th, because we can overall count an a,b,c up, we also need to monitor to see that this whippy behavior is not some form of triangle. For example, today it is curious that the down move was a 78.6% retrace on the up move.  By itself, that may be of little significance and a Flat could form in the upward direction as part of a second wave ii of wave (v), or simple lower lows could form. But because this is overall a fourth wave, it needs to be monitored for triangle formations as well, and to observe if they invalidate or not. It may be way too early in the wave structure for triangles, so just observe to find the best count that follows the rules.

Have an excellent start to the evening,

TraderJoe

Another Bump

When we left off counting on Friday, we were looking for a fourth wave. The ES 8-hr chart below seems to indicate one was made. This chart presently has about 90 candles on it, so it can develop more in time.

ES Futures - 8 Hr - Minuette (iv) ?

Price is still in the parallel. The chart suggests that a further wave minuette (v) of the minute third wave should be made, followed by a larger fourth wave, minute four (circle-iv). Then, for an impulse there should be a minute fifth wave down (circle-v).

The EWO is still on a low, so we'll begin to look for divergences soon.

Have a good start to the evening,

TraderJoe

Brutal Counting

Today we counted down a likely third wave with two, not one, expanding diagonals at different degrees of trend. The wave counting is brutal. The intraday trading subsequently difficult. There can be no question that our diagonal target was met. And it raises the point that this monthly count may still be on the table for the S&P and the NDX. The ES futures are shown here to be representative.

We have shown the skeletons of this count many times. It is the diagonal count to a Primary ⑤th wave that would end Cycle V. Now, finally, on the downside, there is something to work with. Wave (3) is just barely longer than wave (1) in price, and it is clearly longer in time.

We made a notation on the chart regarding possible potential alternation in wave (4). Interested readers should view it. Please keep in mind that I have sketched out an idealized wave (4). Like all fourth waves they can get much crazier than this. Sometimes in a diagonal, wave A comes very down near the trend line before the bounce. Sometimes there is a triangle in the middle of the fourth wave to slow things down and cause traders to lose money fast. Sometimes the Minor B wave bounce is 90% or very nearly there to confuse people with a flat.

But first things first. Overlap on 4,808.25 would first be expected. Then, after overlap, wave (4) must hold above wave (2) to avoid invalidation. Often the fourth wave takes more time than the second wave. So, that's the way we've shown it. And it often retraces 62 - 82% of wave (3) in price. So, the Fibonacci ruler is shown as a guide.

Careful readers might note that the Minor A wave of Intermediate (3) is shown as an expanding diagonal itself. This is what is known as a fractal of the larger pattern if it should play out as shown. It is the only way I can count the wave to observe degree labeling requirements.

Keep in mind this is a monthly bar chart. So, this pattern can take a very long time to come to fruition. To novice technicians it might look like it is forming a large head & shoulders pattern which then fails to play out. 

And if it does invalidate? Place a Primary ⑤ and Cycle V at the high of 2022, a Primary Ⓐ at the bottom of October 2022, and a Primary Ⓑ at the high in 2025, and Primary Ⓒ and cycle a at the low near 2,000 (price) to match the low of Primary ④. We just think the market should have the option of ending a very long wave with a diagonal, and the above count is it, for now.

Have an excellent start to the weekend.

TraderJoe

Lower High, Lower Low

The swing-line indicator now has a lower high and a lower low underneath the 18-day SMA on the daily chart of ES futures shown below.

ES Futures - Daily - Lower High, Lower Low

Daily price is now down past the lower daily Bollinger Band, with a close below it, dropping the odds to 6 - 7% of a further lower close below the band (not impossible, just lower odds). But the daily slow stochastic is not yet even in over-sold territory. So, the trend is down until it isn't.

Further, I have sketched in the wave ii to wave iv trend line with a parallel copy placed on wave iii. This is Elliott's second parallel technique and is often the first target for a fifth wave, v. The next targets, if the first is exceeded, would be 0.618 x net [ i - iii ], or v = iii. So, there could be more downside. Just be cognizant the Payroll Employment report is coming up tomorrow, and it could wreak havoc with volatility.

We will note that 'many' chartists will not be very persuaded there is an uptrend coming until or unless there is an outside bar up, tomorrow, with the close respectably in the upper third of the candle. Then, the low of that bar would have to hold for two days, and price would have to make a close over the 18-day SMA again.

So, be careful. One initial target is dead ahead. Have an excellent start to the evening,

TraderJoe

Rules Not Broken

Nothing about this count breaks the 'rules' of Elliott Wave. The overnight wave is the very definition of impulsivity.

Wave iv may be a failed 'double-combination' wave. It is 13 bars long compared to wave iii's 8 bars. So, it is longer in time, as Neely likes to see. Also wave iv breaks the Neely 0 - ii trend line.

Price is down at the lower daily Bollinger Band. Can it go lower? It can. We'll be on the watch.

Have a good start to the evening,

TraderJoe

Lower Low - Swing Around Day - Higher Close

Today in the daily ES futures made a lower low, primarily overnight, touching the lower daily Bollinger Band, then turned around to close higher. The lower low below the 18-day SMA continued the swing-line extension lower, but, according to Ira's method, it is not in a trend as it has a previous higher high, and then the lower low. It is in what he terms a 'vertical price break'.

And while the front-month or June futures contract - and the SPY cash - made the lower lows compared to the March 13 low, the roll-over futures contract did not. This raises the suspicion that on the short term, a triangle or a Flat wave is being made. That being the case, it is possible for price to revisit the 200-day SMA, although that is not required. Price could just break down and make a further lower low which might then be a fifth wave of the decline.

Interestingly, on an up-close day, the daily slow stochastic lost its over-bought status and is now neutral. There were a couple of ways you could sniff out the possible up day: 1) the weekend stock-market videos were almost solidly bearish - a potential contrarian indicator, and 2) today is the last day of the month and usually sees the typical sloppiness of the window-dressing from portfolio managers with tomorrow as the first day of the new trading month which might see inflows from the usual sources (401k's, retirement accounts, dividend reinvestment plans, etc.). Very often, the futures front-run those inflows, and that may well be what occurred in the latter part of the day.

Of course, over the next couple of days, additional tariff news will be announced, as will the results of the President's third-term election results (..just kidding, I think).

Have a good start to the evening,

TraderJoe

Could the Market Triangle? - A Long-Term Alternate

In prior posts (see LINK here) we have laid out the case for a potential expanding diagonal top, still in formation, or for a Primary Ⓑ wave top at the recent high. Those counts remain active, as we do our best to count locally. But the Principle of Equivalence can be a little more insidious in some situations, and this often requires that we pay close attention while suspending our judgement for just a bit. One thing is not this uncertain. In terms of absolute points (not necessarily percentage in some situations), this down wave is currently longer than all the prior ones since October of 2022. So, it does appear that we may well have had a true turn-of-degree by the definitions involved.

Still, when we back out and look at the two-weekly ES chart in close-only format, we see that we are still in a parallel since March 2020, as below.

ES Futures - 2 Weekly - Close Only

So, because we haven't overlapped anything downward yet, and because the wave (2), down, is a simple zigzag, The Fourth Wave Conundrum - that occurs of every degree of trend, and The Principle of Alternation say that we could get a very sideways triangle or flat - which does not overlap - to make a fourth wave, (4). Note that with 131 candles on this chart, the EWO, while declining, has not come back down to near the zero line, yet.

It is possible a fourth wave triangle could coincide with a FED rate-cutting cycle during a recession if one should occur. This may have the effect of getting the animal-spirits flowing again and keeping the market afloat.

Caution: there is virtually nothing that is guaranteed about this scenario. The expanding diagonal could still happen. And, if the triangle does happen, as above, there can still be a lot of down-side movement yet even from here. We are not yet down to 38 - 50% of wave (3).

We include this scenario for completeness, and because the up waves (1) & (3) are just messy enough in their counting to possibly allow it. Further, we have not seen a clear, massive, agreed-upon triangle on the weekly chart, though the daily triangle possibility at this high has been noted by several analysts, me included. So, this is just a scenario to keep in the back of your mind, even though the expanding diagonal and the Primary Ⓑ wave may agree more with the extreme market over-valuation and extreme, extreme long-term bullishness.

Have an excellent rest of the weekend.

TraderJoe

Lower Low, Lower Close (LLLC)

Today's lower open in the ES daily futures, combined with the lower close, allows the swing-line indicator to be continued lower today, as shown in the chart below.

ES Futures - Daily - LLLC

Despite the seemingly small size of bar, it was quite a whippy day and continued the trend of complex and confusing price action. In a way, the bar does represent the "battle at the 18-day SMA" with prices on both sides of it and a close near it. A possible tell is that prices closed in the lower half of the bar by the cash close (futures are still trading as this is being written). Further, the upper daily Bollinger Band is now under the 200-day SMA and should provide resistance to upward price movement. The daily slow stochastic at the cash close was still in over-bought territory.

That said, a break of either the last down (red) fractal or the prior up (green) fractal would help provide additional clarity. A break of price under that down (red) fractal - which is also below the 18-day SMA might set a sell signal for the algo's that use the band as a reference. This is not trading or investment advice - just describing what some algo programs might do.

From an EW perspective on the intraday chart, we counted three waves down, three waves up, and a close below the prior 'b' wave (see LINK here).

Have an excellent start to the evening,

TraderJoe

Back to 18-Day

On the ES daily chart, below, prices ran away from the over-bought condition we pointed out yesterday and they declined back to the safety of the 18-day SMA - as of the cash close - to decide what to do next. 

ES Futures - Daily - Back to 18-day SMA

This has the effect of temporarily at least turning the swing-line indicator lower. But the chart is dead neutral as price is at the 18-day SMA, although the daily slow stochastic is still in the over-bought zone. From an Elliott Wave perspective, the price action had the effect of overlapping the 'a' wave in the ES 4-hr channel, as below.

ES Futures - 4 Hr - Channel

So, now one must see whether the correction wishes to extend or not. In other words, is this just a 'x' wave down, or a 'i' wave down? It is again The Principle of Equivalence until the waves are long enough to enable a clearer count. However, if the channel broke lower, was back-tested and failed the back-test lower, then one would have more information to suggest that maybe the uptrend was over at the 50% retrace level. That is because 'usually' double-zigzags form a near-perfect channel, first, or a wedge, second. One negative sign is that price did not attack the upper channel line today. So keep that one in mind.

Have an excellent start to your evening,

TraderJoe

Continuation

On the ES daily futures, the early higher high allowed the swing-line to be continued up to today's bar as shown in the daily chart below.

And while this is in accord with the daily bias being higher, the daily slow stochastic tonight is entering over-bought territory. So, according to the methodology this should dissuade large amounts of new money from being committed here. Further, the upper daily Bollinger Band - after dropping down through the 100-day SMA (green crosses), risks crossing down under the 200-day SMA (the brown curve). So, in one way volatility is being sucked out of the market. 

For our part, we have noted lots of overlapping waves - some of them diagonals - and it may be emblematic of the reduction in volatility. Upward price travel is still in an upwardly sloping parallel which may indicate corrective waves. But even though price is having a rough time at the upper edge of the parallel, we have not yet concluded that upward price movement is over, or that the correction won't extend in another way. We watch for signs intraday - such as a triangle or larger diagonal.

One gap was filled to the upside today. Maybe another will fill. Maybe not. After the higher high, the news regarding the Conference Board Consumer Confidence (92.9% down from 100.1) came out and took some edge off of the upward progress. If people lose confidence and reduce spending, it will probably mean some tough going for the market unless government spending (Golden Dome, etc.) and other stimuli make up for it. So far, only marginal stimulus has been announced via the FED's reduction of the amount of QT noted in Chair Powell's press conference. And, yes, the tariff wild card still remains.

Have an excellent start to the evening,

TraderJoe

Daily Swing-Line & Bias Flip

Over the weekend, regardless of what you heard about tariffs, the President made demands to spend billions on a Golden Dome (see this LINK), and when the markets heard the words, "Billions more in government spending - and possibly space based" they went bonkers, gapped up, and kept on going into the close. From the chart, below, you can see price is closing over the 18-day SMA, and the daily swing-line has flipped to positive.

This suggests the odds of the continued down move have flipped temporarily in favor of the up move with the overhead resistance possibly shown by the brown 200-day SMA, the upper Bollinger Band and the 100-day SMA (the green crosses).

So, even though we were expecting upward movement since the Mar 13th low, it may have gotten out of the range of a fourth wave. It's unfortunate, but it places the wave-counter in the position of having to wait for a new lower low, or even a newer all-time higher high, before deciding on the best wave labels. 

Literally, and I mean this sincerely, one could try placing an ⓐ or a ⓘ at that low. And that is all well and good. But it is still of minimal help. In other words, supposing one is thinking a diagonal down is forming. OK. But will it be a contracting diagonal or an expanding diagonal? And is this upward retracement even over? Try to keep in mind, the algo's just got a typical buy-signal based on the Bollinger Band methodology.

Rather this is one of those times when one simply needs more waves, or more overlaps to try to gauge what is going on. Yes, the current up wave is in a channel. If it should break lower tomorrow, more power to it. But, if it doesn't?

So rather than propose multiple wave labels at this time, it is probably best to stand back for a bit and just observe whether the power continues to the upside or a break lower immediately occurs. There are other markets that seem to be counting a bit better at the moment (like Gold), and so maybe that is where some attention should go.

Have an excellent start to the evening,

TraderJoe

Neely Style Chart

I have written before how the zigzag indicator, properly configured, can be used to emulate a Neely-style wave chart which can offer some clarifying information on the current wave situation. The ES 4-hr chart is shown below, again using this technique.

With 132 bars on the chart, the current count looks pretty straight-forward. First, there is no overlap of wave (iv) with wave (i) to be a cause for concern. Second, the Elliott Wave Oscillator (EWO or AO) is still within the range of a fourth wave, and the wave (iv) price, itself is still within the 38 - 50% retrace of wave (iii) that would be expected of a fourth wave. This is shown by the Fibonacci ruler on the middle-right. Third, there is alternation between the forms of wave (ii) and wave (iv) at present. This would still be the case if wave four decides to triangle - which is does not need to do. It is optional. Fourth, the third wave down, (iii), is greater than a 1.618 extension of wave (i) so we are supposed to err on the side of a third wave rather than a (c) wave. And fifth, the third wave, (iii), is in a channel with an impulse count visible. 

All of this is only to say that the probability of a downside continued move is slightly greater than that of the alternate three-wave-count shown in red below the price bars. But I'd still only rate the probabilities as about 65-35%, but 35% odds events are not prevented from occurring in any manner.

The beauty of the zigzag chart is that it connects the actual price vertices when used properly to show the real wave terminal points, but it still eliminates a lot of the noise while confirming some or most of the interior wave structures. Further, the actual price bars can be hidden as above to allow the study of the movement without other distractions.

As a completely sidenote one can also observe that some of the sentiment indicators are dead neutral. These include the advance/decline statistics, the McClellan Oscillator, overall bull-bear ratios (not just the AAII sentiment) etc. So, the chart provides what it does, and the alternate structure is clearly indicated.

Have an excellent rest of the evening and the weekend,

TraderJoe

Lower Low, Higher Close (LLHC)

The ES daily futures made a lower low day, along with a lower high, but swung around at near the end of the session to make a higher close. The daily chart is below. P.S. I'm not sure how this chart will look when Monday reflects the settlement, as the settlement might show a lower close as of 4 PM ET.

In any event, the lower low and lower high were enough to extend the swing-line indicator to today's bar. Price still closed below the 18-day SMA, so the bias remains down, and the 18-day SMA is still declining. The daily slow stochastic has recovered from an over-sold condition with both the %K & %D lines closing over the 30 level.

Again, note the upper Bollinger Band has dropped to join the 100-day SMA (green crosses), and this might provide resistance levels for the next rise.

The wave count is very overlapping since the low of 13 Mar, and it might suggest either a triangle or a diagonal in form. More waves are needed, either as additional lower low days to continue the down trend, or higher high days to make a turn upward.

Have an excellent start to the evening and the weekend,

TraderJoe

Lower High, Higher Low (LHHL)

The ES daily futures so far have had a lower high day, and a higher low day (the futures are still trading after the cash close). This has the effect of again changing the direction of the swing-line indicator lower, when it was previously higher as in the ES daily chart below. The local swing-line is shown on the chart below as the blue line between the bars.

Currently, all of these gyrations are taking place below a declining 18-day SMA. Yesterday's temporary up trend indication in the swing-line indicator is negated by the filter of taking place below the 18-day SMA. Still an overall lower low than 5,559.75 is likely needed to claim a clean five-waves-down.

We have counted the up wave since that low as w-x-y with a possible Ⓒ-of-y failure today that resulted in the lower high. If that is the case, it could indicate the weakness that might suggest that the minuet (v) wave of the minute ⓘ wave is getting underway.

Regular readers of this blog should also note that the upper daily Bollinger Band and the 100-day SMA (green crosses) might join together soon. If they do, it might provide the upward resistance to an upward wave when it gets underway and closes above the 18-day SMA.

Have an excellent start to the evening,

TraderJoe

Marginal New High

ES futures made a marginal new high today on the FOMC report out and press conference. The ES 4-hr chart is below.

Price is still in the vicinity of the 38.2% retrace. It might again pop higher tomorrow, but if it starts to get over 50% around 5,808 - 5,810, then it would put the fourth wave in more jeopardy, and we would then be left with only (a), (b), (c) down as per the Monday 17 March post shown earlier. The EWO is still within range of a fourth wave, also.

Have a good start to the evening,

TraderJoe

Cash in a Coma

If you look at the recent move up in the SPY cash index - because of the missing overnight waves - it is very difficult to count. Yet, the ES hourly chart (front month only) counts like a simple zigzag, formerly in a parallel, with downward overlap on the A wave already.

Yes, either a zigzag (iv) or a triangle (iv) will alternate well with the flat (ii) on the ES 4-hr chart, shown previously.

Still tomorrow is FED Day, and we will wait while they hold us hostage to their dots and their pronouncements. 

Have an excellent start to the evening,

TraderJoe

Rubber Meets the Road

My understanding of Elliott's second parallel technique is that once a fourth wave location in an impulse is identified, then a line is drawn from wave two to wave four and a parallel is placed on the end of wave three, as below in the ES 4-hr chart.

So far, the ES is back to the 38% retrace level or thereabouts. The EWO has turned green with about 108 candles on the chart, and it is still in the range of -40% of the maximum negative reading (i.e. two negatives make a positive reading).  And there is alternation with wave (ii)/(b) at this point. At minimum a lower low is needed for an impulse wave. And, often, a fifth wave, should it occur can equal wave (i) in price, with a secondary target of (v) = 0.618 x [net ( (i) through (iii) )].

Please keep in mind, if the Smart Money wants, this is the most likely location that they will try to bust the wave sequence from.

Have an excellent start to the evening,

TraderJoe

Degrees in the Dow

The Dow's weekly count has been somewhat vexing - to the point where many people are ignoring it and only counting the S&P500 and the NDX. From a degree labeling perspective, we have offered many of these observations before. The count is actually reasonably simple, but it has some twists and turns of interest as per the weekly Dow (YM) futures chart, below.

Dow (YM) Futures - Weekly Close - Intermediate (B)

We have noted before that if the three-waves down is Intermediate (2) or Intermediate (A), then the next Minor retracement wave must - by degree definitions - be smaller than it. We can find no way to do this in the Dow except to call the initial move off the bottom as a single-zigzag W wave composed of ⓐ, ⓑ, ⓒ. That makes the Minor X wave as smaller in price & time than the Intermediate (A) wave.

Similarly, within Minor wave Y, the measure of the ⓒ wave is smaller than the prior Minor W wave. Also, depending on exactly where the minute ⓐ wave of Y ended, it, too, can be counted as smaller than the prior Minor W wave, and it can still have the subsequent ⓑ wave overlap it. So, what we have shown is just a placeholder for the minute ⓐ wave just for charting clarity, but it could have ended at any of the prior humps that have the ⓑ wave overlapping, making it smaller than Minor W.

Further, there is alternation in this count in the form of a contracting diagonal ⓒ wave of Minor W, and an expanding diagonal ⓒ wave of Minor Y. Also, parts of the Minor W wave are extensively long in time and overlapping while much of the Y wave is expansive in price, even though as yet some is overlapping.

It is the decided difficulty of this count that makes us think that it is likely the Intermediate (B) wave count. Included in these difficulties are all of the many, many overlaps in both sections of the waves. Further the (B) wave count is one that - at this time - allows the SPX and NDX to make longer waves up than the prior up wave to 2021/2, and the Dow only make a shorter wave.

Have an excellent rest of the weekend.

TraderJoe

Higher High Day

Prices on the ES daily chart made a higher high day today. This has the effect of temporarily turning the Swing Line indicator up. However, neither is there a trend established by such, nor is there a close over the 18-day SMA as in the chart below.

ES Futures - Daily - Higher High Bar

But also notice that today there is an 18-day cross 200-day to the downside as of the cash close (futures are still trading as of this writing). And further note, the regular calculation of the Daily Slow Stochastic indicator remains embedded.

So, the bias remains down until we see a capitulation and / or a reversal bar with subsequent follow through higher. We showed the local count on the hourly SPY cash index in the comments for the previous post at this LINK.

Have an excellent start to the evening and the weekend,

TraderJoe

Three Items to Note

Below is the weekly chart of the S&P500 cash Index along with the wave count since the low.  The first item to note is that price is approaching the lower channel boundary as drawn best fitting the wave terminals available.

The second item to note is that the current down wave is longer-in-price than the prior ⓒ wave of the Minor B wave down. This may mean that a turn of degree is at hand.

The third item to note is the alternation between the expansive Minor A wave (which is an Expanding Diagonal), and the compression of the Minor C wave impulse. The represents good alternation in a corrective wave.

Locally, the count is a little muddy as we got a triangle yesterday - as suggested - which can be seen either as a fourth wave down, with the fifth to follow, or just the fourth wave of a third wave; with a fourth and fifth to follow. I have no particular preference at this point. Price is still below the 18-day SMA and the daily slow stochastic is still embedded. As Ira would say, "there is currently nothing bullish on the chart".

Have an excellent start to the evening,

TraderJoe

CPI Sputters

The benign CPI report spiked the ES futures in the pre-market, yet - by the time of the cash open - the SPX had made a new high, but the SPY did not. As for the futures, they did make a new daily higher high bar as below but look to be closing in the lower half/third.

ES Futures - Daily - Close Inside the Band & Embedded

Note that after two consecutive closes below the lower band (odds about 4 - 6%), price travelled to the inside of the lower band and stayed there for the day. This close will likely reset the number of consecutive closes lower (this is being written with cash closed but the futures still trading).

Because of some of the discrepancies we noted, we started a possible contracting triangle count and are looking to see if we get a proper fourth and fifth wave down in one of two different ways that were outlined in the comments for the prior post. The second of the two counts doesn't follow a wave formation guideline really well, and also has a potential degree violation in it. So, we prefer the version that starts with the contracting diagonal, but they both have wound up in the same place. Let's see how it goes over the next couple of days.

Have an excellent start to the evening,

TraderJoe

Short Pluto Video

The title means the video is 'short' in length - about 3 mins - and related to Pluto somehow; not to try to short Pluto stock or something 🥵. But since EWI issued it for free on YouTube, I thought I'd share it with all just to be sure you were aware of the information. There is a caveat below the video.

The caveat is that EWI has been showing this chart for many, many years without the sought-after turn. Still, it's hard to fudge the numbers involved, and likely there is some real truth in there. So, enjoy the video and keep an eye on things.

TJ

Patience, Patience - 2

In the prior post I referred to further analysis this weekend. That work is below and what is shown are the three-touch trends lines on the NDX with all the available historical data. The crux of this count is that we know the SPX made its low in March 2009, but the NDX never made the lower low.  So, perhaps that wave is a truncated zigzag in the NDX. That's just a zigzag where the C wave (Ⓒ in this case) never quite makes the lower low. But the truncation would be a harbinger of the strength of the significant up wave to follow. The six-monthly close-only log chart of the NDX shows this as follows.

So, the alternation in this case might be two-fold. First, there would be a truncated zigzag versus an expanded flat. Second, there might be the alternation of "long-Ⓐ, short Ⓒ to short-Ⓐ, long Ⓒ". Note that the current Ⓐ down looks a lot like the prior Ⓒ down on a log scale. That is not proof positive, but it certainly is curious.

A second attribute of this count is that it might explain three current anomalies in the recent up wave. First is the fact that 1) the current up wave is extraordinarily difficult to count, 2) the Dow has not made a longer wave up yet. It could, it just hasn't yet, and 3) the Dow does seem to be vibrating around the 1.618 exterior retrace on the down wave. (See chart as this LINK).

None of these criteria are necessarily fatal for the Dow. Enough market experience has shown the Dow can wander on its own for a while if it wants. But, taken together, and in view of the possible form of the NDX it must cause one to raise an eyebrow. Recognition of this for months prior is why I am sincere when I say, "there is no amount of downside that will surprise me". This is true even as we patiently count to see what the local direction is.

This is the second post this weekend, and if you have not seen the first one yet, you might like to read it now. 

Have an excellent rest of the weekend,

TraderJoe

Patience, Patience

Before further analysis this weekend, I wanted to post this chart of my own construction showing current three-touch trend lines on the three-monthly log-scale chart of the S&P500 cash index.

SPX Cash Index - Three Month Bars - Log Scale Trend Lines

And while I encourage you to review the monthly RSI below the chart, and its current divergences from price, it would be helpful to post a couple of cautionary notes. Let me lead out by saying that the wedge itself outlines a certain level of risk that one might want to pay attention to. The upper wedge line would have to have prices break up through it and cause the upper wedge line to go parallel to reduce the risk. This is plausible but certainly hasn't happened yet. And the lower wedge line could be in play.

But if the ES futures have made '5-down' and overlapped certain waves, cash has not overlapped the most important down wave yet - the Aug/Sep 2024 high. The roll-over ES futures contract has not yet, either. But the NASDAQ (NQ) futures have overlapped that same peak, and that must be paid attention to.

Further, the Dow Jones Industrial has not yet made a lower local low over their January 2025 low. And that is curious. It may be that there is rotation out of tech and into stocks perceived to be more stable. So, we said earlier that stocks might go over the high again with a reduced probability. That is still the case and may depend more on the index being tracked.

Clearly, the three-month wedge might indicate a fourth and fifth wave inside the wedge to complete the upward count. But it doesn't have to. We'll try to indicate why later in the weekend.

But for now, the task at hand is to understand if the downward diagonal is ending or leading as the SPX 2-hr chart below shows. We have provided some minute degree wave labels for the wave as ⓐ, ⓘ or ⓒ at the wave (v) low. These follow from The Principle of Equivalence as related to market probabilities.

SPX Cash Index - 2 Hr - Diagonal

The Principle of Equivalence tells us to mind our p's & q's unless & until a retrace occurs that does not go over the high. And the patience comes from the fact that it took fully three-weeks to make the down wave. It does not have to, but it could take three weeks or more to make a corrective wave upward. Any upward impulse might take less time.

This is the part of the wave principle some people do not like. But if one wants to see a first wave down, then one simply must accept the necessity of allowing the market to make a decent second wave up. I hope to have more insights in further posts before Monday.

Have an excellent rest of the weekend,

TraderJoe

Five Down

As of today, it is possible to count five-down as a contracting diagonal on the ES 4-hr chart, as below.

This is currently a 3-3-3-3-3 diagonal. It would have been nicer to see a 5-3-5-3-5 diagonal as it might have eliminated one possibility.

As it is The Principle of Equivalence tells us we must be patient and wait to see if there is a retrace wave that does not go over the high before being more committing to a down label. The wave is either ⓐ, ⓘ, or ⓒ. Because of overlaps on some charts, we have listed the ⓒ wave potential last with the lowest odds. I'd rate the odds roughly about 40:40:20 based on the overlaps. That does not mean going over the high again is impossible. It just means it has lower odds.

Yesterday, we said the 18 cross 100 SMA on the daily chart could lead to a lower low today. It did.

Today broke the November low on the ES roll-over contract, and price closed below the 200-MA on the daily front-month contract. Price is at the lower daily Bollinger Band and so Ira's "elbow" warning applies.

Have an excellent rest of the evening,

TraderJoe

Now 18 Cross 100

Today in the ES futures was an inside range day. A lower low was not made, but a 90% wave down was. So, this has the effect of turning the local swing-line up temporarily, but as long as price is under the 18-day SMA, a new upward trend is not in effect, even given we recognize some price gains we made today. The daily chart is below.

Other items on the chart include a close of price above the 200-day SMA, the brown rising curve, and the fact that the 18-day SMA now has a cross under the 100-day SMA. Often, not always, that cross leads to an additional lower low. We shall see. We have not had such a cross in more than a year. The cross has only occurred on the lead month futures contract, and not the roll-over contract, yet.

So, price is still in a down trend until it isn't, and the daily slow stochastic (regular calculation) flirts with embedding and losing that status. So, the wave structure is a mixed bag at the moment on the daily, and we are counting locally in the comments and have provided some ideas on the nearby wave count.

Much more than that can't be expected. Is it possible to return over the high? Yes, it is possible, but the odds are dropping rapidly every day we stay under the 18-day SMA. By the discipline, we shouldn't begin an upward count until / unless price closes back over the "line in the sand".

Have an excellent rest of the evening,

TraderJoe

Too Far ?

According to The Eight-Fold-Path Method for Counting an Impulse, with 120 - 160 candles on the chart the guideline for a fourth wave in the Elliott Wave Oscillator (EWO or AO) is +10% to -40%. The daily ES chart, below, has 145 candles on it - well within the desired range. The Method is the Featured post on this blog, and the link for it is located under the Purpose and Ground Rules on the upper right-hand corner of the main blog page.

ES Futures - Daily - EWO -69%

The EWO on this chart is currently at -69%. So, even though there is no downward overlap in the continuous futures contract - like there is in the lead month only - as best we can tell the upward count is over. We drew this chart earlier in the day, noted that it had the right look for an impulse and wanted to check the EWO at the end of the day after the expected rebound. The EWO remains out of range. The fifth wave truncation count was shown earlier in several posts and comments.

Any further lower lows would more strongly suggest that Intermediate (3), up, is over, and Intermediate (4), down, has begun.

Have an excellent rest of the evening.

TraderJoe

Two Options

Nothing in the ES daily chart has yet invalidated or been proved. Today price headed down to touch the 200-day SMA on the front-month futures contract. This is shown by the brown rising curve below price. In earlier posts, we said it could. It did. We don't know anyone else that outlined that possibility. As shown by the dashed lines, there are no lower lows, yet, leaving the two options shown.

The triangle doesn't look particularly good, but it counts acceptably. So, we must still be patient and see whether the truncation count applies or not.  These are very close calls, and one would have to have an excellent set of market metrics (usually not available to retail) to tell the difference as of the close today. Essentially, the question amounts to whether or not price will take a strong bounce of the 200-day SMA. It's a reasonable expectation that it would, but it is not required.

Have an excellent start to the evening,

TraderJoe

Window Dress, then Front Run

The ends and the beginnings of the months are getting somewhat predictable. We suggested there would be end of the month "book-squaring, or window-dressing", and then preparation for the "first-of-the-month" money. That's what happened. We also warned readers to beware below the lower daily Bollinger Band. Yes, price might try to touch the 200-day MA, but it did not have to. That warning, too, was prescient as prices whipped around to close back inside the band. So, for today, the chart below is still just an alternate, but because of the length-of-time of the pattern it is the preferred alternate. The chart is a 2-day chart of the ES (rollover-contract) futures.

Nothing has invalidated a barrier triangle's measurements, and this one looks better when this starting point is shown, along with the 0 - 2 trend line.

We note that today there was overlap with not only Minor wave 3, on the downside, but then also upward overlap on the internal down wave of the ⓓ wave. Lots and lots of overlap & sideways price movement ... if it looks like a duck and quacks like a duck ...

Have an excellent start to the evening,

TraderJoe

With All Due Respect

With all due respect to wave counting, which is a lot of fun and very useful, today the market as measured by the ES daily futures stalled in its up wave right at the 100-day SMA (green dotted line) and then fell off in another whippy wave as on the ES daily chart, below.

ES Futures - Daily - Reversal from 100-SMA

Further, we see prices closed outside of the lower daily Bollinger Band which only roughly happens about 5 - 7% of the time. Further, we see the 200-SMA, the brown line, is sneaking up from under the market. It would not be unusual if they touched, or more. Price has not hit the 200-day in more than 300 days - as we mentioned earlier. It is due.

Ira notes that often the retail gets most bearish when price cracks the lower band. And while that is true, the Smart Money often uses the lower band to come out of their short positions entirely, or at least partially, perhaps letting some profits run.

With about 5 - 7% odds, lower prices can happen. So can whipsaws. Which this will be remains to be seen. We do note that the daily slow stochastic is currently only in over-sold territory. It has not embedded. Embedding would be the best sign that that Gorilla-Glue trade to the downside might occur, where price latches on to the band and doesn't let go for days. But, as stated, embedding hasn't happened yet.

Perhaps price will just touch the 200-day, and bounce; it will be interesting to see if there is any reaction. Still, according to Ira's methods, there is nothing bullish on the chart until or unless price closes back above the 18-day SMA and the swing-line indicator turns up. Right now, the swing-line indicator has a lower high and lower low, so very little can make it outright bullish, either, at this point in time.

There are still multiple ways to count this beast. This weekend I will review some additional wave degree information. And while nothing to the downside will surprise me, one of the few ways I could see a true top at this point is with a truncation - as follows.

ES Futures - Daily - Alternate Truncation Count

For the truncation count, both of the Key Levels shown would be expected to be undercut is relatively short order. One issue to note is related to the Elliott Wave Oscillator, EWO, or AO. Note that after it turned down into the January 14th lows for what looked like a fourth wave, it subsequently rebounded to give the appearance of a short fifth wave, above the zero line, and has since turned back below the zero line. So, that is one sign - albeit not definitive - that waiting for a longer in time Minor 4th wave for too long may not be the most prudent.

We shall see. It is still The Fourth Wave Conundrum (that happens at every degree of trend) until it is not. Remember that tomorrow is the end of the trading week, and the end of the trading month. So, some book-squaring may occur tomorrow waiting to see if First-of-the-Month inflows from the previously identified sources are waiting to be invested.

Have an excellent rest of the evening,

TraderJoe

Critical Milestone

For the first time for this alternate, we can count a legitimate triangle in the ES daily futures that goes back to October 2024 high. We have been very, very patient waiting for the three-wave sequences and overlap that make this alternate even possible. Further the ⓔ wave dipped further below the 62% level today and broke the prior daily fractal lower.

As with the remainder of The Fourth Wave Conundrum counts, we have some probability associated with it, but it is a low number (in the 20 - 35% range) because of the number of possible patterns.

The benefit of this pattern is that it cuts off the 0 - 2 trend line in the right location, making everything to the right of Minor 3 part of the potential fourth wave.

Can the pattern devolve lower into a Flat? It can. It just hasn't yet. Still there is absolutely nothing to the downside that will surprise us. Can the minute ⓔ wave develop further sideways into a triangle, itself? It can. That is because so far it only looks like simple zigzags make up the legs of the potential triangle.

Maybe the pattern is waiting for some significant economic news. We shall see.

One word of caution regarding a Flat wave, is, as we showed, the New York Composite Index already has overlap on its first wave up. The triangle might help to rectify that if it comes to pass.

We're following it closely. We can't rush it. We think this is a really excellent lesson in fourth waves and why I coined the term The Fourth Wave Conundrum. It is interesting. It is trying. It is fatiguing, and it is instructive.

Have an excellent start to the evening,

TraderJoe

Either in a Parallel

Either count in a parallel might result in five-waves-down on the SPY 15-min chart. It is often typical for the fourth wave to be longer in time than the second wave.

Readers of this blog know we were well-prepared for the downturn at the end of the day, even calling for a potential b wave downward if there was downward overlap, which there was. There could be more downward. Nothing in the downward direction will surprise us.

Have an excellent start to the evening,

TraderJoe

Running Away from the News

The economic reports before and during the stock market open were almost uniformly negative, indicating declining economic activity - which inversely should argue for lower interest rates in the future and higher stock prices. Except that the University of Michigan Consumer Inflation Expectations came out at 3.5% vs 3.3% and may dissuade the FED from lowering rates. The stock market, as measured by the ES daily futures, ran away from the upper band yesterday, traded below the 18-day SMA and closed darn near the lower band. This temporarily both changed the daily bias to lower, and temporarily - at least - caused the daily slow stochastic to lose its embedded status.

Further, the drop was low enough, being 62% of the prior wave, that for the first time we can count a triangle on the daily chart, as follows.

Is this count correct? It is still difficult to say. For the first time, the trend line up from the January low was exceeded lower. Triangles often do this. Further, the MACD is as flat as a pancake and this, too, often happens during triangles.

But the item of concern is that the ES lead month contract (ESH2025) has simply not made a higher high since December like the cash market has. So, the formation might be a barrier triangle. And we're OK with it if it is.

But we ALSO can see the possibility of any of the following: 1) a larger triangle with the b wave where it is shown in red, 2) a lower ⓔ wave or 3) an even larger fourth wave flat for Minor 4 because the up wave is at least 90% of the down wave.

So, we must bide our time and count locally until we get a breakout or further breakdown. Yes, it is somewhat exhausting trying to count and wondering which pattern is playing out.

But, what else should one expect if we are getting a longer sideways pattern for a fourth wave? So, we look forward to what Monday brings to see if further information can be gleaned. IF there is an immediate, swift reversal of consequence it may reinforce the case for a triangle. But that remains to be seen.

Have an excellent start to the evening,

TraderJoe

ES Embedded

The lead month contract of the daily ES futures came within 1 tick of hitting its upper daily Bollinger Band, yesterday, and today it sold off a bit, but not to below the 18-day SMA.

Of note, the regular calculation of the daily slow stochastic embedded today. This suggests that under certain conditions the Smart Money will buy breaks (like today), and 'try' to reach a target of the upper band. They might continue to do this until / unless price closes back under the 18-day SMA or the daily slow stochastic turns back down under the 79 level from where it is now - this would lose the embedded status.

Today's small down break overlapped some waves but not others, so there are still multiple ways to count. (Yes, you can see triangles, and/or contracting diagonals as you might like). But the down wave did not break a trend line from the January low, yet. And neither has price closed below the 18-day SMA. So, the bias remains up until it isn't any longer. Still, to paraphrase Ira, he wouldn't even tell his worst enemy to buy new over a daily Bollinger Band - because the odds of price closing outside of the band is only about 5% of the time. He might advise either a) to come out entirely depending on the risk, or b) to take some partial profits and let some run, knowing the risks are high. 

Have an excellent start to the evening,

TraderJoe