The Bias

Two days ago, in the post at this LINK we proposed a way via an Elliott wave count that prices could decline on the FOMC report out and then recover to a great extent. Today they did that. The ES daily futures chart for December lead month contract is below. The FOMC did, by the way, cut the FED Funds rate by 1/4%.

ES Futures - Daily - Hanging Man

The importance of the chart remains that price could not get down to or close below the 18-day MA so the daily bias remains up. The daily slow stochastic is still embedded, so, on substantial breaks, like today, it is expected the Smart Money would deploy some new money, and they appear to have done that by the size of the tail they left. Yes, this is a hanging-man candle, but like all single-candle patterns, then confirmation candles are required.

It is not until the red line of the slow stochastic closes under 79 that price might be expected to start down to that "line in the sand" in earnest.

While it's nice to have an FOMC meeting out of the way, the next item is the reaction to the rates cuts as the sun travels around the globe and the reaction to it in other countries is seen.

So, it is possible that higher highs are made. It is also getting increasingly risky to rely on just the assumption that such will continue. Not only is the wave structure almost fully mature, but the distance between price and the longer 200-day moving average is also getting quite extended.

Have an excellent start to the evening,

TraderJoe

The Brakes

Another Elliott Wave issue I've noted is what is likely incorrect counting off of a top. The tendency is to rush to try to find 'five-waves-down'. The market is currently going to have none of that (until perhaps later in the cycle), and so the market, or the Smart Money, does one of two tricks. They both involve putting on the brakes to avoid a steep decline. To view a recent example from the standpoint of degree labeling see the chart below. This compares the ES futures to the SPY cash index.

ES Futures vs SPY Cash Index - Intraday - Diagonals

So, your eye should first go to the bottom chart. Note it has already made a 62% retrace of the whole wave. That is far too much for any fourth wave. Note also that wave ② is the largest retracement in the decline. So, this likely means that the blue a,b,c are likely sub-waves of wave ①. Then, there appear to be too many overlaps to consider anything other than a diagonal. This is one form of "putting on the brakes".

From what I can tell, there are two reasons for this. The first, and lesser important, is that the whippy behavior makes it nearly impossible for retail to get a decent trade out of it - without considerable skill. The second and more important is that the Smart Money is not going to change from overall buy-mode to sell-mode without considerable evidence the trend has changed - something like trading below the 18-day SMA. So, the Smart Money fights it all the way down from the high, and that is what makes the whippy behavior in the first place.

Now go back up to the first chart. I rightly gave kudos today to someone today in the blog for utilizing the Kennedy Channeling Technique. Bravo! Glad to see it. I use it too. But, what Mr. Kennedy fails to explain to you is what I have termed The Principle of Equivalence. Jeffery explains that leaving the bottom of the channel sketched in is confirmation of third wave price action. Yes, dear Jeffery, it can be and often is. But The Principle of Equivalence I have developed says, "whoa! the last time I checked C waves are in a third wave position, also. There is not a confirmed impulse until the proportional fourth and fifth waves are completed."

So, when the futures leave the channel, as they did in this case it can just be to the 'c' wave which ends the first wave of a diagonal.

What does this do for degree labeling? It makes the whole wave down either the first wave down as a diagonal or it makes a complete wave that ends a previous wave with a :5 - like a 3-3-5 Flat - or similar ending pattern. It can also put the overnight futures in-synch with the cash market.

What is the second trick? They herk & jerk the market down in an expanding diagonal until it sends a big enough signal to the Smart Money to bail if they wish. But they give them time. They put on the brakes.

These are hard learned lessons. They are not for the faint of heart or those easily disappointed in Elliott Wave. They are for serious students who see the glimmer of potential. Do you?

Tomorrow is schedule to be FOMC report date. Have an excellent rest of the evening,

TraderJoe

A Stab

Now likely back within the Minor A wave, this is a probabilistic stab at the local hourly wave count. The wave appears to be extended in time, which means it might be an extended fifth wave sequence. Even within it, retreats to the lower channel line are possible/probable, particularly with the FOMC magicians about to work their conjuring on Wednesday.

Good, stimulating discussion on the blog today. Look at the divergences on this puppy. No issues out there, right?

Have an excellent start to the evening,

TraderJoe

Rebound

Like a basketball off the backboard, stocks prices on Friday - as measured by the ES E-mini futures - hit both the upper daily Bollinger Band and the (red) 1.618 external retrace of the potential minute ⓐ-3 wave, and at least temporarily recoiled from that level. In the process, the bar formed was a doji. As far as I can tell, this would otherwise end a minuet degree (w)-(x)-(y) should upward movement end in this vicinity. Because of the exceptional length of Minor A, there is no time violation for minute ⓑ-3 as things stand. But the issue is the typical price lengths of ⓑ waves in expanded flat corrections. Price appears to be roughly there.

ES Futures - Daily - Near a Limit

There are two additional issues. The first is that the daily slow stochastic has just embedded - which often occurs before continued moves. And the second is the premium of the December ES contract is currently +50 or more points over the current level. The impact on local prices is not known yet. It could be a substantial driver, if not this coming week perhaps later in the year. Certainly, reversal is a potential around the quad witching that occurs this Friday.

So, we have two suggestions. First, if prices extend instead of reversing, then we simply suggest counting the Minor A wave as follows in this best alternate.

ES Futures - Daily Close - Best Alternate for Minor A

The sub-waves in the above chart can be 'forced' to work, so we'll just accept it if that is the case because the identification of a Minor B wave is certainly difficult in that circumstance. This count would simply recognize all of this wave as the volatility squeeze since the tariff low.

The second suggestion relates to the roll-over. The suggestion here is to just use the December front-month contract for local counting. Don't back-adjust it, don't make it a 'continuous' contract - just use it as is and see what it provides.

In terms of local actions, the current ES 2-hr pattern suggests a wedge with three-touch trend lines, as below.

What the chart suggests is that for any significant down trend to begin, there should be a break of the lower trend line, a back-test of it, and a failure below the overlap level. All we can do is watch to see if and/or when larger sellers show up to reverse the current situation.

Have an excellent rest of the weekend,

TraderJoe

ES/SPY (CFD) - Another Short-Term Channel to Watch

Today, we were able to count five-waves-up. The question is whether it is part of another channel or not, because there was only minor divergence on the RSI. Here is the chart of the ES/SPY (CFD) 30-minute.

If the channel does not hold up, then it might be possible to see today's high as part of another three-wave move.

One note of caution: the December roll-over contract is currently trading +50 points higher than the September is. Have an excellent rest of the evening,

TraderJoe

Running Triangle

We had a lot of discussion on the blog about what Neely calls a "running triangle" - which is improperly constructed - and is actually a contracting diagonal, versus a running triangle as defined by the rules of Elliott Wave. Interestingly, there is a live example of a potential running triangle in the US 10 YR Yield as in the 2-weekly chart below. The pattern below does follow the 'rules' for a valid running triangle.

US 10Yr Yield - 2 Weekly - Potential Triangle

Elliott Wave International has shown a similar chart, but my count is more nuanced than theirs. Beginning on the left, I have long held the 2020 low is a truncation as shown. This is one sign of the great strength in yields to follow. The second great sign of strength is the running second wave, (2), where the Minor C wave terminates above the low of the Minor A wave. This presages the great strength in the third wave (3) to follow.

In my understanding, it is only from there that the five Minor waves of the triangle A,B,C,D,E unfold and are still doing so.

Notice three things: first, this likely correct count gives an exact 1.618 Fibonacci relationship for the high of the Minor B wave of the triangle. Second, the E wave of the triangle already has come down under the prior impulse high, (3), to be corrective to it as required by the 'rules'. Third, this picture provides a clear, close and clean invalidation point for the triangle should the FED's actions disrupt the triangle. If a pattern does not provide such a clear invalidation, it is likely of little use to the trader.

If the triangle does play out with a higher high, then a full impulse can be completed. But, what IFF the triangle has become obvious and breaks down? Then, it suggests the impulse is already completed earlier as shown below.

US 10Yr Yield - 2 Weekly - Potential Trap

Both of these charts should currently be viewed as "equal and opposite" by The Principle of Equivalence. Everything depends on the lengths of the waves and the new positioning of the world's largest banks and hedge funds as the result of the FED's actions or inaction.

IF the potential triangle should break down, then I think it speaks to how many bars - time wise - should be considered 'proportional' for a triangle in an impulse wave.

Two other items to keep in mind. Neely often states that the A wave in a true contracting triangle is the most violent and often the shortest. Note the A wave in the first chart is a zigzag, true, but it sure took its own sweet time and didn't go anywhere. So, this gives more credence to the second chart, though not definitive.

Also, the old Wall $treet saw is "trading is treacherous in triangles". That's because apparent triangles have been observed to break down, as well as up. Should this one break down, you'll know the reason why. (hint: it wasn't a real triangle). And, if it should break upwards, that should become clear to you as well.

Have an excellent rest of the evening,

TraderJoe

Freebie

For today's post, here's a freebie on YouTube from Elliott Wave International. All I will say is that it is interesting that they now have adopted my equity count, and not the other way around. After all, it was they who initially taught me to count waves.

There are also some other interesting relationships and data points.

As always, you can make the video larger by clicking the [  ] (full screen) icon in the lower right of the video.

Have an excellent rest of the day and evening.

TraderJoe

"Just a Darn Tootin' Minute"

Between last night and this morning after the payroll report, stock prices as measured by the ES futures were headed higher. And as the daily chart of the ES, below, shows prices got up to - and over - the upper daily Bollinger Band.

It was there that the upper daily Bollinger said, "Hold on just a darn tootin' minute", and fulfilled its function of suggesting that the Smart Money would begin to exit at those prices. This is especially true with the daily slow stochastic above the 70 level and indicating 'over-bought' at the highest prices in history.

So, prices not only stalled there, but they also did a complete outside key reversal day down - making a lower low than Thursday and closing lower than that same day, and all from the highest high in the trend count.

This, again, while not completely 'fatal' to upward market progress, and a downward overlap of a wave i / a up shown this morning in the comments for the prior post, suggest that the market is struggling & failing to make impulsive activity up.

Price is still closing above the 18-day SMA, meaning the bias is still to the upside, and the swingline indicator still has a higher high after a lower low and so is still indeterminate by itself.

Still the outside-day-down cautions us that, "if the high of an outside-day down is exceeded higher within the next two trading sessions, then it can constitute a trap for the bears". So, we need to watch the next two days in particular, very carefully. From an Elliott Wave perspective, there are some remaining legitimate ways that higher highs can be made, but the odds are dropping.

Notice than the minute ⓑ-3 wave still does not violate degree definitions, so it can extend within reason if that is to be the case. Yet, triple zigzags are supposed to be pretty rare, so that is one reason why the odds are dropping a bit. Better odds would be provided by closes below the 18-day SMA, and a bonafide trend on the swing line under that level.

So, why am I thinking that this is still a ⓑ-3 wave, probably of an expanded flat, and not the end of the trend? Because, besides the EW count, if one looks at the NYSE Advance/Decline line, it is still basically at an all-time-high. Bear markets have typically not started in that position. And the weekly sentiment indicators - while getting steamy - just haven't fired off clear signals yet. Maybe someday soon. Meanwhile, the economy gives signs of weakening, and this often associated "B" wave type structures.

Have an excellent start to the evening and the weekend,

TraderJoe

Count Still Suggests the Minute ⓑ wave

The daily ES chart is below. Nothing has changed to invalidate the count presented days ago. The market is whippy as anticipated. "First-of-the-month" money from the usual passive sources is flowing robotically into the market near the all-time-highs, and in the month of September.

ES Futures - Daily - Plausible Count

One might watch to see if the upper daily Bollinger Band is hit. And, if so, does price proceed further to the upper line dashed blue parallel shown? Or is there to be a reversal on the payroll numbers tomorrow? So far, the other most-recent economic reports have been treated benignly.

The swing-line has a lower low and a prior higher high, so it is waffling; not trending. But prices are over the 18-day SMA so the daily bias switched to up.

Have an excellent start to the evening,

TraderJoe

Plausible Route to 195/200 in NVDA

In my last post on Nvidia, I said that I was looking for a fourth wave to come down and attack the lower channel line. As far as the daily chart below, shows, that has happened. 

Note that the formation may be a barrier triangle because wave ④ has come down to overlap wave ③. This could result in a pop above the upper barrier trend line. If so, the usual triangle projection of 'the widest width of the triangle added to the breakout point' allows for a projection to ~200. But barrier triangles can be tricky and do not have to reach the typical targets because of the energy already expended to try to breach the barrier.

None-the-less, the Elliott Wave Oscillator (EWO/AO) has made a reasonable fourth wave travel near the zero line and could allow for a fifth wave higher. This could also result in higher prices for the NQ/NDX and ES at some point.

On the downside, the triangle would likely invalidate below the 165/170 level, and a possible Flat wave could form instead. The EWO has divergences what looks like the extended first wave, and if the first is, indeed, the extended one, then the fifth wave would have to be shorter than the third. Let's see how it goes.

This is the second post this weekend, and if you have not seen the first one, you may wish to read it now at this LINK. Have an excellent rest of day, weekend & holiday, if you are celebrating it.

TraderJoe

Fits Together - So Far

From our post at this LINK on Saturday, we said we thought we were making a large ⓑ-3 wave up. That assessment has not changed. This is what the current wave count looks like on the ES/SPY (CFD) 4-hr chart.

ES/SPY (CFD) - 4 Hr Close Only - Elements of an Eventual Minor B Wave

This morning's dump should be watched to see if it nears the lower parallel, and/or holds there or near there. Double zigzags often form remarkably precise parallels - but we know 'this' market.

This is a further reminder that today is the last trading day of the month, with a Monday holiday, and so Tuesday may see the inflows from the typical passive sources we have so often noted (company bonus plans, 401k's, dividend roll-over schemes, etc.). And the Smart Money may try to front-run such sources, but this is not a requirement, sometimes they are patient and wait.

Eventually, the ⓑ-3 wave could reach the upper parallel, and - while likely - that is not a requirement either.

Have an excellent rest of the day.

TraderJoe

Crawling

As far as I can tell using the 1-Hr ES/SPY (CFD) or the ES alone, which has a delay here, the five-wave structure of the likely a wave from the 4-hr chart in the previous post is now emergent. The chart uses 120 candles. It's a crawler. But it works.

The fourth wave, 4, is between 38% and 50%, with no overlap, so there is no reason to think of any non-impulsive structure. Notice the third wave, 3, "turns-to-the-left" and goes above the channel as I have indicated it should do in true impulse wave structure.

Regular readers of this blog should now explore the channel shown previously on the 4-hr chart. The 'a' wave can have a bit further to go.

Have an excellent rest of the day. I will add the reminder that Nvidia reports after the close.

TraderJoe

'B' is for Belief, Bubble (and Babble, too)

The thing about B waves of expanded flats or running triangles is that they try to get you to believe they are built on something substantial, when they might not be. They might be part of a bubble too. And, as long-time reader and contributor BBRider commented on the prior post, this one is also built on some FED babble. A mumbling, stumbling Jerome Powell, Chairman of the FOMC, said on Friday the FED might be in a position to lower interest rates. OK. With that in mind, we just keep on counting, using parallels and finding clear five-wave sequences where we can find them as on the ES 4-hr chart below.

ES Futures - 4 Hr - Channel Upward

The above count is cognizant of both time and price degree considerations. It also recognizes the following counting items.

• The (c) wave down could be counted as 'five' as a diagonal, pointed out in prior comments.
• The a waves of both upward sequences in (w) & (y) are very, very similar in size and shape.
• The minuet (x) wave, down, can be seen to take less time than the minute ⓐ wave, the prior higher degree wave in the same direction.
• We also said a lower low was needed to call the down sequence from Aug 15th as a five-wave sequence. That lower low did not happen, and there was, instead, a near exact double-bottom leaving only three-waves down.

In terms of price lengths, we know the SPY and the DJI have exceeded their prior highs. So, likely all indexes must be counted in upward sequences, even if the ES has not made a new high yet. It likely will with the momentum from this wave. So, we are watching the typical ⓑ wave external retracement levels to see what information they provide.

Still, things could get very, very whippy near a new all-time high.

Have an excellent rest of the weekend,

TraderJoe

Down But Not Out

Overnight the ES futures went down to tag the 18-day moving average of closes, also known as 'the line in the sand'. Prices have since started to bounce from there as in the daily chart, below. The 18-day SMA is the place where prices often retreat to in order to figure out what to do next. This again might be the case with the FED minutes today, and Jackson Hole on Friday.

Looking at the chart we note several things: 1) there has been a more forceful overlap on L #1. This again is not fatal, but it does rule out some impulsive upward counts. 2) While this morning's lower low has the trend line currently pointing down, it has a prior higher high and now the lower low which is not typically counted as a trend. And it is currently above the 18-day SMA - so even if it was a trend - it is still neutralized by the daily bias still being upward. 3) the daily slow stochastic is currently below the 79% level. That is a warning that price and the 18-day SMA could come together. Well, they already have, they occurred almost simultaneously. 4) The only day that the embedded status can be regained is the next day, if it remains lost through the close. 5) Although not followed by many, we will note there is an upward cross of the 100-day over the 200-day SMA. This has some weak bullish significance to moving average followers.

The overlap of L #2 would provide more information from a wave-counting-perspective but that has not happened yet. So, keep an eye on things.

Have an excellent start to the day.

TraderJoe

Wobbly but Not Topped Yet

The ES daily swing line has wobbled a bit but has not set a clear new downtrend yet. Prices on Friday overlapped the prior high but not by enough to draw any firm conclusions yet. The daily chart is below. Prices retreated from the area of the upper daily Bollinger Band as expected, especially given the daily slow stochastic is over-bought only (for two days). The third day needs to be watched closely to see if gains the embedded status or not.

ES Futures - Daily - Into Minor B

Meanwhile, two other overlap levels are shown which are of interest in ruling-in or ruling-out counts. In particular, we note that if L#2 is exceeded it would probably be below the 18-day SMA and might set a trend.

In terms of an EW count, we still see the Minor A wave at the July high, and the new August highs confirm that the early August drop was only a three-wave sequence (probably ending in the diagonal we counted).

Again, we have no proof positive upward movement is over. It is possible for a Minor B wave to form in numerous ways including: an expanded flat, running triangle, or even more complex Flat-x-Zigzag, Flat-x-Triangle. Those patterns are in the book for a reason.

Have an excellent start to the weekend,

TraderJoe

Hourly Trend Line Becomes Hourly Channel

Today is Friday. Higher highs are possible, although the morning is starting out 'wobbly' - possibly like a triangle or diagonal, there is insufficient evidence for a turn yet. The lower three-touch trend line we cited earlier has held. It has become an hourly channel.

Since 123.6 has been hit and slightly exceeded, then 138.2 may be possible, but not required. Maybe the Minor B wave will be an expanded flat (at least initially) that would add length to the downside. If not, it might become a running triangle with the first :3 waves down as the more violent start of the triangle. Time will tell. The hourly MACD has turned lower again, but could be rehabilitated again, too. Dicey times.

Have an excellent start to the day.

TraderJoe

Hourly Trend Line - In the Making

In the SPY cash hourly index, as confusing as some things might be, there are four or five indisputable facts as shown in the chart below.

The most undisputed item would be the measurement. The up wave made 90%+ of the prior down move. So, if the prior down move is only a :3, then the up move can be the "B" wave of a Flat. If the down move is a :5, then it might be the 'deep retrace' from the diagonal counted provided that price does not exceed the prior high.

The second most likely undisputed item would be that a three-touch trend line has formed in the cash market. The nearly precise rebound off it at the end of the session means the market itself probably recognizes it. So, any break lower and/or back-test & failure of this trend line in the cash market needs to be watched very closely.

The third most likely undisputed item would be the volume on today's close. While a bunch of bulls (green volume bar in the middle of today's session) chomped on the fishhook at the exact high, the red bars started to gain in prominence into the close.

Fourth, like it or not, on this time frame the MACD had a cross and red histogram bars. It remains to be seen if that holds.

Fifth, we counted a wedge to the high. It might be disputed whether it is a true diagonal, and/or whether it has been decisively defeated yet. But the pattern ended on time and without any problems in the measurements. So, it would not be surprising if the up gaps in the chart start filling to the downside, depending on the news tomorrow.

Is there still a way for prices to lurch higher? There is, yet the odds keep getting lower & lower.

Have an excellent start to the evening,

TraderJoe

Three-Fer & The Principle of Equivalence

As you know I count Elliott waves in real time. As far as I can tell, the reason many Elliott analysts make some truly horrendous mistakes is that their Elliott Wave principles are not well founded. As an example, take the ES/SPY (CFD) half-hour close-only chart, below. We are using the closes only - not to hide anything - but to illustrate the overall form of the wave. And we need to tell you that there are at least three reasonably good ways to count this uptrend - being in the channel that it is. The uncertainty in the wave structure is precisely the reason I have developed and added The Principle of Equivalence to my overall wave theory.

If you follow the black count, you can clearly discern the Ⓦ-Ⓧ-Ⓨ triple zigzag count contained within the channel. The two Ⓧ waves would be of slightly different lengths but that would be okay if they are of the same degree. The issue with that count is that we were able to count five-down on the 7th. 

If you follow the blue count, the blue count can correct for this problem by claiming the 'c' wave of a failed-flat at that location. After all, that wave did not travel below the wave on the 5th, and the b wave in that count just ticked beyond the 1.618 external retrace on the 'a' wave down. This is often where the b waves of failure waves end on the upside.

And if you follow the red count, it says there was a gross mismatch ('extreme alternation') between red iv and red ii. But, none-the-less there was no iv to i overlap, so no rules were broken.

So, again, this is why I have developed The Principle of Equivalence. The counts are to be treated as equivalent until there are some distinguishing characteristics available.

For example, we said in the comments for the prior post that because the second Ⓧ wave is larger than the first, it ruled out any further contracting diagonal from that point to the recent high. So, that longer Ⓧ wave is one distinguishing characteristic. We can currently rule out a contracting diagonal and it does not appear on the chart.

Another item to note is within the red count. That count may contain some degree violations because there would then be internal sub-waves of wave iv that would be longer than all of wave ii, the prior higher degree wave in the same (down) direction. And that seems like a violation of degree definitions. So, from this point forward, you can consider the red count to be what I consider a 'cartoon' and just for illustration only. And it will not appear on further charts unless something develops to warrant it.

But - at present - the waves are still in a channel. The timing of the up waves is similar in pace. So, they seem like zigzags. But we also have not confirmed that upward price movement is over. So, a better developed Ⓩ or (c) wave could still form.

But "Wait a minute." You might say. "Isn't The Principle of Equivalence just the same as saying 'there are alternate wave counts'?" In fact, The Principle of Equivalence definitely says there are alternates at some times, but it is also deeper and much broader than only just saying there are alternates. But I will not get into that now so as not to confuse things. But I still caution, The Principle of Equivalence does not say there are any wave labels you like. No. Labels that don't follow the rules or that involve clear violations of degree definitions are still to be avoided to the greatest degree possible.

Have an excellent rest of the weekend,

TraderJoe

Market-suggested trend lines

As of today, the market has suggested slightly contracting trend lines shown in the daily SPY cash index, as below. At this time, they are tentative only.

SPY Cash - Daily - Suggestions

While we were able to count an impulse down, and then either a full or partial (we think the latter) retrace today, the market path is pretty unclear just now. As the daily ES chart below shows, price settled just above the 18-day SMA in a Doji candle.

ES Futures - Daily - Neutral

The slow stochastic is stuck in the middle, so this summertime chart is about as neutral as it can get. Still, taking out yesterday's low - tomorrow - would be more bearish than it would be bullish as it would take out the low of an outside-day-up in less than two sessions (IF it does).

This is a great time for patience, flexibility and small commitments, if any. We're doing our best to count locally, but the number of choppy diagonals on the chart is astounding (see last comments in prior post).

Have an excellent start to the evening,

TraderJoe

Close below 18-day SMA

The ES daily futures today had a close below the "line in the sand", the 18-day simple moving average of closes, as shown on the daily chart below.

ES Futures - Daily - Close Below 18-SMA

This is the second such close and follows a "battle for the line in the sand". The daily slow stochastic is not yet in oversold territory.

With the overnight lower low, the swing line indicator is currently pointed down but needs to undercut Friday's low to firmly establish a downward trend.

From an Elliott Wave perspective, we are watching two consecutive rejections of the 62% Fibonacci level. The first one occurred at the ES 6,377 - 80 level in the overnight session, and the second one occurred after the morning downdraft at the 6,350 level. And the lower low in the overnight may be a bit of a clue.

So, this is a good time to watch the developments carefully and see if a better-defined wave sequence takes place or if price will just bounce around between the Bollinger Bands. We have made the case for the former, but it's up to the market to decide.

Have an excellent rest of the evening,

TraderJoe

The Dog Didn't Bark

In the short story The Adventure of Silver Blaze by Sir Arthur Conan Doyle, Sherlock Holmes helps solve the mystery of the stolen racehorse by noticing for Scotland Yard, that "the dog did nothing in the nighttime." When one would have expected the dog to be barking - with the theft of a horse underway - it didn't. And one had to wonder why. Here in the markets, on the long-term count, we are faced with a similar clue. Ask yourself the following question as you look over this 2-weekly chart of the S&P500 cash index, "Is there anywhere on the chart that even remotely looks like a properly formed sideways triangle?

SP500 Cash Index - 2 Weekly - Potential Diagonal

If you answer the question honestly, you'll likely arrive at the same answer I have. A curt, "No". At this scale, there is no grinding sideways pattern that can clearly form an overlapping a,b,c,d,e which has the characteristic 62 - 78% wave retraces. So, since triangles often (not always) precede the last move in a trend, could it be that - for some period of time - this potential Minor B wave down will form as a triangle prior to the last move up? Maybe. It does not have to, but it is one of the good possibilities.

Degree Labeling

Notice in this count that within Intermediate (3) then Minor A is shorter in price and time than all of Intermediate (1), the previous higher degree wave in the same (up) direction, so that that this wave can qualify as a true subwave. Also, the notice the same is true of Minor C within Intermediate (3). Next, we also note within the potential Intermediate wave (5), then this Minor A is also shorter in price and time than all of Intermediate (3), the previous higher degree wave in the same (up) direction, so that this wave, too, can qualify as a true subwave.

So, what does this mean for potential Minor B? Well, within this wave there is a choice of two prior degree waves in the same (down) direction. So, in terms of price Minor B must be shorter in price than Intermediate (4) down. But, in terms of time, not having been in this situation before at such a high degree, it may be that a triangle for Minor B might have the option of being as long in time as Intermediate (2). Maybe longer because of the nature of triangles to move price sideways, but that remains to be seen.

One's wave counts should try to respect degree labeling to the extent possible. If the degrees are unclear, then it is likely that something hasn't meshed properly in the count.

Have an excellent rest of the weekend,

TraderJoe

Outside Key-Reversal Day Down

From the highest high in the trend count, probably the high of the Minor A wave, up, today made an outside key reversal day down, as shown in the ES daily chart, below at the cash close.

Although Amazon and Apple earnings are not out yet, this is also accompanied by the loss of the embedded status of the slow stochastic and a close approach to the 18-day SMA at this time. The only day the embedded status can be regained is the next day (tomorrow's close).

The high of an outside day down should not be taken out within the following two trading days or it can constitute a trap for the bears. With this in mind, it bears watching the impact AMZN and/or APPL may have on the count. Further, the tomorrow is the first of the new month with possible inflows from the usual passive sources, so some sort of correction may result.

If price starts significantly trading down through the 18-day SMA, and closing there, then the Minor B wave is more likely underway.

Have an excellent rest of the evening,

TraderJoe

Copper Tariffs and Earnings

One more trip over the high is possible yet not required. The black and the red count below are equivalent until they are not by The Principle of Equivalence. This is the SPY 4-hr CFD. Prices today were whipped about by the FOMC results, the imposition of 50% tariffs on copper, and by mega earnings after the close.

It is possible that Minor B started today, but we must watch into tomorrow as the institutions might want to bite on the mega earnings news. The red count allows another trip over the high. But the wave counting remains ugly with few good true impulse waves. So, we will learn what we can from wave invalidations or resistance points.

Have an excellent start to the evening,

TraderJoe

Three

After three daily closes above the upper daily Bollinger Band, price today made a higher high, a higher low and a lower close. The three closes higher than the upper band dropped the odds to about 3 - 5% of today's close being outside the upper band, and it was not. (While the futures are still trading as this is being written, we think it likely represents the 4 PM EDT settlement time of the futures.)

Note that the daily swing-line indicator is still up with higher highs and a higher low over the 18-day SMA. The daily slow stochastic is still embedded. And until the red line of the slow stochastic closes under the 79 level it is possible there are some pros (or Smart Money machines) that might still try for a higher high against the upper band again.

From an EW perspective today we counted a possible non-overlapping fourth wave down, (iv), as an Expanded Flat. So, a fifth wave up, (v) is possible tomorrow. But, being Tuesday it could also be a turn day, as well.

It is likely that the prior swing-line low of 6318.75 would be of interest as it might indicate the end of an uptrend, and, if broken, would likely be below the 18-day SMA.

Have an excellent rest of the evening,

TraderJoe

Waiting Patiently

We promised in our last video that if additional waves higher were made this week, it would require a reconfiguration of the Minor A wave higher. Here is that reconfiguration, Essentially, we dropped the degree of the contracting leading diagonal one degree to minuet degree, symbol (i), composed of the five sub-minuette degree waves, symbols i-to-v. Then minute ⓘ is composed of the five minuet degree waves symbols (i)-to-(v). This count has the additional benefit that minuet (b) is shorter in price and time than minute ⓘ, the previous higher degree wave in the same direction, preserving degree labeling definitions.

ES Futures - Daily - Minor A Reconfiguration

In this configuration, Minute wave ⓥ and Minor A now has a new limit shown on the chart of 6,633 because again the third wave in the futures is shorter than the first wave. 

Critical note: since minute ⓘ is now an impulse, and the leading diagonal is only a minuet degree sub-wave, it is possible for this minute ⓥ wave to be an ending diagonal because it is at a different degree. So, it can either be an impulse or an ending diagonal wave. So, first we will show the current SPY 1 Hr chart in the impulse configuration as another extended first wave, at minuet degree, 

SPY Cash - Hourly - Minute ⓥ Impulse Configuration

We are showing this configuration as the extended wave (i), symbol x(i), because minuet (ii) is only a 38% retrace on the first up wave as shown by the Fibonacci ruler on the right. As you know by now, this is highly characteristic of extended first waves. We note that for the SPY, the lower wedge trend line has not even been broken yet!

As an alternate, we can drop the degree one level for the diagonal configuration as below.

SPY Cash - Hourly - Minute ⓥ Alternate Diagonal Configuration

If a diagonal does form, then we would expect a 50 - 78% retracement of the entire up wave for minuet (ii). In that case, the attack on the lower trend line would fail rather dramatically. Although the preferred case is the impulse, because it is simpler, the diagonal alternate is noted for completeness and as another way to extend the Minor A wave in time as the diagonal would have to extend and further cycle through waves (i)-to-(v) yet again.

Have an excellent rest of the weekend,

TraderJoe

Suggestions

Today, on the SPY hourly timeframe we were watching the Fibonacci 162% external retracement on the three-wave down wave that occurred on 16 July. It's the upper red line on the chart shown. Prices over-ran it slightly but nothing to be very concerned about yet. The SPY Cash 1-Hr chart is below.

SPY Cash - 1 Hr - Some Suggestions

There were two possible indications of a top: First, the potential extended fifth wave of c/iii with this wave shorter than a/i. Second, there appeared to be a diagonal forming that we counted in real time. So, the current up count, if it holds could be a,b,c to a (b)-3 wave. Such a (b)-3 wave could be for an expanded Flat or a triangle.

But we don't know upward movement is over. There are still no downward overlaps, nor the undercutting of any significant lows, yet.

So, watching the trend line sketched in, if prices respect it and make a higher high, we will probably conclude there are five-waves-up at that point, and configure the count with Minor A at the new high.

If, on-the-other hand prices breakdown significantly, and perhaps back-test the trend line and fail, then we could likely be in either an expanded flat or triangle scenario. These are very testy waves at this point, and we must just count what we see going forward. At least we have some ideas of the like possibilities.

Have an excellent start to the evening,

TraderJoe

IF Today's High Holds

In the SPY cash index, IF today's high holds I am only pointing out that there would then be a 138.2% Fibonacci relationship with the prior three down waves. I am doing my best to count by legitimate 'fives' and you can see where I've done that explicitly on the chart.

But whether because of overlap or because the time relationships would otherwise seem too bizarre, there is a point where they don't work well. So, this structure could be (a)-3, down, and (b)-3, up. Today's tiny higher high in cash, still not over that 633.94 level, is on a whopping MACD divergence.

There are diagonals galore in these counts. You can see two of them in the space of a week in the above chart. But, if you want to see the count proceed by fives to the extent possible, then as far as I can tell, that is what's involved.

The above count does - if it holds - mean that the Minor A wave may have finished on 15 July, and we could be into the Minor B wave now.

Have an excellent rest of the day,

TraderJoe

Video Update - July 20, 2025

Here is a brief Elliott Wave weekend update video which is designed to take less than ten minutes of your time, compared to some updates that can take an hour or more. As always, hit the full-screen icon on the video player to see the detail in the charts.

I hope you enjoy the content and look forward to seeing what the next week in the markets brings.

Have an excellent rest of the weekend and beginning of a new week.

TraderJoe

Snoozy Clue (3)

The chart news today is interesting on the ES daily chart, below. First of all, as shown by the Fibonacci ruler on the right, we have a longer wave down than the 7 JUL down wave. This 'should' mean - by the rules - that we are out of what appeared to be a diagonal formation at the high.

Second, while the lower today today moves the swing-line indicator temporarily lower, price is still above the 18-day SMA, although it did come quite close to tagging it before rebounding, Meanwhile the daily slow stochastic (regular calculation) continues to have lost its embedded status.

From a news perspective, it was filled with money-laundering bank fines, tariff news, and quasi-news about firing the Fed chair, all of which made for a whippy market.

From an EW perspective, all we have in the ES is one price segment down (like a small i or a), and then a large Flat wave following it that did make greater than a 50% retracement on the down wave. We'll see if this is enough to get prices moving such that they close below the 18-day SMA or not. It remains to be seen.

Have an excellent rest of the evening,

TraderJoe

Snoozy Clue (2)

Today's ES price movement was higher, then lower. But, it was not a full-on outside reversal day let alone a key reversal day. Still prices did have the odd structure of a higher high and lower close. What might turn out to be a bit more significant is that in tonight's overnight action the series is possibly on the verge of losing its embedded slow stochastic status. If, the red line of the slow stochastic closes below 79 by the close tomorrow it might set a different tone on the daily chart, below.

ES Futures - Daily - HH/LC Day

If the embedded reading stays lost, then price and the 18-day SMA might try to come together again. Still, such price movement would not set a trend lower yet. Lower lows and lower highs below the 18-day SMA are needed for that. If that should occur - and we don't know that it will, then the lower daily Bollinger Band would be the first target after the 18-day SMA. Let's see how it goes.

Have an excellent rest of the evening,

TraderJoe

Snoozy Clue

Green volume in the SPY (cash) hourly time frame went to sleep again shortly after the cash open. It didn't stop prices from gnashing higher. The lower hourly trend line held in both the cash and earlier in the ES futures.

If the three-wave sequences we are seeing are part of a diagonal, then the price limit in cash is shown on the chart as 630.85 and in the futures it would be about 6,348. The alternate would be that if the July 3-4 high is actually a third wave, then additional waves would be needed to form a triangle. We'll cover that count more if it begins to materialize.

The market is getting very testy in terms of stalling and prolonging waves. There is a gap overhead and there might be some reason for the market to fill it. We shall see. We are still looking for the Minor wave A, up, to wrap up before beginning a Minor B wave down.

Have an excellent start to the evening,

TraderJoe

Dow Follow-Up (2)

In a further follow-up to the May 18th post (see post at this LINK), now some two months later, the market continues to take its time to complete this pattern. Now at 139 two-weekly bars, the Elliott Wave Oscillator's (EWO or AO) fourth wave signature, dipping below the the zero line - which is not always required, but did happen this time - is apparent. So too, can be seen the initialization of the fifth wave up bars in the oscillator. The EMA-34 can be seen to be winding through each numbered wave for good form and balance.

DOW (YM) Futures - 2 Weekly - Likely Diagonal

The pattern could take a while yet, especially if the next Minor B wave becomes a triangle. The pattern is trying to put you to sleep and make it difficult to trade at the same time. And, it may be waiting for some news to make you think there is a reason for the decline - whenever it comes. And, yes, the Minor A wave can go a bit higher if it wants.

Is it possible for a pattern like this to fail? It definitely is. But, as of yet, there is not real good evidence of such. And based on the lengths of the prior waves, we are trying diligently not to rush the count and would like to see if the full A,B,C zigzag develops.

Have an excellent rest of the weekend.

TraderJoe

It's Summer 🔥- 5

Between yesterday and today, Jul 9th and 10th, we could count five-waves-up in an impulse to the local higher high today as shown as the right-most c wave on the SPY one-hour chart, below.

Green volume appears to be declining as bulls lose some interest at the highs. Red volume is picking up but nothing to write home about yet. The volume profile on the left of the chart shows the point of control (orange line) for this particular up wave being located within the gap in the triangle. This is a level to keep an eye on.

From the left the first a wave up is an impulse, then a b wave triangle followed by a thrust from the triangle for the first c wave. The next a wave up is an expanding diagonal, followed by a brief and sharp b wave down. The diagonal is then followed by the impulse up of the last two days for the c wave and good alternation in a corrective wave.

I haven't done much intraday posting as few seem interested. Have an excellent start to the evening,

TraderJoe

It's Summer 🔥- 4

So far, the overnight action has an a-b-c, up, as in the ES/SPY (CFD) 30-min chart below. The intraday slow stochastic is meandering around the 50% level.

ES/SPY (CFD) - 30 min - a,b,c up

The a wave up is an expanding leading diagonal, and the c wave is an impulse for good alternation in a corrective wave that has a marginal higher high. Three waves unfortunately does not provide that much information yet except that it looks corrective at this point.

Please be sure to translate this to the instruments you are following. Have an excellent rest of the day and start to the week.

TraderJoe

It's Summer 🔥- 3

Nothing wrong with the current count. Today in the ES/SPY was a halting, grinding, slow day upward to the new high. There could easily be more, within limits. Here is the current count, simply continued from the previous chart on the SPY 15-minute timeframe. We'll be switching to the SPY 30-minute shortly.

SPY Cash - 15 min - Count

There is no clear indication that wave (iii), up, is over, yet. It does not have to be. For a contracting diagonal it must remain shorter than wave (i). So far, it has been. If a fourth wave (iv) occurs it should remain shorter than wave (ii), to continue a contracting diagonal.

Retraces can definitely occur, but not below the low of wave (ii) without repercussions for the count as is shown on the chart.

Have an excellent start of the evening, and an excellent rest of the possible vacation week if you are taking it off.

TraderJoe

It's Summer 🔥- 2

Today was the end of the month and the end of the quarter. How long will they drag it out? We had a near-perfect Elliott Wave analysis today, including the suggestion of the 'front-running-of the-beginning-of-the-month-money'. No one apparently cared much. No one commented. No one charted. So, here's the chart we are left with at the end of the day.

The Principle of Equivalence tells us to be patient. To be cautious. We are so being, we are holding no overnight positions at this time.  Although a further wave 5 can not travel below the low of wave 4, there might be some other clues like the EWO turning below the zero line again. There are definitely ways for prices to extend higher. So, we are again flexible, patient and cautious.

It will be interesting to see how much money is committed to the market tomorrow. And it will be interesting to see if any remaining downside gaps get filled.

Have an excellent rest of the evening, and possible start to your holiday week if you are going on vacation or taking some time off.

TraderJoe