With all the whippy price action near the high, traders might feel a bit like a punching bag with certainly some black eyes to show for it. This would be expected. On the 4 Hr chart of the SPY below, today's low beneath the low of 20 December 2024 at least suggests that sketching in the base channel as we proposed a few days ago was the correct exercise.
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| SPY Cash - 4 Hr - Base Channel |
Still, the Principle of Equivalence tells us not to go over the deep end at this point. The black and the blue counts should be viewed as equivalent within the realm of probability, with a slight preference for the black count. Why? Well, let's look at three prominent features of the chart.
The first is that there may be a failure swing on 06 Jan 2025. Note: it's clear that because the ES did not make a new low on 02 Jan, but the SPY cash did, this is likely a "b" wave flat location, and the up wave is a strong "c" wave. And because of the failure, it could signal a strong downward wave to come. The second is the number of gaps to the downside, so far. The count is getting third wave-like but just doesn't have the needed length yet. Third, if the up wave is a second wave, it is quite deep for a second wave. Possible - but also in "(b)" wave territory of 78.6% or so. The first two factors provide the slight preference for the (i), (ii) count. The third factor leans in the direction of the blue count.
Once again, although this blog is not about buy or sell signals per se, price is below the 18-day SMA and so the bias is to the downside on the daily chart. So, almost no price movement lower will be a surprise. But we need to get out of the whippy 1-2 type conditions and see additional acceleration for impulse characteristics lower.
Also note, although daily fractals are breaking lower on the daily chart, price is down to the lower daily Bollinger Band combined with the 100-day SMA. The daily slow stochastic is also in the oversold area. Further, on the weekly chart, price has just closed below the weekly 18-SMA. So, for now, the weekly bias is lower, too. But the weekly slow stochastic is not in oversold territory or near it.
Have an excellent start to the evening and the weekend.
TraderJoe
Thank you, I prefer the B wave scenario with C being formed now. The rsi is pretty low and the weekly BB, which should be major support, is near 5600 and so is the 200ma. We lost the weekly 18ma, so that lower BB area looks good for at least a temporary target, maybe very quickly.
ReplyDeleteAnother value of that channel is how price reacts to the lower line. If we are in a third wave, it will likely be breached in short order!
DeleteIt is often helpful to consider other market signals when trying to navigate the EW ambiguity of abc vs 123. In addition to momentum indicators and moving averages, the number of new 52 week highs vs lows is a metric used to determine when a Hindenburg Omen is triggered. Fwiw, we currently have three official H.O.s on the clock. Not ever warning leads to a market crash, but there has never been a market crash absent a H.O..Three on the clock simultaneously seems noteworthy.
ReplyDeleteNotice the changes in direction are on the LOV dates
ReplyDeletehttps://www.tradingview.com/x/in62Qs2t/
In the futures the triangle is more obvious..it will be clear by Tuesday if this is a triangle or not. The scenario i see if there is some buying on Monday/Tuesday which will be a E wave and then cpi report on Wednesday break out of triangle to downside.... just one of many options out there at the moment.
ReplyDeleteIf that happens any subsequent move down would be a C wave as a triangle would rule out a second wave.
DeleteYes and then inauguration euphoria would result in upside moves. D and E of bigger triangle with a breakout uoside if some new bill in presented by Trump abt tax cuts etc
ReplyDeleteA new post is started for the next day. TJ.
ReplyDelete