While there is a tendency here to call your favorite pattern, and bend or break the rules to do so, there is usually no need. As we showed last week, the up wave was literally ambiguous: it can be counted as either a three-wave OR a five-wave sequence (although we think it 'best' counts as a 'three'). So, there is one way the market could have topped, and that is with a failure in some indexes and the new all-time-high for the S&P500. That is shown as the second option, in the upper right, below, in red as it must be an alternate at this point. An alternate, yes, but still a fairly high probability one (roughly 25 - 30% odds).
But other patterns the market could be sketching out include the expanding triangle (upper left), the double-combination Flat (lower left) or a continuing fifth wave or diagonal (lower right). They have similar odds.
We do note today that the downward retrace of the recent upward wave is 62%. That gives the best option yet that there may be a diagonal in play. But there simply is no telling for certain.
It is what I have termed The Fourth Wave Conundrum: the thirteen patterns possible from just three-waves down off a recent high, and it occurs at every degree of trend.
What is important now is to monitor for new highs or new lows and to continue to follow the rules to determine the appropriate pattern.
Have an excellent rest of the day,
TraderJoe
I really appreciate your quickly sketching out the ALTs. The one problem I'm seeing here is that ONCE AGAIN, the equity markets are quite fragmented. The downside is NVDA centric, while banks, rtk, and dow aren't terriby fazed ... yet. Perhaps, this 'hissy fit' is what tech needed to bring it back in synch with the broad mkt, as it had been leading to upside. So, different w4 strokes for different folks?
ReplyDelete"Once more into the breach..." Methinks Mr Market aligning all the indices for new ATHs.
ReplyDeleteFutures is looking like abc from the low in the form of a rising wedge. Put/call from y charts still historically very low at .52 and supposedly retail traders heavily bought the nvda dip yesterday. No fear in the market whatsoever.
ReplyDeleteIf an open gap this close to an ATH is not filled I would be stunned! Doubt that gonna happen...! ,😊
DeleteES 30-min: from the intraday wave-counting-screen, the market keeps making the self-contradictory patterns of diagonals or triple zigzags. This makes it impossible to tell until the high or low is exceeded. Contracting leading diagonal is labeled 1 - 5 in black. The triple zigzag is labeled w-x-y-x-z in blue.
ReplyDeletehttps://www.tradingview.com/x/d0uvH5To/
TJ
Wouldn't in effect self contradictory patterns be evolved states of more efficient, not manipulated, markets and waves?
DeleteI think that is absolutely the case, and has been for several years now. I first noticed this when traditionally bearish patterns became bullish ones. I actually cited patterns and instances and there were literally dozens of them. One would have to be blind not to see this.
DeleteThey are just an example of "The Principle of Equivalence", which I have cited here many, many times. Two counts are the same until they are not. They are not 'more' evolved, or 'less' evolved, or more efficient, or less efficient. The market waits for the 'Smart Money' to make the big move, and tries to catch the dumb money in the reversal. If anything, because 'size' matters, it is an example of quite extreme manipulation when the Smart Money runs the "news reading program" at this morning's 10 AM Consumer Confidence number for example. Retail can not compete.
DeleteTJ
I also noticed this very frustrating development, after ~2009, when previously reliable patterns in the S&P 500 Index seemed to almost automatically take the reverse direction that would have been expected.
DeleteAt first I thought that this was due to the market being in a corrective pattern (complex corrections of corrections, etc.), but then it began to dawn on me that the algorithmic trading of market makers and other "quant" participants, which had begun to take over the market volume, had been programmed to recognize, or even CREATE these false patterns! Thus drawing as many traders as possible into one side of a trade, and trapping them -- in order to drive the market in the desired direction (short and/or long term).
For those who can remember, back in the day, this was a time when some people still thought it was "conspiracy theory" to say that the Federal Reserve would or could actually intervene in markets directly! Then we heard the new terminology of "Quantitative Easing"... and here we are now, more than 5000 SPX points higher! 😂
Again, "when two things are equivalent" - the Principle of Equivalence - there can be no "expected" directional pattern. And, yes, the FED can intervene with 'size' and change the character of the market. And again, retail cannot compete with them. And it is another example of market manipulation because the FED's operations are not even completely transparent or broadcast in real time. TJ.
DeleteThis raises a fascinating question about the thesis under-girding EW theory, namely, that price is solely a function of "herd' mentality. Clearly, a smaller cohort with deeper pockets are the ones controlling price, and not necessarily majority or "herd" sentiment. I have rarely seen this aspect of EW theory discussed. Prechter maintains the FED does not affect market price, a remarkable notion!
Delete@tachyon .. this aspect of trading pre-dates EW theory. Here is but one example.
DeleteBaron's Pigeons
TJ
Great "Bird's Eye" view, as it were! I think two things still give the "shallow pockets" a fighting chance. First is the fundamental driver's of fear and greed universally apply, irrespective of "pocket depth". Second, the principle of "mean reversion" is immutable. Deep pockets are not immune to greed. and when such greed is combined with leverage, well...you get my drift...target rich environment.
DeleteES 30-min: blue count invalidates.
ReplyDeletehttps://www.tradingview.com/x/UOl6StmO/
TJ
the 1 2 3 4 5 doesnt measure right as a diagonal for me
Deleteyou're just being argumentative lately. TJ.
Deleteno. im asking about the count not arguing.thanks
Deletethe waves 1,3,5 have 14, 8, 18 bars. if its a contracting diagonal i wouldnt expect to see the longest wave as the last. perhaps because those waves occurred overnight its not an issue?
Delete@marc .. I wrote you extensively before with examples that the timing in a diagonal can be squirrelly (I showed you the 2015 top as a specific example). This is especially true if the waves happen in the overnight. There is no 'rule' for the timing in a diagonal, just a 'typical' expectation. TJ.
Deleteyes thanks again
DeleteIf 5th of the move down was extended then this wave up should target the start of 5th of A or 1
ReplyDeleteIf that happens, Jack, I think it should close the large SPX gap between 24/27 January.
DeleteES 5-min: it's wave x1 that creates all the issues via the "news-reading algos". It occurs for the 10 am bar.
ReplyDeletehttps://www.tradingview.com/x/4L1yMbDj/
TJ
..now over the top again, in five waves with alternation. TJ
DeleteES 5-min: the EWO has gone green again as expected in a fifth wave, yet it should still diverge when 5 is done.
Deletehttps://www.tradingview.com/x/BNrBwHXV/
TJ
Yep. Mind the gap!
DeleteIwm and transports both weak today. Iwm definitely looking like a small impulse down yesterday with a correction today.
ReplyDeleteES 30-min: from the intraday wave-counting-screen. Arguably 'at this time' there are only three-waves up, labeled A,B,C. But The Principle of Equivalence says we have no objective criteria to say that the up wave is over, such as overlap.
ReplyDeletehttps://www.tradingview.com/x/CgMlZ4OG/
Therefore, the two counts A/1, B/2 and C/3 'must' be considered equivalent unless and until there is more information. For example, IFF the larger daily gap fills without overlap, it might be the larger A wave up of minute ((iii)) of a larger diagonal. You can have opinions, you can have guesses, but objectively the ES daily bias is still 'up' being over the 18-day SMA until it isn't.
TJ
Thanks for your expert analysis, as always, Trader Joe. 😊
DeleteWelcome HG. TJ
DeleteOne comment about the "little guy" being at a disadvantage - true, the market movers can move the market the way they want. But a smaller trader can have several advantages - one is flexibility to get in and out of positions quickly - the big guys have to load up their positions (and unwind them) over time. The second is they DO show you what they are doing - through volume bars, which I find more and more essential.
ReplyDeleteAgreed. People generally are talking about trading, as opposed to investing when they cite the "Little Guy" disadvantage. These activities are not the same. Buffet's advice about fear and greed may apply to investors but is the polar opposite, imo, of how traders should think or you end up fighting the trend. Market whipsaw of late has been the theme and a scalper''s playground. And of course, the BTFDippers. A big change is coming...,😊
DeleteExactly so Walter. And some of the really big guys can only be long, or must stay fairly fully positioned. Re volume, I made that point here a few weeks back wondering if there's room in some more formal way for volume (like others try with time) in using EW.
DeleteYeah but those big guys also have machines that whipsaw traders out of positions, including those trading EW before market moves. Those machines, apparently, love three wave moves tortured into triangles within triangles within triangles. People like impulse moves so the path forward becomes cleaer. Machines laugh as they no impulse today.
Delete@pedro; one can look for 1) increasing volume to reinforce the trend (blue curve), 2) peak volume to indicate a possible turn, and 3) volume divergence to see if the turn holds or not. But it does not provide guarantees, probabilities only. This morning's example shown below.
Deletehttps://www.tradingview.com/x/xUySrHHD/
TJ
TY for that ET. Just wondering if some kind of volume indicator might be suitable, to pair with the AO. I use a customized volume indicator (smoothed) in my own work, but I haven't aligned it with EW.
Delete@pedro .. the problem with an indicator - which is usually smoothed is how do you get it to recognize the 'opening bar' difference from the overnight, as below, unless you only analyze the cash market??
Deletehttps://www.tradingview.com/x/8qOoAQoI/
TJ
ES 30-min: (From the intraday wave-counting-screen), so we are here at about 100 candles, and the 0-2 trend line has been touched. So far, there is no overlap. Any higher high with the cash market open would likely be an impulse.
ReplyDeletehttps://www.tradingview.com/x/7UI1UuPW/
There is a 'potential' wave 4 signature in the EWO. Let's see if it holds or not. There is not a lot of news until FED time scheduled for 14:00 ET.
TJ
The overlap warning has been triggered in futures. Not fatal, but not real good either.
Deletehttps://www.tradingview.com/x/jzNWRI20/
While it's possible to see the overnight high as "5", it leaves one wondering about the cash market.
TJ
Overlap in futures..
ReplyDelete..as above. TJ.
DeleteES 1-hr: just for illustration, because b-3 is shorter in price & time than A, then it might be possible to count this way and maintain degree relationships.
ReplyDeletehttps://www.tradingview.com/x/s9rSIOPr/
I personally wouldn't put any of my money on anything given the FED this afternoon and tech earnings after the bell.
TJ
Absolutely! If ever there was a S.O.H.(sit on hands) scenario, this is it. Lol!
Delete(From CNBC) "Fed holds rates steady, takes less confident view on inflation"
ReplyDeleteTJ
Algos running amok! Lol!
ReplyDeleteES 30-min: intraday wave-counting-screen. Down wave is 78.6%. Watching up wave. Triangle or expanded flat possible.
ReplyDeletehttps://www.tradingview.com/x/aGNbyQgV/
TJ
Here is my Fed day chart.
ReplyDeletehttps://fred.stlouisfed.org/graph/?g=TSH7
ES 1-hr: cross below 6,073 needed for triangle (or lower for expanded flat).
ReplyDeletehttps://www.tradingview.com/x/cAakvh0G/
TJ
ES 1-hr: here's where things sit after the housing numbers (-5%).
Deletehttps://www.tradingview.com/x/XOMvkBZF/
TJ
TJ, Do you think gold is making a b wave?
ReplyDelete'Plausible" until 2,900 - 2,950 for an expanded flat or 3,000 for a running triangle. But no guarantees.
Deletehttps://www.tradingview.com/x/BAHjrT5x/
TJ
Thank you for your input!
DeleteYeah seems to be we just completed B in the morning of this triangle and now c
ReplyDeleteES 6,070 has been hit (below 6,073) a triangle has been validated. Lower would be an expanded flat, but certainly not required. High might be a ((c)) wave of ((a)), ((b)), ((c)). Chart to follow.
ReplyDeleteTJ
Chart of hourly valid potential triangle in ES.
Deletehttps://www.tradingview.com/x/JXbGkiZN/
TJ
When you have it figured out in live mode...that's a great feeling and could result in a good trade
DeleteOr D and E
ReplyDeleteES 30-min: from intraday wave-counting-screen; back to 18-per SMA. TJ.
ReplyDeleteD completed
ReplyDeleteES 30-min: triangle count confirmed by trading over the top in what still looks like a third wave up from the (e) wave low. TJ.
ReplyDeleteGreat call on the triangle, TJ!
DeleteThx HG. TJ.
DeleteES 30-min: new down wave overlaps after five-up. Watch the low. Right now, it "can be" a second wave, but not below the low.
ReplyDeleteTJ
ES / SPY (CFD) - here are the five non-overlapping waves up to the new high above the triangle before the 'spill'.
ReplyDeletehttps://invst.ly/18ou-y
Apple earnings are out; some aspects miss and some sales projections lower.
TJ
NVDA - https://ibb.co/GQh7gSLM
ReplyDeleteA new post is started for the next day.
ReplyDeleteTJ.