GOLD - Weekly & Daily

In the prior post (LINK here), I said that it was very difficult on the long-term chart to keep degree labels making sense and to get reasonable Fibonacci ratios unless a triangle was considered for the Cycle IVth wave, after the 2012 top. I also said for that reason I was still counting "by parallels" until that was no longer possible. But where are (is) that parallel, and what is the count? The chart below shows the likely parallel at present.

GOLD (GC) Futures - Weekly - Degree Analysis

The parallel is based on the fact that the largest and longest correction should be the larger degree correction by degree labeling. So, it is given the label of Primary ②. And it is much less than a 38% correction, so that means that the prior wave was highly likely an extended first wave, x①. So far, that is holding true as Primary ③ is shorter than Primary ①. Further, the Elliott Wave Oscillator is near a high, so this agrees with a large third wave at this position. As another sign of this count, there are no significant overlaps at this point, and the most likely overlap warning level is shown. So, IF a Primary ④th wave can hold the parallel, then the wave has a good chance of finishing like an impulse. Remember that a ④th wave can be one of several types of triangles if it wishes. This may make trading very tricky & whippy. Keep in mind the ④ and ⑤ shown on the chart are placeholders only - just to keep track of the count, not to indicate the levels price should reach or when it should reach them.

And what about wave Intermediate (5) of Primary ③, how is that finishing? The daily chart shows that wave below.

GOLD (GC) Futures - Daily - Local Count

So far, from the Intermediate (4)th wave on the daily chart, with its EWO signature at or below the zero line, there appears to be an expanded diagonal fifth wave which has already made a new high. So, if there is to be a Primary ④th wave, then it might come back down to the level of the prior fourth wave, which would be the Intermediate (4)th in this case. So far, this wave is on a daily divergence with the EWO, which is often the case for fifth waves. So, the indications are that the technicals are working at this point, and there is still some wiggle room at the high.

Again, while this is not trading or investment advice, be prepared for highly whippy and volatile price movement, or very tough compression or whippy action if a triangle forms.

This is the second post since Thursday. Have an excellent rest of the day and weekend.

TraderJoe

Long-Term GOLD

When Gold is reviewed on a long-term-basis, problems arise with degree labeling, especially in the most recent weekly waves, unless the center section is seen as a long-in-time fourth-wave triangle as seen in the 3-monthly log chart, below.

Notice that after the 2012 peak in Cycle III, the Elliott Wave Oscillator, EWO, did take on fourth wave characteristics by traveling under the zero line again. Also note three items.

• The triangle would be in a 'typical' fourth wave position. It 'may be' a non-limiting triangle, and it would alternate with the sharp Cycle II wave.
• The recent extremely impulsive action looks like the 'thrust from a triangle'.
• The typical technical analysis measurement of the "widest-width-of-the-triangle added to the breakout point" is coming up ahead.

This measurement is one of the few measurements that make sense, whereas other Fibonacci ratios in the recent rise would be extremely out of proportion. For this reason, we are counting the current impulse up in parallels until we can no longer.

Have an excellent rest of the day and start to the weekend,

TraderJoe

Two Options - The Principle of Equivalence

With the ES roll-over futures now at a new all-time high, the Principle of Equivalence tells us to be on the lookout for these possibilities. The first is "Minor A is done" and an Expanding Triangle Minor B is in progress.

ES Futures - Daily - Minor A is Done

What this count has going for it is that it meets the rules, and from a timing standpoint each leg is 'longer in time' than the prior leg in the same direction. For this count to really emerge, then cash should (must) also make a higher high. But, then the minute ⓓ wave should approximate a 150% extension.  Notice there is also a way for the expanding triangle to be in a fourth wave position, minute ((iv)), as shown secondarily, but that is a rarer situation.

The second count is "Minor A is Not Over", and either an impulse for minute ((v)) is underway or a diagonal wave is underway.

ES Futures - Daily - Minor A Still to Complete

In the above chart, the diagonal is sketched out. But then its wave (i) and (iii) would most likely make new highs.

At these lofty heights, the Principle of Equivalence is really saying, "Be absolutely prepared for large down drafts, but look for a pattern than can be counted." Be calm, patient, and flexible and we head towards the end of the year. I'm absolutely ok with either pattern. One implication of the second pattern is that a deeper wave would form for Minor B. One implication of the first pattern is that Neely says that the thrust up out of an expanded triangle sometimes fails.

Have an excellent rest of the day & Holiday upcoming if you are celebrating. I know I am!

TraderJoe

Absurd Futures Rollovers

As a sanity check, I went back through several years of on-line historical data to look at the differences in the futures roll-overs from the lead contract to the next contract using the ES E-mini futures. The sample of data is listed in the table below. To conduct this study, I used the closing prices on the date which was the fifth day prior to the expiration of the lead contract and compared it to the roll-over contract on the same date. The differences are shown in the right-hand column.

Having followed futures trading for most of the 2000's, it was my observation that the futures roll-overs being a premium of -6 points to +6 points just wasn't much of a problem. It was seemingly pretty much at random, and it was a fairly small percentage of the price level. For example, at 6 points of 1,770 points it was about 0.33% of the price level at the time.

But, after the Covid years, the futures premiums have absolutely exploded. Not only are the numerical levels much larger in absolute value, but in terms of the price level the premiums are now 0.85% to 1.20% of the notional price.

This situation is absurd. First, why does it cost one much, much more to roll a contract now than it did before? As shown above, this is not just a function of the price level. Second, one now needs to consider how this extremely absurd amount of roll-over will affect chart structures (triangles or diagonals in progress, for example) when using the roll-over contracts (typically /ES in ThinkorSwim, or ES1! in TradingView).

I have highlighted this matter before. The point is that the roll-over used to be largely a non-event. And now it has become a major event that has to be managed for some reason. And that reason simply is not clear.

This is the second post since Thursday. Have an excellent rest of the weekend. 

TraderJoe

Simplest Is Best - Right Now

On the intraday chart of the ES 30-min (March 2026) futures, simplest is best right now. As the chart shows, two parallels can be drawn around current price action. They should be respected until they should break, if either does.

The overnight pounding action from above on the 6,820 level tends to indicate a triangle, but that is not locked in stone. If it is a triangle, the up wave can be an a / b sequence as shown. But, if the structure is some kind of quasi-structure, or a w-x-y, then the up wave could evolve as an impulse sequence shown as the alternate i / ii. The Principle of Equivalence still tells us to mind our p's and q's until we get some waves with more definitive lengths to the upside or the downside and potential channel breaks.

The daily count options have not changed. To the upside is perhaps the potential daily expanding triangle. And to the downside is still the potential daily expanded flat.

Yes, one could bring in a lot of other considerations: the Santa Rally, the 'holiday effect', ending the year and the quarter on a high for both political gains and capital gains purposes, the typical holiday low volume, etc. But in an Elliott Wave blog, the main consideration is whether the price pattern is an impulse or not. So far, there are three-waves-up. The Smart Money can do a lot of things: gap up, grind up, gap down, etc. Try to use the parallels to check what path best fits and accept the results.

Keep it simple. Have an excellent start to the evening and the weekend.

TraderJoe

Trend Day

Today's lower low and lower close below the 18-day SMA has firmly set a down trending wave in motion as per the March 2026 ES Daily chart, below. This occurred after prices initially rose overnight to the underside of the line-in-the-sand before falling off.

The next target on the chart would be the combination of the lower Bollinger Band and the 100-day SMA. The daily slow stochastic has quickly moved from embedded higher, to over-sold. The hourly count looks like this at present.

It's a bit too early to say whether an impulse is forming or not.

Have an excellent start to the evening,

TraderJoe

Back to the Line-In-The-Sand

US equity prices, as measured by ES futures had an inside day today. This temporarily (at least) turns the swingline indicator up. With prices not making a new daily low today, the 18-day SMA rose up enough to cause prices to contact it as shown in the chart, below.

Meanwhile, a new up (green) fractal formed at the prior high, and the regular calculation of the daily slow stochastic lost its embedded status. The only day it can get it back is the next day (tomorrow) without going through the whole rebuilding process again. Because of the prior day's lower low and potential lower high, IF a follow-through down bar occurs tomorrow and there is a close below the 18-day SMA, it could start a trend lower. It hasn't happened yet, but we'll be on the lookout for it. 

For the moment things are dead-neutral. From a wave count perspective, the downward count remains the expanded flat, while the upward count remains a potential expanded triangle.  Again, keep an eye on the local technicals until the situation clears. 

Have an excellent rest of the evening,

TraderJoe

Some Clarity in the Dow Futures - The Benefit of the Doubt

As most readers here know, the Dow and its futures have been making two new highs (along with the Russell 2000) while the ES and NQ futures have made only one new high. When the first new Dow high was made, we commented on the likely presence of the triangle also seen below between the blue lines in the middle left of the chart.

Based on actual measurements of all waves, and where there are five-wave-sequences, and where there are not, this is the only way we can legitimately count the Dow futures and still follow the rules and guidelines of Elliott Wave, along with the degree definitions.

So, after the running triangle - which is still bullish because of the higher 'b' wave - a thrust out of the triangle occurs. This should end a wave, and we think it does end the Minor A wave at the tail end of October. But anything upward is likely not a diagonal, as the low of wave (iv) has not been undercut yet.

Then, there appears to be three waves down to minuette (a) of minute ⓐ, and a minuette (b) wave, up, followed by a minuette (c) wave, down to make a minute ⓐ wave down in three waves as an expanded flat. Then, a similar three-waves-up occurs to make a minute ⓑ wave, up.

Again, based on measurement, and how high typical 'b' waves go, this is about the only way we can read the chart. The suggestion from this chart is that there will be, or should be, a strong minute ⓒ wave down in five waves to below the level of (iv), and even possibly below the level of the prior wave iv. This should make the Minor B wave down. And yes, there might be more of the minute ⓑ wave to go, but it looks nearly completed.

In any event, the Fibonacci ruler shows some downside targets in the event a slide begins before the holiday. The 2.618 target - which is very common - is below the chart border. Readers of this blog should replicate the measurement if they are interested.

We also ask you to carefully review the degree labeling. Note that (a) of ⓐ is larger than 'e' of (iv). Also note that (c) of ⓐ is also longer than 'c' of (iv). Note, too, on the way up, that (a) of ⓑ is about the same size as (v) of ⓥ of Minor A. Then, ⓐ down, is longer than all of (iv), down. So, the degree definitions appear to work well, too.

Then why do we call this labeling 'The Benefit of the Doubt' count? Because it is possible that this last wave up in the Dow is the last wave up as a C wave. But we simply will not label that option until and unless the minute ⓐ wave down is exceeded lower. Right now, the degrees of the waves don't require it.

Meanwhile one item of confusion to check out this weekend is whether the SPY (cash) made a new high this week. TradingView says, "No, on the daily. Yes, on the 4-hr." How does this figure? But Barchart says, "No, on both the daily and the 4 hour". I do understand there are some after-hours considerations here which is why I tend to use the futures a bit more.

This is the second post since Thursday. Have an excellent rest of the weekend,

TraderJoe

Discount Double Deceit

Wednesday in the ES daily futures was an outside day up. The low of an outside day up should not be taken out within the next two sessions, or it can be a trap for the bulls. The next day took out the low, potentially setting the trap, but on that Thursday bar the high of the prior bar was also taken out, creating another outside day higher. The first outside day up on Wednesday just plain lied. Then, the low of that Thursday bar should not be taken out within the next two sessions, or it can create a trap for the bulls. The low of Friday's bar took out the low of Thursday's bar - again potentially springing the trap. The Thursday bar lied, too.

ES Futures - Daily - High Made 90% Level

In the process, price left a gap at the local daily high and got down to within about ten points of the 18-day SMA but didn't quite hit it. At the end of the session, the daily slow stochastic remained embedded.

The Fibonacci ruler is shown so that you can see that the highest high, so far in December has reached the 90% level which, by rule, can define a flat wave.

Meanwhile the Dow did make a new higher high over both the late October and early November high. Again - for the intermediate term - the count remains indeterminate for a bit. For the shorter term, yesterday we showed the chart at this LINK and said a larger flat wave certainly could result in the whippiness. So far, it appears to have although we would like to see a finish to this down wave on Monday or Tuesday to more firmly conclude that.

I know most readers would like more clarity than I am providing here: so would I. Still, we have said the risks are high and to expect a whippy, volatile market and that's what we are getting, so far. 

Hopefully, there will be some additional thoughts over the weekend. Have an excellent start to the evening.

TraderJoe

Local Count

Yesterday we said much of the current wave count was indeterminate and we needed to wait for some clarity. Today's movements offered a bit of a look into the local count, particularly if we use the ES 4hr chart, and the zigzag indicator - which we have often used to mimic the method Glenn Neely uses to examine wave points.

So, in the above chart, the terminals of the waves are accurate (right up until the last one which may still be under development).  But at least it shows part or all of the up movement in the after-hours session to the new higher high.

So, we have the five-waves-up ending with the expanding diagonal which is by The Principle of Equivalence can be an a/i wave. Then, we have a flat 3-3-5 sequence with only the marginal new highs. The substructure of the :3 on the FED meeting rise is not observable here, but I could not count it as a 'five' of any type on the OHLC chart down to the 15-minute level. So, now the question is, "is that b/ii done and over, or will it make a larger Flat wave?". I don't know the answer to that question, as that is where more uncertainty comes in. I'm showing you what I do know about the current count. I'm not guessing what comes next. Yes, it could be that even a larger b wave is in the offing. This is where topping structures get nasty.

Again, in the bigger picture, the expanding triangle is still on the table. IF so, this would be part of the ⓓ wave, up. Or we could still be making a much more complex flat with this as some kind of ⓧ wave. That remains to be seen.

So, let's take it step-by-step and observe how things develop. Clearly, this remains a time for caution, calm and flexibility. Throw in a good mixture of developing holiday spirit and patience as well.

For now, have an excellent rest of the evening,

TraderJoe

Outside Day - Up

Today's FOMC meeting provided the impetus for an outside day up, candle, in the ES daily futures shown below. This was not so much for the expected one-quarter percent interest rate cut, but also for the $40 billion surprise announcement of cash-management T-bills to be purchased ahead of schedule. Of course, the banks can figure out a way to use that money, and stock prices rose. This was not much of a surprise as prices were still over the 18-day SMA and the daily slow stochastic was still embedded.

ES Futures - Daily - Outside Day Up

In the process, the prior up (green) fractal was exceeded higher. As with all outside day ups, the low of the day should not be taken out lower within two days or it would be a trap for the bulls.

The wave count is almost entirely indeterminate at this point. A new all-time high is needed for the expanding triangle option we presented which can be seen at this LINK, and it is still a valid possibility. But a compound Flat is also possible - whether the high is exceeded or not. And, that count, too, can make a lot of sense. There are just times in a wave count when one has to be patient until the count clears. This is one of them, and so we need to pay attention to the local technicals.

IF the market continues higher, then the upper Bollinger Band becomes the next target. Still, stiff retraces are possible at any time.

Have an excellent start to the evening,

TraderJoe

Candle Confirmation

Friday's "spinning top" or "doji" candle was given a candle confirmation today as shown by the daily chart of the SPY cash ETF, below. In the process, the latest "three-touch" trend line was broken to the downside.

This could mean that the 'c' wave of an expanded flat correction since 18 Nov is complete, but the evidence is only preliminary in the fact that Friday's higher high occurred on a divergence with the EWO as shown. Also, the swing line has a lower low but is still above the 18-day SMA, so the two cancel each other out. Again, price is still above the 18-day SMA, and the daily slow stochastic is still embedded. As a brief reminder, we showed the expanded flat potential in the post at this LINK.

So, IF the expanded flat count is correct, the market should start down in a really substantial way over the next couple of days. And, if it is not correct, the alternate count is that an expanding diagonal ended at the low on 21 Nov.

There should be lots of news to ponder over in the course of the next week, including an FOMC decision and press conference on Wednesday. Because of the conflict in the local technicals (they are all not in gear) calm, patience, and a high degree of flexibility are still required - both in wave counting and in trading.

Have an excellent start to the evening,

TraderJoe

Spinning Top Candle - Of Course, Requires Confirmation

U.S. equity prices early on as measured by the ES daily futures made a higher high day and then faded somewhat by the close. We are showing the OHLC version of the chart below, but the bar translates into a weak spinning-top candle formation as the body would still be green.

The swing-line indicator indicates there is a higher high after a lower low above the 18-day SMA and the daily slow stochastic obtained embedded status for a second day. So, the bias is up until prices again close below the 'line-in-the-sand'.

Today's higher high exceeded the second up (green) fractal back from 12 Nov. And although we have shown a way to count a completed wave, candle confirmation is needed in the form of a substantial closing-lower candle. Absent that, there is not much on the chart yet.

The wave action is whippy intraday (as shown by today's 30-min candles) and this is interesting given a $VIX which is down in the 15 - 16 level. We should note today that the $VIX closed a cash gap from way back on 26 SEP 2025. Interesting, but nothing dispositive yet.

There are lots of ways to see that a minimum of a pullback is due, even just considering the waves since the late November low. And, although nothing to the downside will surprise us, we must be patient until the market decides the time is right. As we all know, next week is an FOMC meeting week. Perhaps the market will decide that time is the right time.

Have an excellent start to the weekend.

TraderJoe

Grinding, Stalling & Swinging

The wave counts are really getting strained. One almost has to look at the structures with one eye closed and the other one squinting to see what the machines are doing to the market - grinding for hours and swinging leisurely at other times to make waves that waste a lot of time and make little progress. For our part, it looks like we called the internal structure properly in the prior post.

We had no idea that such a lengthy diagonal would form in the wave structure. But, it apparently has. I say apparently for three reasons, 1) we don't know upward movement is over yet, though the odds are getting better and better, 2) we do not have diagonal confirmation yet, in the form the of the start of the diagonal being exceeded lower in less time, and 3) one could put the label iii at the high close on Friday 28 Dec, and label all but today's breakout as a triangle. I have no qualms with doing that. It would be in line with The Principle of Equivalence. However, because wave iii was not on the exterior of the parallel it would not have been as predictive as this original labeling. 

Further, we said the diagonal could still extend until or unless 6,812 were exceeded lower. It hasn't been yet. That statement is still operative, and it explains the timing of some of the retracement waves. There was not much interesting in the wave structure until about 3 pm today when a very, very modest decline began. However, we do now have the SPY cash and the ES futures making new highs on the same day - today. That was not the case yesterday.

Should the market start downward in earnest (which it is not obliged to do, given the internal machinery) the next questions for a wave count are 1) whether either of the cash gaps fills, and/or 2) whether a low under the start of wave i is made or not.

Have an excellent rest of the evening,

TraderJoe

Internal Structure

As best I can tell at the moment, a retrace of wave iii in the ES 1-hr futures would be very shallow and most of it would have occurred during holiday trading hours. So, a deeper fourth wave might be allowed to form until or unless there is downward overlap.

The overlap level in the futures is shown. Since in this configuration wave i is the longest wave, or the extended wave in the sequence, then wave v should remain shorter than wave iii.

Have an excellent rest of the evening,

TraderJoe

Outage - Back Up

Right. The CME Group would like you to forget about this little item. One or more of their data centers went down with no 'back-up' or 'fail-over' response for hours as this chart of the ES futures (SPY/CFD) 5-min time frame shows.

According to a news source:

>>

Commodities futures and options trading on CME Group’s popular platform was halted on Friday due to a technical issue at data centers, the world’s largest exchange operator said in a social media post.

“Due to a cooling issue at CyrusOne data centers, our markets are currently halted,” CME Group said in a statement posted on X. The company said it was working to fix the issue in the near-term.

Dallas-based CyrusOne operates more than 55 data centers in the U.S., Europe and Japan.

A host of commodities and agricultural goods contracts appeared to be disrupted by the outage. Futures prices for equity indices, including the S&P 500 and Nasdaq 100, also appeared to be impacted.

The outage contributed to already slow trading volumes across the globe following the U.S. Thanksgiving holiday on Thursday.

>>

Didn't they learn anything from the NYSE's fail-over response after the 9/11 attacks (putting additional data centers in New Jersey, etc.)? Prechter said in the internet age, issues like this would increasingly disrupt markets. And this one seems pretty tame. From what I can see, they are back up and running. What might we expect next?

TJ

Bias Flip

After contacting the lower daily Bollinger Band and making a new lower low - without having the slow stochastic embed - prices headed higher as might be expected from a retracing wave. In the process, price today closed above the 18-day SMA again, and the swing line has turned to up. So, there is now a lower low and a higher high with a close over 'the line in the sand'.

The retrace, so far is 62%, The prior green (up) fractal has been exceeded higher, but there is nothing to say that upward price movement has ended. The daily slow stochastic is headed higher and is not over-bought yet. 

The best suggestion is to follow the local intraday technical analysis and be cautious in the very high volatility waves, using small positions. Of course, another option is to sit on the sidelines for the holidays.

There are several ways to interpret the current wave count, but they depend on whether or not a new all- time high is made. For example, one could place Minor B at the low, or (c) of minute ((iv)) of the Minor A wave still. But another way to interpret the low is a lower degree ((w)) wave, with a new minor ((x)) wave high possible in a larger compound flat, still for the Minor B wave. It's a truly messy wave situation. There may be other answers to the puzzle, as well. And it's another good reason to just use the local technicals until the situation clears up a bit.

Have a good rest of the evening,

TraderJoe

Gator Flips

If you've ever been down south in the US (deep down south like the Bayou), you may have seen or heard the expression Gator Bites and Boudin Balls. If you haven't, here's a LINK to what it means. Well, with apologies to the phrase, this week the gator took a bite. I'm, of course, referring to Master Trader Bill Williams indicator called the Alligator. As you can see from the daily ES futures chart, below, the Gator rolled over and closed its mouth, taking a bite on prices.

In the process, note that three down (red) fractals have been exceeded lower fully beneath the alligator indicator. We're glad to have caught an instance of this for you, especially prior to a holiday. Why? It is because many people tend to have opinions about the holidays. Some of these run like, "if the bears have Thanksgiving, then the bulls will have Christmas dinner", etc. Or like, "the period leading up to a holiday is bullish, then a sell-off after the holiday".

Yet Bill Williams was a great proponent of having no opinions on the market and thought it was best to just "want what the market wanted". He was especially fond of avoiding the news. Granted Bill was very well capitalized, had deep pockets, and other market strategies, but if having no opinions was good enough for him, why isn't it good enough for the rest? After all, who knows when the politicians will deliver some surprising refrain like "tariff rebates", or "reduced tariffs", or whatever the latest fad is.

An 'opinion' might cause you to miss a gap down on Sunday-to-Monday. Or it might cloud your judgement to the effect that, yes, we did have a correction Friday which was more than adequate for Thursday's decline, but complex corrections are possible. No, clear the head, let the market try to tell you what is coming next.

And so, there comes a time to try just to monitor local technical analysis and see if the gator fractal breaks just recorded will amount to anything. One of the things I like about this methodology is that is says there is nothing bullish on the chart until price exceeds a fractal above the gator. As you can tell, this marries very well with Ira's strategy of there being nothing bullish on the chart until price has closed above the 18-day SMA again.

Another thing to like about this method is that it does not require wave labels - even though these can be useful. So, for example, are we in a Minor B wave, or a minute ((iv))th wave of Minor A still? There can be good arguments for either.

So anyway, unless you're having Boudin Balls for the Thanksgiving Dinner, don't let the Alligator bite your Turkey. I, for one, will be taking some time off, and updates will be a bit less frequent.

Have an excellent rest of the weekend,

TraderJoe

Two Plausible Counts

Today was a reversal day, lower, in the ES futures after the NVidia earnings came out and trading began in the cash markets this morning. Price initially traded higher, sketching out an expanding diagonal which we showed in the comments for the prior post. When the diagonal was complete, slightly beyond the 1.618 extension we cited, then price reversed lower hard and fast.

The Principle of Equivalence requires that I show two plausible and valid scenarios for this wave as in the two-block below of the ES 12-hr futures.

The first count is the expanded diagonal count which is valid in every sense since wave v is longer than wave iii and wave iv is longer than wave ii. If it wants to it can still break lower to 1.618 the length of wave iii. It is not there yet. It does not need to do this, but it might.

The second count is the nested (i), (ii), i, ii count which is valid because ii is less than (ii), and because i is less than (i), allowing degree labeling definitions to hold.

Today closed the gap in the ES futures contract from Fri 10 October. It took quite a while, but this target, target #3 was met. Each of the first three targets (lower Bollinger Band, 100-day SMA, and gap close) were somewhat higher probability targets. The fourth target, target #4, is the 200-day SMA. It has a slightly lower probability of being met, until the current Head & Shoulders on the daily chart breaks down. But, if it does it would be in reach of ⓒ = 2.618 x ⓐ subtracted from ⓑ in the Expanded Flat that we sketched out before.

And this might complete the Minor B wave if that occurs.

Any bounces from here should respect the 18-day SMA since price failed there today. And as the note on the chart shows, either count is free to just break lower if it wishes. Of course, there can be some backing and filling, especially after what we think is a five-wave diagonal we counted this afternoon. It may be a 5-3-5-3-5 diagonal, but some overnight waves need to be looked at.

Have an excellent start to the evening,

TraderJoe

Follow-through Day

U.S. equity prices, as measured by the daily ES futures contract, headed lower overnight and continued lower into the open until about 11 AM. At that point, as the chart below shows, the 100-day moving average was tagged, slightly below the 6,600 level, meeting our Target #2 price. And then there was a bounce.

As of the cash close, the bounce occurred in three-waves, missing a five-wave-move by fractions, and then price headed lower breaking the lower trend line of an upward parallel, and then price again closed below the lower daily Bollinger Band.

Price has not closed the daily futures gap yet (as Target #3), but it could. The market is still quite bouncy in the sense that there is a lot buying on the way down. We suggested whippy action, and we appear to be getting it.

With two closes below the lower daily Bollinger Band, the odds drop to about 4 - 6% that the next close will be below the band (not impossible, but lower odds). The greatest number of consecutive closes below the band as reported by broker Ira Epstein, is typically seven - and a grinding lower scenario like that cannot be dismissed out of hand.

The hourly SPY can still be drawn in a downward parallel, and readers of this blog are encouraged to perform that exercise. As long as it is in a parallel, it suggests downward continuation. 

Tomorrow is NVidia earnings after the close.

Can the bulls rescue the current downtrend? Well, at the moment, the wave down today from 13:30 to the close is longer in price and time than the wave down from 11:40 to 12:35. And the up wave from 12:35 to 13:30 is longer than the prior one this morning. This suggests the primary up path would be by a low probability expanding diagonal. However, keep an eye out if price gets below 6,614 either in the overnight or tomorrow as such a diagonal would invalidate below there. If it busts it would not surprise me in the least. Again, no amount of downside selling would truly be unexpected at this point.

The daily slow stochastic is in over-sold territory, and that bears watching. If price has "latched on" to the lower band, it may force the stochastic to embed. But we are a way from there at this time. So, a word of caution is worth its weight at this time.

Have an excellent rest of the evening,

TraderJoe

Outside Day Down

Today's ES daily candle made a slightly higher high before the open, then traded down in seeming expanding diagonal (or expanding triple-ZZ) fashion to make a new lower daily low coming within three points of the Nov 7 low.

This price action keeps the daily bias to the downside. As of the cash close, the close is below the lower daily Bollinger Band, and this happens roughly only 5% of the time. The daily slow stochastic is also now in over-sold territory, and this is not a condition that generally attracts new short money. In fact, some of the Smart Money may be covering some of their short positions here.

So, this could still be a situation where conditions are ripe for whippy trade. The next two targets, should the market decide to trade lower, are the 100-day SMA (green dashed line) and the prior gap close (purple dashed line).

With today being an outside day down, the outside day guidelines apply: "if the market takes out the high of an outside day down within the next two trading sessions, then it can be a trap for the bears." Otherwise, the bar could indicate continuation lower.

IF the market takes out the Friday Nov 7 low tomorrow, then it will have done it with more speed (that is, more impulsivity) than the prior down leg. And a daily expanded flat as a Minor B wave can still result. But there is no certainty that this will happen as of this time. We can get a lower degree flat, up, wave to form first, or a larger daily triangle can still be in the works.

Have an excellent rest of the evening,

TraderJoe

Not in a Hurry

The first target we cited last week of the lower daily Bollinger Band was hit and exceeded somewhat as seen in the ES daily futures chart, below.

 

After hitting the target and the band, price staged a turn-around to close nearly unchanged or slightly positive. The daily slow stochastic is not over-sold. Price did still close below the 18-day SMA so the daily bias is lower as of this time. We additionally note that the speed of the three-day decline was (sic) obviously faster than the speed of the seven-day decline into the prior Friday's low.

This means - if it comes to it - that this prior Friday's low and the wave leading to it can be a sub-wave of a further decline. Now the question is will any upturn respect the recent Wednesday high, and will it take less time? Currently, the wave count can still be seen as the Expanded Flat in progress. Alternatively, even if a minor new low is made below this recent Friday, a triangle might still be in the works.

Either way, whippy trading can be expected. And we know what that means (flexibility, patience, small size, etc.) until further information is available.

Have an excellent rest of the weekend,

TraderJoe

Gap Close

Yesterday, we counted only three-waves-up to a lower high in the cash market. This suggests a leg of a triangle or diagonal. After some initial price moves higher for the futures last night on the re-opening of the U.S. Government, prices subsequently headed lower, and down through the 18-day SMA. The daily chart of the ES futures is below.

The close of today's bar will likely be in the lower fourth of the bar - which represents weakness. During the session a prior cash gap up was closed. Still, by the end of the day we could only count another three-waves-down. So, a lower low would likely be needed in the next two days in order to claim an impulse formed lower.

IF prices continue lower, then the lower daily Bollinger Band is still a target, and, if that is significantly exceeded lower, then the 100-day SMA would be the next target.

With today's three-waves-down, there is a low probability of a triangle to this point since all the legs since the high on 09 Oct can be counted as three-wave sequences. But the look and the measurements are not the best for a triangle. Still, if that's what happens, we'll accept it. Otherwise, we continue to count downward.

For now, the daily bias is still down, and that should be respected until and price closes over the daily 'line in the sand'. Intraday, the market has not even yet closed up over the 18-period SMA on the half-hour chart.

So, this could be whippy action requiring patience and small positions (if any) until the market makes a few more local decisions.

Have an excellent start to the evening,

TraderJoe

Local Degrees and Count - 2

For the ES futures today, we were expecting further up movement today both because we have counted a five-wave-down sequence on Friday, followed by one up wave, and because there appeared to be some movement on the government shutdown talks, let alone renewed called for direct government subsidies to individuals for tariff-caused inflation. Up movement did occur with a gap-and-grind scenario that left the market at the day's high in quite a strange manner. The wave in cash doesn't channel from Friday, it wedges currently.

The oddity of the wave, and the lack of retraces only suggested an alternate to the second wave up scenario and that would be the fourth wave, (iv), of a diagonal as below.

Please note that some of the terminals used to draw this potential diagonal are different than those used to draw the impulse. I need to note that this pattern has its significant drawbacks which is why it is only an alternate at this time. Some of those draw backs are the following:

• Wave c of (i) looks like three waves, but the 4-hr bars might obscure five waves.
• Wave (iii) is much longer in price than wave (i) when usually in a diagonal they are often very close in price.
• Wave (iv) is a very, very deep wave already.
• We don't know that upward price movement is over.

We show the pattern for completeness, and because the EWO was on a low on Friday's low. Hopefully, price movement will either validate it or invalidate it soon.

Have an excellent start to the evening,

TraderJoe

Local Degrees and Count

Yesterday, we suggested that a short position might find "bad positioning" being initiated too low in the wave count - except for the ultra-nimble. By the close that seemed to come true. Today, using the ES futures we'll show again what we think the local degrees are, and what the wave count is. First, here is the scenario from the Minor A wave high, using the ES 8-hr futures, as shown below. The minute ⓑ wave high is at the 150% level on minute ⓐ.

ES Futures - 8 hr - Minor B Overall

Overall, we are trying to complete minute wave ⓒ of Minor wave B. Friday's down wave portion may have completed minuette wave (i) of that wave. There should be five sub-waves of minute ⓒ, and they should be (i) through (v).

The local down count of minuette wave (i) appears to be a non-overlapping impulse, but one that is a complete mess because waves ii & iv formed in reverse order of typical with wave ii as a long-in-time complex Flat wave, and wave iv as the relatively short sharp for alternation. So, that count appears on the ES 2-hr futures chart, below.

ES Futures - 2 Hr - minuette (i)

Because it is very clear that waves v and iii are clear impulses, I assume that wave i was also and it can be counted that way. Wave v is the longest in the sequence, followed by wave iii, followed by wave i as the shortest. The waves do not channel exactly, but that's what we expect from an impulse. Further, wave Ⓒ of ii was a true diagonal as its low was exceeded in less time than the diagonal took to build.

I have looked at the cases for both contracting and expanding diagonals, but they wound up not following the rules or guidelines. Wave two in a diagonal simply may not be a Flat, or the rules are broken. It 'must' be a zigzag. To me the down waves of the Flat are what I call guard bars in that they actually prevent overlap with wave i by acting as resistance against the up move. I won't break the rules, first, and the guidelines are applied secondarily.

Yes, I too initially thought we were making some kind of diagonal downward. But the market had a different idea in terms of price lengths and formations. Specifically, the up-wave portion of Friday's move is the largest up wave in the sequence thus far, and, hence, it may represent a turn of degree.

The impulse does suggest that we will eventually go below the low of the minute ⓐ wave of the overall larger expanded flat wave - and perhaps substantially so (i.e. 1.618 or 2.618 x from the minute ⓑ wave).

Have an excellent rest of the weekend,

TraderJoe

ES Lower Low Day - 2

With today's lower low the swing line indicator continued lower. Further, the daily bias flipped to down, and this establishes a down trending wave as per the ES daily chart below.

The daily slow stochastic has not broken the 50 level as of the cash close, but neither is it in over-sold territory. If the downtrend continues, the lower daily Bollinger Band would be a first target, and the lower gap close a second target. (There are further targets below that if activated).

For the moment, because of the overlapping structures, we are counting a diagonal downward, currently as a contracting diagonal, but if we need to, we will switch to an expanding one, or a later impulse. More on that as the days progress.

The big news of the day is that members of the Senate are scheduled to have lunch tomorrow. Fancy that! Maybe on full stomachs they will vote to re-open the government. In the dearth of other economic news, one might want to mind one's stops especially closely, as whipsaws might occur in the "we're gonna open; ooops, oh no we're not" scenario or vice-versa.

Have an excellent start to the evening,

TraderJoe

ES Lower Low Day

The interesting features of today's daily ES futures chart are shown below. As most know in the after-hours last night a number of tech stocks were affected by earnings news. That contributed to a gap down in the cash markets. For the futures, it resulted in a lower low day, as below.

The lower low day turned the swing line lower and made a pattern of a lower low and lower high. The problem is that this pattern is still neutral as the pattern is over the 18-day moving average of closes. The bias is up until it isn't. But as we suggested one of the two futures gaps did close today.

Further, price got very near to that 18-day average, and almost tagged it, as the embedded status of the slow stochastic was lost today. The only day it can be gotten back (without rebuilding the whole three-day sequence) is tomorrow.

Another observation of this market one can make is that the New York Composite Index (NYA) did not make a higher high in mid-to-late October as did the indexes that include the Mag-7 stocks, as below.

This is a very telling intermarket divergence that should be respected until or unless it can be shown to be broken. This index has the classic look of a B wave that rises to 90 - 100% and has since headed lower.

Have an excellent start to the evening,

TraderJoe

ES Inside Day

On the ES futures daily chart, today was an inside day, holding closely to the center of day. As such, and with the higher close, it can temporarily change the swing line indicator to up again. Price is still above the 18-day SMA, so the bias remains up, and the daily slow stochastic is still embedded.

We also note that neither of the two downside futures gaps have closed yet. We'll be watching closely to see if and/or when those gaps might close. For the moment, a higher high remains possible, and a (b) wave up can complete whether there is a new high or not. The eventual expectation is that the futures gaps will close, as gaps in the futures typically close faster than those in the cash market.

It seems somewhat odd that the market did not have a more robust upside response on the major news of deals with China and/or the FED feeding the reverse repo market - especially given today's position of the first trading day of the month. Even if a new high is made, are these signs of a tired market? We shall see.

Have an excellent start to the evening,

TraderJoe

DOW Ekes Out its Own Alternate

Regular readers of this site simply know by now that we have been counting out a contracting ending diagonal for the Dow and the SPX for months and months. That Elliott Wave count comprised of three-wave sequences is shown on the 2-weekly chart of the Dow futures in log scale format below in blue. Because I have gone over it time and again, I won't spend much time on the count details. Readers should review it.

Dow Futures (YM) - 2 Wk - Diagonal Count

The reasons the above count 'works' to the extent it does are the following: First, in log scale, reflecting inflation over a long time, wave (3) is much less in price than wave (1). The Fibo scale on the upper left shows that (3) is less than 0.786 x (1). Second, wave (4) overlaps wave (1) and is shorter than wave (2) on this scale. Third, in 147 bars, the count follows The Eight-Fold-Path-Method with the EWO dipping below zero for wave (4). And fourth, there are no time or price degree violations in the count which seems to agree with the degree definitions as well.

But The Principle of Equivalence says we must at least be aware of potential similar counts and see what they suggest in terms of eventual market progress. And, to honor that principle, we note that just this week the Dow and its futures eked out a longer wave on an arithmetic scale than its wave (1). We commented on this several times back in January that the S&P500 had made a longer wave up, but the Dow hadn't. It seemed odd. With that in mind, here is the alternate in the Dow.

Now note that, again on arithmetic scale, wave (3) is now slightly longer than wave (1). So, that would suggest the alternate of an expanding diagonal, rather than a contracting one, but again, only on arithmetic scale. So, automatically, one factor against this alternate count is that it doesn't account well for the considerable experienced inflation over the five-year span. Second, to count this wave there would be a degree violation that we have written about repeatedly that circle-ii, or ((ii)), would be longer in time than Intermediate (2), the next higher degree wave in the same direction, and this would seem to be a degree violation. Third, this count would not reflect a fourth wave where the EWO drops below the zero line in April of this year.

So, The Principle of Equivalence suggests that we keep the original diagonal as the main count. We have done "due diligence" and looked at the alternate suggested by the arithmetically longer wave (3), but it still has a number of drawbacks and is not as compelling at this time. So, we stay with the main count, with a sharp eye on the alternate in the back-of-one's-mind. Why? Because there is no clear evidence that price has started retreating yet, as it will inevitably do one day. Also, while Elliott said to chart in both arithmetic and log scales, he did not say how to resolve conflicts between the two.

Further, if there is a recession and/or the FED does something unexpected, as they did on Friday, by easing the situation in the reverse repo market yet again, then it could further bend or morph the count by changing the value of the yardstick further, creating the false impression of higher prices, relative to GOLD, say.

Lastly, we have not seen the impact of inflows that might occur as of the first trading day of the month, even though many sentiment indicators are getting red-hot in terms of the percent bullishness. So again, patience, caution and flexibility continue to be vital tools in understanding this market.

Have an excellent rest of the weekend,

TraderJoe