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.
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| 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.
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| 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
Sub waves of b definitely perplexing. Their time relationship to the entirety of a seem wildly out of all reasonable proportion, granted the torturous nature of the corrective triple ZZ. Weird!!!
ReplyDeleteET - Here is the link to the declines I was referring to marked by the white lines.
ReplyDeleteThey seem to be longer than wave (2), which made me not consider that count.
https://www.tradingview.com/x/JtgvfCMq/
Within iii, the net distance travelled between Ⓐ and triangle Ⓑ is much less than ii.
Deletehttps://www.tradingview.com/x/0ayBlG8M/
So, I think the observation, in short, is being fooled by a triangle. A triangle is one of the few places where degree violations can seemingly temporarily occur because, the net measurement of a triangle is always to its (E) wave - and that is whether the triangle is contracting or expanding.
TJ
Thanks ET! So, in this case we can ignore the lengths of (A) & (C) (which are sub waves of the triangle & are longer than ii) & just consider the net distance between Ⓐ and Ⓑ. Since these lengths were long, I was forced to consider end of iv as ii. Wow, its amazing that you could do that in real time.
DeleteThanks TJ. Fed cut will reduce the govt. interest paid on debt by almost 1 trillion + higher equities bring more corporate tax + tariff tax collection + (in process)no income tax till 200k(85% of US population-India already did)+ fed setting a new inflation norm @3% target + $ depreciation which gives competitiveness. With all these things hard to imagine 50 points difference in Dec contract. corrections may come in between but seems long term SPX/ES targets are way way ahead.
ReplyDeleteFor those who wanted to see 6,666.00 it occurred just a few minutes ago on the ES Dec roll-over. TJ.
ReplyDeleteinteresting. SPX March 2009 low was 666..still needs 60 points from Friday's high 6660 for a 10x multiple :)
DeleteSince price now appears to be beyond the 1.618 external retrace, it looks like the alternate shown in the second chart applies best. TJ.
ReplyDeleteSeries gaps on display. Typically signal start, or end of a new trend...
ReplyDeleteI wonder how effective ew is now from trading perspective. Right now seems like we are left with guessing the probable ew counts. In the end we are left with coming up with one of the right counts when majority of the move has played out. I guess the fact algos are involved plus now most know about ew is rendering it ineffective tool. Am I right?
ReplyDeleteThis very idea which you suggest, that Quantitative Trading Algorithms are deliberately creating (false) Elliott Wave patterns in the financial markets, in order to fool small traders, has been discussed for years in the comments of this blog. 🤔
DeleteI can recall back in 2004-2005, when traders began insisting that the Federal Reserve was intervening directly in the markets (and the floor traders in Chicago - back when there were still physical trading floors😅 - had learned which brokers the Fed was using to put a "floor" under the market, and were following their large volume entries for quick profits). People in general would insist that this was nonsense, that the Fed didn't intervene in the markets, that this wasn't even legal! 😂
Then came the new co-located servers at the "exchange", and the high-speed fiber optic cables to the new High Frequency Trading operations, and people began murmuring that these companies were skimming millions from the markets every day by front-running (which is, on paper, illegal) everyone else's trades by milliseconds. And this was also denied, until books like "Flash Boys" and other exposés let the world know what was really happening.
My point is that, while the author of this blog is unparalleled in his skill at Elliott Wave Analysis, I think that EW is less of a precise tool, as the background architecture of Financial Markets has evolved. I would imagine that if we went back to the 1930s, with what many of us know about Elliott Wave, that we could all become billionaires overnight!
But now these principles are well known, and the odds are stacked against small traders higher than ever before.
Prior to 2005, I was making a nice living by using EW to scalp the floor traders. But then everything began to change, and these "exogenous" factors began to rule the markets, more and more.
So now I use EW to paint with a broad brush, and don't sweat the smaller moves. It still works, when the market goes into an emotional and impulsive move. But most of the time, the market seems driven by machines trading against each other in the nanosecond time space. Something which humans are not able to see, or react to.
So we have to be patient, watch for the signs, and be prepared to jump in, and, (with a little luck) grab some of these rare, impulsive moves.
Just my opinion. Sorry for the trading talk, TJ, but I thought it might be relevant here. 😏
Marry the two: 1) 18-day SMA, and slow stochastic embedded = bias still up. 2) Elliott Wave triangle, below (more likely) downward diagonal (less likely).
Deletehttps://www.tradingview.com/x/LrnlV0gA/
Don't be the hero; the two hour rising trend line still has not been broken lower.
TJ
From what I can show you, the market is trading 'full on' Elliott: Bill Williams style (i.e. Chaos Theory). How many up-fractal breaks did it take before one decided there was an uptrend this morning?
Deletehttps://www.tradingview.com/x/1omkyOe5/
TJ
Now, the triangle has broken down into the possible diagonal. But, we could see the possibility of such - as above - from The Principle of Equivalence still likely' in the context of a fourth wave.
Deletehttps://www.tradingview.com/x/6ImXjZNV/
TJ
And the triangle is broken, exactly my point. Is it now downward move or upward move..
Delete..and now The Principle of Equivalence says, "either expanding diagonal, or a fourth wave as w-x-y, or a larger triangle (until such breaks)". That's just the way it is. TJ.
Delete@Jack, that is completely determined by things like 1) how the entire world is positioned in the market, 2) how many brokers will trade against their clients (allowed by CFTC, and must be signed in many commodity brokerage applications), 3) some 'big whale' who wants to prove a point, 4) when, and IF, a company buys back its stock. In short, Elliott Wave is not a scheme that pre-determines prices for all times in the future - as many Elliott & Gann people want you to believe. How could it be? People are free to do whatever smart, stupid or unethical or illegal things they want. And big people can do them in a big way.
DeleteTJ
Now there is 38.2% on the very interesting 4 am low. The gator has rolled over as if there 'could be' a fourth wave. But this is still probabilistic.
Deletehttps://www.tradingview.com/x/EXVEbpZS/
TJ
Exactly, TJ. 😊
DeleteAnd we, as traders, have to be flexible and roll with these unpredictable changes.
Robert Prechter has been making a living by curve-fitting Elliott Wave to show that it is always 100% correct (years and decades later). But, as they say, "hindsight is 20/20". 😂
Back in the day, Prechter made a name for himself as a champion Options Trader, ostensibly using EW to plan his trades. But I think that his main source of income for the past few decades has been selling newsletter subscriptions.
The point being, if you wait for the latest edition of the Elliott Wave Theorist to make your trades, you will be late to the market.
One has to develop the skills, and then have the "guts" to apply those skills in real time. And there will always be elements of uncertainty, and luck. No system of analysis or trading can remove those factors. You also have to learn how to control risk, and protect your capital.
..now price is back inside the 'old triangle'. Did a social media 'reading bot' break down the triangle after I described it? Did my broker try to prove me wrong? Did some 'big whale ' sell against the "too small" (i.e. not 38%) triangle? Was there a 'natural' failure top? These questions will drive the trader literally crazy until one begins to accept just the probabilistic nature of the wave principle. TJ.
DeleteNo i don't believe in any conspiracy. My underlying assumption is that more the people get to know abt ew the more ineffective it will become. Thats all
DeleteF
Here is an article I wrote back in 2015. Not much has changed.
Deletehttps://studyofcycles.blogspot.com/2015/09/snake-oil-or-not.html
TJ
I can remember when the opening bell was changed from 9:00am to 9:30am. Some of the Elliott guys believed it was a deliberate move to mess up Prechter's hourly count. Good grief.
DeleteES/SPY (CFD) gator has temporarily flipped to positive, AO is now above zero.
ReplyDeletehttps://www.tradingview.com/x/AUaX97KE/
The only downward pattern is an expanding diagonal because of overlap & wave size. The upward patterns are a larger triangle and a fifth wave.
TJ
ES 5-min: lower low. Upward triangle off the table. Downward expanding diagonal needs some length yet. "Expanding Diagonal 'Failure' is a valid possibility as a C wave". But there is no proof of that yet.
ReplyDeletehttps://www.tradingview.com/x/U9D8aWY0/
I turned off some indicators for measurements.
TJ
ES/SPY (CFD) .. there is nothing not 'Elliott' about today. The citing of a potential 'C' wave failure of a fourth wave was a correct thing to do. Price ended the down move between 38 - 50% of the wave from 4 am. Note, the AO is green and pointing up. The alligator is curled up.
ReplyDeletehttps://www.tradingview.com/x/So6HTgWc/
Since the up wave is more than 90% of the high - even if it should fail in the overnight it is high enough to say it is 'likely' a fifth wave. It doesn't show signs of breaking down, yet. The alternate is that it is the 'b' wave of a flat, but there is no need to invoke the alternate yet.
TJ
A new post is started for the next day.
ReplyDeleteTJ