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

It's Summer 🔥

Readership is down as is usual at this time of the year. Everyone's hitting the beach or their camp to try to stay cool in the heat dome. The tried and true 'Wall Street' expressions of Sell May & Go Away did not work again as they have failed so often. So, we'll just chill and show you the same chart we have been showing for months and months, remembering that since there are so many years now involved, including years in which inflation was rampant, we have switched to log format as Elliott advises.

We have been counting this wave using 'degree labeling' the way it is defined: longer waves are higher degrees. Thus, Primary ④ down is longer in time than Intermediate wave (2), down and longer in 'log price' or percent change. And Minor A wave up of Intermediate (3) is shorter in price & time than all of Intermediate (1), up, the prior highest degree wave in the same direction.

So, if we have entered Intermediate (5) of Primary ⑤, as the new roll-over futures high suggests, then Minor A should remain shorter than all of the previous Intermediate (3), the prior higher degree wave in the same direction. We are looking to confirm its closure, now, along the upper diagonal trend line. And Minor B should remain shorter in log price than Intermediate (4) down - the prior higher degree wave in the same direction.

If and when Minor B gets under way, we just provide the reminder that it could be "any three". It could go over the high again in an expanded flat. Or, perhaps more likely, it could be any of several types of triangles. Those triangles could potentially take months if they occur.

So, drop another cube in the lemonade. It may have to last a while. Have an excellent rest of the weekend.

TraderJoe

Less Absurd

Today in the comments for the prior posts I posted links to two charts I labeled as "Patently absurd" but still following the Elliott Wave rules. By the end of the day those counts had busted by narrow margins as I expected they might. Part of the reason for posting the links was to show what wild things are possible under the wave rules unless a good measure of adherence to the guidelines of wave formation is also thrown in the mix. So, below on the ES daily chart is the best interpretation of the current state of the waves given the extent of today's up movement. The key is not to let the truncation in the lower left be ignored.

ES Futures - Daily - To Minor A

I tried counting without the truncation, meh, I wasn't happy with the results and measurements have since likely busted. I did suggest in prior posts I could see a way we were still in the Minor A wave, but it needed new highs. Today provided them. And there is no sign the up wave is over. A clear reversal candle set, and a break of the new trend line is needed along with a back-test that fails. So far, we haven't had that. The truncation at the low, and the "running fourth wave" both spell strong conditions. 

And, the ES 2-hr chart which is its analog is shown below. The two waves are so self-similar (i.e. fractal) on different time scales it gives one goose bumps to consider it.

Yes, this sure is a weird wave minuette (v) of minute ⓥ. It is hugging the rail along the lower parallel line and keeps threatening - like a summer rainstorm that doesn't happen. But at some point, in the not-too-distant future, it should have a clear turn. The lack of fourth waves that don't make their downside targets is a learning experience to have up here at these extraordinarily high prices and against the daily Bollinger Bands.

Have an excellent rest of the evening,

TraderJoe

Don't Swear

I can't swear to it, but I think this is how it goes in the hourly ES futures. The expanding diagonal off of the low meets the correct length requirements for each of the segments and is deeply retraced.

ES Futures - 1 Hr - Channel

That is i/a and ii/b, the MACD indicates a strong third wave following, and for alternation, there may be a Flat wave following. The alternate is that there was an overnight wave as iv which is complete in a wedge count and the majority of today is the v, up, of the wedge.

So, the parallel is drawn in - as are the retrace waves off of wave iii/c - which ended at the location of a prior ④th wave. But because that was only a 23.6% retrace, the question is whether a deeper 38 - 50% retrace wave will be made possibly beginning in the overnight tonight.

The alternate is given as this is a possible minute ⓑ wave up of an expanded flat, after the minute ⓐ wave down, shown in prior posts, and 'B' waves can be very, very testy.

There are other alternates (such as locating all of the Minor B wave low where minute ⓐ is shown or locating minute ((iv)) of Minor A at the same location. If so, five waves up would end Minor A and we would try for a Minor B wave down, again!) But there is insufficient evidence for them at this time. So, we need to take it a step at a time and resolve a wave at a time.

Have an excellent start to the evening,

TraderJoe

One-bar Detour

We were expecting upward price movement today, and - eventually - that happened. But not before prices started out lower as the result of the war actions over the weekend. Those dropped the market on a futures gap, and the first four-hour bar of the overnight session was a lower low with a close in the upper 1/3rd of the bar as the ES 4-Hr futures chart, below, shows. See brown arrow. The drop was never seen on the opening bar in the cash market. This has often become a sign to me that the PPT (Plunge-Protection-Team) or duly authorized President's Working Group, as it is formally known, is active in the markets. Having a bit of a skirmish, are we? Let's make sure the markets are protected from it.

So, the overall count remains the same. What changed is that the contracting diagonal downward to the (c) wave morphed into an expanding diagonal to that same (c) wave where all the legs are still zigzag 'threes' but now the wave lengths are v > iii > i, and iv > ii with iv overlapping wave i, but with wave iv not traveling beyond the end of wave ii. In the prior post I commented on how the up wave 'ran into a brick wall' at wave ii. And now you know the significance of that. It was 'marking its turf' that wave iv could not exceed wave ii.

Thus, we still count three waves down to minute ⓐ, and that could allow a 90% or greater wave up as a minute ⓑ wave, or something else as a minute ⓧ wave that does not have the 90% requirement.

Note the MACD histogram is positive, and the MACD line is just now crawling above zero, although the signal line is not positive, yet.

From a daily Bollinger Band perspective, price had closed Friday under the 18-day SMA and so had negative bias. The futures followed-true and make a lower daily low bar but ran into the combination of the 200-day SMA and the lower daily Bollinger Band where they found support. Today's bar is an outside-day-up, which is to be respected until its low is exceeded lower.

Have an excellent start to the evening,

TraderJoe

Three-Ways (2)

The front month futures currently show the clearest, countable pattern in the four-hour time frame. As we said earlier the initial pattern is a 3-3-5 Flat pattern, as below.

ES Sep Futures - 4 Hr - Flat Pattern

This makes the low on the 19th either a minute-ⓐ or a minute-ⓦ wave. These down waves - and their hesitation and halting nature - likely represent the "battle for the 18-day average" back on the daily chart.

The current up wave seems unresolved currently because a slightly larger parallel can still be intact. The question is how high a minute-ⓑ or minute-ⓧ wave would go. For example, Friday's c wave stopped almost precisely at the level of the prior ii wave, up, of (c), down. There is a non-zero probability that the up wave is over, and, if so, because it did not reach the 90% level it would be the minute-ⓧ wave, as in the pattern known as a Flat-x-zigzag. The zigzag extends the wave lower. Otherwise, if the 90% or better level is reached, the multiple-flat (double-three or triple-three) pattern might be in play.

For those considering the structures shown, we note that the (c) wave is longer-in-time than the (a) wave down. This again means that the two waves should be of the same degree or else the (c) wave down would be of one-higher degree. For the moment, we see them as the same degree as their price extents are very, very similar.

Have an excellent rest of the weekend,

TraderJoe

Three-Ways

You've heard of "Freeways", right? Where traffic is supposed to zoom along like I-15 to Las Vegas, right? Not like the "405" that crawls you down to a crunch stop on the way from LA to San Diego, right? Well, today's market, so far, in front of the Federal Reserve announcement, dot-plots, and press conference is more like the latter, but what I have termed temporarily "Three-Ways".

ES/SPY/CFD - 2 Hr - Three-wave Sequences Only

As of this morning anyways, the two-hourly ES/SPY/CFD has only three-wave sequences. And last night's up wave was longer than the immediately prior b wave. Further, note the downward c wave stopped around that 78.6% level which could indicate a triangle.

So, the bottom line is that highs or lows need to be broken to get out of this mess. A triangle is possible, overall. A downward diagonal is possible for the most recent wave. Fittingly, the front-month ES contract is only down to the 18-day SMA as of last night with the daily slow stochastic in over-bought condition only (not embedded) - and this is where it often goes in front of major announcements.

ES Sep Futures - Daily - Bounce from 18-day SMA

So, be careful as whippy conditions could prevail. Lots of valid Elliott Wave structures are valid from here, so it is more a case now of ruling out what becomes not possible - or less possible - based on price lengths made today. On the first 2-hr chart, one might especially watch the 78.6% upward level in the triangle eventuality, or the low of the c wave in the downward diagonal eventuality.

Have an excellent rest of the day.

TraderJoe

Cash to 90%+

After three-waves down we noted over the weekend, the SPY cash index went to the 90% level, plus some, as below. The current front month (June) ES contract did also. The roll-over contract went to the level of 1.236 times the down wave.

The ES price is still over the 18-day SMA. The bulls are still in control. That being the case, a (b) wave of a Flat, Expanding Flat, running Flat or of some of the kinds of triangles is still possible, but no conclusions are reached as of this time.

Have an excellent rest of the evening.

TraderJoe

The Extended First Wave Count to Minor A - 3

On the daily chart not too much has changed with the recent hostilities. In terms of the wave count it remains the same, as below. Confidence has increased slightly because, over the last couple of days, a longer wave down has been made than the (e) wave of the triangle, and it traded below that level, as well. Since, triangles often precede the last move in a sequence, there is some greater level of confidence that a top is in place temporarily on the ES daily chart, below.

ES Futures - Daily - Minor A

This also means that the break of the wave ((ii))-to-((iv)) trend line (circle-ii to circle-iv) occurred in less time than wave ((v)), circle-v, took to build. Neely adherents will recognize this as the first step in the confirmation process. Trading below the (a) wave, and possibly filling the higher of the two open gaps would be a good second step.

We say - and we mean - confidence precisely because we are always just dealing with probabilities and odds. For example - at present - we only can legitimately count three-waves-down, so far, on the hourly chart shown below.

ES Futures - Hourly - Three Waves Down

Notice the very precise Fibonacci relationships where - at the b wave high - wave Ⓒ = 2.618 x Ⓐ, and at the bottom wave c = 1.618 x a. Again, this just reinforces three-waves-down in the futures. Then, for the up wave, notice that it is longer in price than the b wave, up. Therefore, it is either of the same degree or one higher degree. At present, we are showing it as one higher degree. However, IF it is of the same degree, then it is possible a triangle is forming (we'll deal with than one if Friday's low is not exceeded lower).

Then, notice the Elliott Wave Oscillator (EWO or AO) is really only showing a significant trough, a hump above the zero line, and another lower significant trough. So, this looks like only a three-down, with a flat for the b wave.

This does not mean it can't start a diagonal lower, but lower lows are needed to prove that case. And if a diagonal forms, then the five minuette waves down, (i) through (v), would form minute ⓐ wave down, because it would take three minute waves, ⓐ-ⓑ-ⓒ to form the minimum Minor B wave down.

The bottom line is more length in the Minor B wave is probably still necessary. Readers of this blog should also plot the daily Bollinger Bands with the 18-day SMA and daily slow stochastic to see that all we have been doing is "fighting the battle at the 'line-in-the-sand'." A close below that 18-day SMA is needed to be a more convincing onset to the correction. So, try not to rush the counts. There are only three-waves-down, so far. The bulls are technically still in control until they are not. Legitimately, the three-waves-down means travel over the top is still possible until / unless Friday's low is exceeded lower.

Have an excellent rest of the weekend.

TraderJoe

The Extended First Wave Count to Minor A - 2

The lack of progress on the Minor B wave downward despite overlap, after overlap, after overlap suggests that perhaps Minor A is still underway with a triangle for minute ((iv)), circle-iv, on the ES daily chart, below.

The remainder of the counting process and conclusions remains the same. Further, we do not know that upward movement is over.

Have a good start to the evening,

TraderJoe

The Extended First Wave Count to Minor A

The concept of this chart has not changed since it was originally published on May 29 at this LINK. It is still The Extended First Wave Count to Minor A. It is now out to 130 candles, and it is still the count that 'best' meets the rules and guidelines of the wave principle, and which follows The Eight-Fold-Path Method for Counting an Impulse Wave. The ES 8-hr chart is below. Please remember that double parenthesis, i.e. (( )) is the same in text as a circle, for minute waves. Thus, in text ((i)) = ⓘ and so forth. With that in mind we have added some recent details.

In the extended first wave count, then, wave ((v)) < ((iii)) < ((i)). Notice wave ((iv)) is actually somewhat longer in price than wave ((ii)) but does not overlap wave ((i)). This is likely a key that the count is correct because the two waves, ((ii)) and ((iv)), should be of the same degree - or else ((iv)) is of one higher degree, since it is longer. My contention is that they are of the same degree. Further, note that all of wave ((iii)) is above a 0 - ((ii)) trend line. And wave ((ii)) is much less than 38% which typically indicates an extended first wave.

We are now likely in the Minor B wave, and in the (b)-3 wave of a B wave at that. So, wave counting here is ugly. That said, sometime soon the first (c) wave lower should occur.

Also, the leading contracting diagonal for wave minute ⓘ should mean that the fifth wave of A, minute ((v)), circle-v, should not be a contracting diagonal by the Principle of Alternation.

If/when the (c) wave lower gets underway it certainly could be an impulse, but it could also be one of two types of diagonals (contracting or expanding), depending on how slow or fast the algorithms want to go. Still some larger down movement should occur to better signal the onset of the Minor B wave.

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

TraderJoe

Doji & the Seven-Gaps

Like the title of a bad alt Disney movie, today's SPY contract gapped up starting way before the tepid Payroll Report. We warned we could see some vicious retracement and used the hourly EMA-34 as a marker, but price far exceeded that level and made a new local higher high which is still in an overlapping wedge shape. Price then waffled around lower, making a double-zigzag lower only before heading up near the open to create the Doji bar. Today's gap up created fully the seventh unfilled gap upward, as the daily SPY chart, below, shows.

While the higher prices overall are great for investors, currently, the numerous gaps on the chart, which is not a first, continues to make wave counting a bit more difficult. For the interim, yes, there is an overlapping wedge shape near the high. We pointed out several of those overlaps in yesterday's post. And today added more overlaps to that list. It can still be part of the (b) wave higher as the price difference overall is minimal.

But our most prescient concern is what happens when the algorithms reverse and go "gap hunting" to the downside? At some point that is still likely. Let's just hope they don't go for all seven at once.

Notice 1) price has pulled away from the upper parallel and has made a turn to the right, which is a slowing of momentum, 2) there is still MACD divergence, 3) and also have a gander at green volume here. We have drawn in just one Fib line. Today was the 1.272 from the initial leg of this mess, and the close was almost dead on it.

There are no certainties here, but the wave count feels very much like B wave territory. I don't think the retrace levels are deep enough to consider diagonals.

So, I did get the call to a (c) wave of a larger B wave incorrect for the day. No doubt about that. And, even still, as frequent readers of this blog know a single-candle pattern - such as a doji is insufficent to call a turn. Much better to have a significant closing lower candle. So, Monday could even trade up again, and reverse, or wait until Tuesday to reverse.

What I just really shake my head at as the chart clearly shows how much risk there is up here, and the complacency is amazing to me. Pick-your-gap fill, right?

Have an excellent start to the evening,

TraderJoe

Bouncing Around in a "B" wave

Our count presupposes that five-waves-up to a Minor A wave, up, has been made and is in the rear-view mirror as shown below on the left in the ES hourly chart. We are now bouncing around in the Minor B wave as given by today's false break-out higher and overlap lower.

So, we suppose that a (c) wave lower is underway, and this may dovetail with the reaction to the Payroll Employment Report tomorrow. Since sharply higher prices are still possible, say to the EMA-34 or so, provided we do not go over today's cash high, it behooves one to use the utmost caution reading these waves.

As we look at the daily chart below. We see that price did close over the 18-day SMA, and so the daily bias is still up. Price did rise to tag the upper daily Bollinger Band and then fell off in an outside-day-down. And both cash and futures technically made their highs on the same 'day' - just not the same hour of the day.

Price then went down near the 18-day SMA and bounced a bit. It is possible that if we make a (c) wave down that it is only "one leg" of a correction - like minute ⓦ of a complex ⓦ-ⓧ-ⓨ which could be something like a Flat-x-zigzag to help give the correction some length. Remember, "B" waves can be "any threes". And maybe on the daily chart such a correction would help form a better daily parallel.

This is one of the myriad possibilities for a B wave. A 'multiple Flat' would surely be another. Still, we are looking for a count that provides some downward length - and perhaps overlap - to differentiate it from other counts. So, we'll stay loose and flexible. The next milestone would actually be a close below the 18-day SMA to suggest that the daily bias has changed. The slow stochastic tonight is only around 77, and if stays below 80, it might indicate that price will again try to attack the 18-day SMA.

Only time will tell. For now, there are overlaps galore, and we are following the 'rules' as best we can. 

Have an excellent rest of the evening.

TraderJoe

Three & three ?

On the SPY 15-min timeframe, we do not know that the up wave is over even though it shows signs of tiring. But, so far, the best count is :3, down, and :3, up, to now more than 90% of the prior cash high. As always this is a sign of a potential "b" wave of a Flat, or expanded flat, or the next impulse wave up. See the chart below.

SPY Cash - 15 Min - 3-3- ?

Since tomorrow is Tuesday, one might ask, "if today was an up Monday, will tomorrow see a turn on Tuesday"?. We don't know for sure, but the chart above suggests such a thing is possible. Note the cash high corresponds to the futures limit we posted in yesterday's chart.

Have a good start to the evening,

TraderJoe