Scamper Back to 18-day SMA

Sort-of as promised, the algo's are having their way with this wave as U.S. equity prices, as measured by the daily ES E-mini futures failed to make a new high today and, in fact, headed back to the 18-day SMA, often the neutral point on the chart, to figure out what to do next. The daily chart is below. Note that intraday, the highs of each of the possible upward first waves were overlapped downward today. Also observe the daily slow stochastic is only in over-bought territory and is not embedded.

The new blue trend lines are tentative only and I think they will be adjusted later. There 'might' be a triangle in the making but with lower odds. Why? See the chart below which is the 4-hr chart.

Notice that twice in the last two days, price bumped up against the 90% level. And, while possible, it is not common for triangles to do. So, a triangle bucks the odds a bit even though the trading is whippy as all get-out.

Rather the better odds at the moment are for a Flat wave if prices keep heading lower. For now let's see what prices do at the 18-day SMA. If they close below it again, it would likely tilt the daily bias to down. Then we'll go from there.

Have an excellent start to the evening,

TraderJoe

The Next Parallel in Gold

The likely next parallel in GOLD is shown below on the daily chart. The prior (KCT-style) channel was shown on the 4-hour timeframe.

Given the position of the EWO, one should probably give room for another Flat, or a possible triangle so the EWO has time to come back down towards the zero line.

Have an excellent start to the day.

TraderJoe

An Oddity

I was examining some alternative counts, and I ran into this anomaly or oddity. The Neely 0 - ii guideline has been able to be used for nearly all prior waves. It certainly even works in the initial wave sequence in this series. So, I thought I'd check in what might be the continuing Minor A wave as an alternate to the Minor B wave down. Clearly, one can see that the guideline is broken. And it would break at several of the lower troughs on the close-only chart. So, something is odd.

We appear to be in a fourth wave or B based on the Awesome Oscillator (AO or EWO). I'm going to be noodling this situation a bit. Again. Something seems odd. Ideas are welcome.

Have an excellent rest of the weekend.

TraderJoe

Hitch - 2

Tentative steps were made today to close the gap we wrote about in the prior post on the ES daily chart, below. Today made a lower high and a lower low as shown.

Also of interest, there have now been four consecutive closes below the 18-day SMA, and the daily bias is said to have shifted to downward.

Markets have a funny way of getting to their Bollinger Band or moving average targets, particularly in an environment like this where a news story or a bad key earnings report or a worried hedge fund manager gets the heebie-geebies and decides to unload can quickly and significantly affect the price level, and the algos keep trying to pull things back to make it look like nothing actually happened.

So, in the above chart is there a way to be in a triangle? I think so, but a triangle is atypical with a gap at the low (not impossible, just atypical - or lower odds).

Are there ways that the market could get back down to the lower daily Bollinger Band, to close the gap, and or get down to to the 100-day moving average of closes? I think so, because large gaps in the futures typically fill a bit faster than those in cash, and it is very common for prices to find the lower daily band or their key moving averages.

We'll try to count it internally as best as possible, but we still need some key levels to break to have an understandable count. And, keep in mind, failures can occur. We're pretty sure we caught one this morning, and there may be more to come. They are a sign that the opposite movement wants to happen with some dispatch and length.

That said, you don't need me to tell you that when you put in an order than you think has momentum behind it, the algos go haywire - like you violated a commandment or something - and instantly yank on it back & forth until it almost drives you crazy. And the only way I know to even try to mitigate that is to watch positioning. Trying to initiate late in a move can have serious adverse consequences. We're likely all feeling that as the market seems to be making three-wave Elliott Wave structures. It might continue to do that until certain Smart Money players (and their algo-bots) are more convinced there really is a down trend under way.

That's why Ira invented the swing line indicator - to help determine if there is a real trend over or under the 18-day SMA.

Have an excellent start to the evening,

TraderJoe

Hitch

The ES daily chart has a bit of a problem - a hitch - in it which is pretty glaring. That is, on a non-rollover day the chart has the large gap up in it that is shown, below, around the 6,552 level. The gap was a 'news gap' and, again, not one just from the futures roll-over.

ES prices today initially headed higher, stopped underneath the prior high in the six-bar congestion area, made a lower low than the open (not a new daily low) and then rebounded to find comfort at the 18-day moving-average-of-closes. It is very whippy, as is wont in the middle of the Bollinger Bands, and the algos have the control.

Is it likely the gap will fill? Yes, unless the news cycle keeps being manipulated with the sheer nonsense of the tariffs, the shutdown, etc.

As best we can tell, the up wave currently counts as w-x-y, where the y wave is shorter than the w wave. So, it might be a (b) wave, up, in itself. But we can't confirm yet that the up wave is truly over. Still, one would expect some resistance from the 18-day SMA, and that seems to be happening, so far.

So, we have to take it day-by-day counting as best we can. It is possible that some news item or other (earnings, etc.) might spark a (c) wave or more downward, but, right now the count is still sloppy until lower lows are made. There are still ways new highs could be made, like if the w-x-y turns into w-x-y-x-z and forms a diagonal. But that is speculation, as well. All we know is that at the present the local upward count is not an impulse one.

Have an excellent start to the evening,

TraderJoe

Sideways in More Time After the Pop

SPY cash prices on the 15-minute chart, below, gapped higher (once again) after all the weekend hype including the scary videos. We have written, "if you want a third wave down, even if it's a 'c' wave, you have to be willing to enjoy a second wave up before that." After the gap up, prices traveled sideways - in the process taking more time in the lateral wave than the prior five-waves-down.

Tentative three-touch trend lines can be drawn today but they are just that - tentative. Yes, that could also be a triangle inside that wedge, but it remains to be seen. Usually, if a triangle should not hold up, then its three-wave internal structure allows an expanding diagonal down to form, instead.

It will be interesting to see if a recognizable pattern completes tomorrow. Today should be viewed as an inside day, and a possible consolidation day for a further down move until that is disproved.

Have an excellent start to the evening,

TraderJoe

Big, Medium, & Smaller Picture

Here is the long-term picture from 2009 as best as can pieced together from degree labeling. The span since 2009 is now 16 years, and during that time much inflation has occurred, Therefore, the chart is log format, and the channel is a log channel. The SPX (S&P500 Cash) Index is used to reduce any influence of time-decay from the futures. The chart shows the Cycle, Primary and Intermediate degree waves.

S&P500 Cash Index - Monthly - Log Channel Count

The next chart focuses more on the medium term. It is the two-weekly chart of the ES E-mini futures since the 2020 low.

ES Futures - Two Weekly - Log Diagonal Count

The above chart shows the Primary, Intermediate and Minor Sized waves in this advance. As best we can tell, while the whole sequence can follow The Eight-Fold-Path Method for a diagonal, the internal sequences are grinding three-wave corrective waves. The third wave, (3), is longest in linear scale, but not in log format. It is longest in time. The fourth wave, (4), is shorter than wave (2) in time and in log length. It misses overlap with wave (1) by less than 1%. The Elliott Wave Principle by Frost & Prechter says the fourth wave in a diagonal 'almost always' overlaps the first wave. It does not say 'always'. It does overlap in the Dow and the Russell. It does not in the S&P500; it misses by much less than 1%. Given the exceptional influence of seven stocks in this market, that is likely acceptable. And a fourth wave signal was received on the EWO.

And the Minor B wave? Well, first it may not travel - even by a tick - below the low of wave Intermediate (4). Next, technically it can be "any three" including a zigzag, a multiple zigzag, a Flat, an expanded Flat - and go over the high again - or be a triangle. And within the triangle category, it could be a symmetric contracting triangle, a barrier triangle, a running triangle or an expanding triangle. In the last three cases of triangles, higher highs could occur.

If instead there is fast and rapid movement below the low of wave Intermediate (4), we would have to conclude that Intermediate (5), red alternate, finished at the high we just experienced. But there is no evidence of that yet. Yet, most Elliott analysts know, the B wave could be any measurement (more typically 38 - 78%), but even less than that, or more than that.

And if Minor wave B turned out to be a triangle, it could stretch the wave sequence potentially well into next year. We'll have to see. A triangle is often likely in the next-to-last position before a wave termination.

For the smaller picture, we noted that the SPY made a higher high on Friday while the ES futures did not. Although we initially surmised that this could have meant we made a larger diagonal downward in the ES (as in prior comments), when we consider the SPY's higher high, it could also mean we had this diagonal failure in the vth wave of (v).

ES Futures - 4 Hr - Diagonal Failure

The lengths of waves ii and iv are acceptable for it, and the down move very characteristic after the end of a true diagonal. The start of the diagonal (iv) would have been exceeded in less time than the diagonal took to form. Further, there is one green pip above the zero line on the EWO associated with v, so it may indeed be a fifth wave. Further, the EMA-34 on this time scale fits for form and balance.

So, now we have to see how the Minor B wave evolves. Once again, nothing to the downside will surprise me. The downside is covered. The task ahead is to see if a B wave holds up; if something like a nasty 'take-your-money' triangle forms, or if we should get zigzags lower for the wave.

The bottom line is it remains risky for trades to the upside (very!). And yet we know there will be retrace waves, and waves that will form an eventual pattern. It's just that most Elliott trading references advise one to steer clear of B waves because of the number of forms they can take. What you do, of course, is up to you. I'm just summarizing what the literature that I've read suggests - not offering trading or investment advice.

And the reason for showing this smaller term picture is to show that ending diagonals can fail. So can the C wave of the (5) wave of Primary ⑤. That is important to note, and we will also address it later.

This is the second post this weekend, and if you have not read the first one yet, you might like too.

Have an excellent rest of the weekend,

TraderJoe

One Day Takes Out a Month

Pens will be flying. YouTube and other videos will say you were warned. CNBC will say it's not even a 5% correction, and "who cares if there's a 10% correction" (heard recently). Meanwhile, we just counted waves and suggested it was an extended first wave count. The first chart of the S&P500 Cash Index, below, shows that count. From our measurements in the futures today, one day, today, took out all of the trading from the prior month!

S&P500 Cash Index - Daily Close - Back to EMA-34

And the Fibonacci retrace ruler shows it's not even a 23.6% retrace on the up wave-set from April, yet.

We certainly did warn appropriately: that the downside risks were high, that sentiment was highly bullish, that put-call-ratios were speculative, that rare Elliott Wave patterns were showing up right & left. All of that. And so here we are.

In our experience the extremely small retrace nature of the internal waves & the lack of pullbacks after the April lows suggested to us that the wave personality is that of an "A" wave. And we think the Minor B wave is underway.

Now in the second chart is an open-high-low-close format version of the ES daily futures. I post this chart for one specific reason.

ES Futures - Daily - KCT Failure

I like Jeffery Kennedy personally. He seems like a sincere analyst. But I need to point out the first part of this wave sequence in April. If you were relying on the KCT (Kennedy Channeling Technique) to deliver the third wave breakout above the channel, it clearly did not happen in this case. Of course, we have stated that is more likely when the third wave is the extended wave. Because it didn't happen this time is why we think the first wave was the extended wave in this sequence. Those extended first waves just grind and turn to the right rather than turning to the left as the extended third waves do. His information should point out the circumstances where it is most likely to work, and where it is least likely to work. In that regard we agree with Neely that "the analyst needs to know which wave is the extended wave in the sequence".

Personally, I think this wave shows the folly of letting machines set the pricing of securities. They grind and grind and grind on every tick for six months, based on the original tariff news story. And then they have a day like today with little let-up in selling all day long, based on another tariff news story. Yes, there will be rebounds, but people work or put stop orders in, and they might not be able to assess things until after the close or they might have elsewhere lost a bunch otherwise. Meanwhile, machines assessed the story nanoseconds after it came out, and the rest is history.

So, others can strut their bravado, accumulate incredible wealth, publish cavalier television stories that somewhat mislead their audiences, or worry publicly in on-line videos. No, for our part, we'll just take the opportunity to learn. I truly hope your losses were small if you had them. Losses are no fun. And if you made a few pennies, great. For our part, we are just trying to sort out what really does and does not work with the Elliott Wave Principle - calmly and clearly.

Have an excellent start to the evening,

TraderJoe 

Arbies - They Have The Treats

With apologies to the restaurateur of a similar name, the number of tricks being played in these markets are a real treat. Several treats. Treat after treat after treat ...

Overnight, it looked like the ES futures were making a grinding set of waves in zigzags upward. They did, but I did not get the count exactly right. It took one of our loyal blog readers, Roy C., to consider that cash SPY could possibly only be making a fourth wave signature in the hourly EWO. Good call, Roy! So, that leaves this count in the intraday ES 30-minute futures.

There's an overlapping leading diagonal for a first wave, a fairly brief second wave lower, a big third wave, and then all of, or just part of, a non-overlapping fourth wave lower. At this time price has already made a new high above 6,807. It might turn out to be a 'b' wave of a flat or just extend to be the fifth wave. Either way, the count sure looks and feels like a five-wave-count.

Then, there's the tricks in GOLD. After invalidating an ending diagonal overnight at the 4,035 level, GOLD used that diagonal too to add third fourth and fifth wave up to the 6 AM morning high. Since the morning, there was this overlapping pattern traced out on the 10-minute chart.

So far, it can look and count like a running triangle. The drop at 15:00 was a fairly dramatic $25 in less than five minutes from which there has been another recovery attempt. We'll see if it holds. If it does, then the widest width of the triangle added to the breakout is another target. If it doesn't hold, then we could be making a diagonal downward, but that just doesn't count at all well internally. And, while a running triangle can point towards the ends of a wave, it is still supposedly bullish because of the higher b wave, as shown.

Apologies, but things like truncations, triangles and diagonals are supposed to be more rare in Elliott land in terms of frequency. Yet, here at market highs, the arbs, quants, hedge funds and other Smart Money are throwing them out right & left.

We're doing our best. We wish you the best. Have an excellent start to the evening,

TraderJoe

Second Verse Same as the First

Yesterday, we pointed out that the daily slow stochastic on the ES futures had its third day of re-embedding. Ira Epstein (broker with the Linn Group, LLC.) who noted this characteristic also noted that the 'second' time embedding happens in-a-row it is often - not always - a sign of a weakened market; one that is wobbling. The ES daily price chart is below. Price has still closed above the 18-day SMA, and so the daily bias is still positive.

ES Futures - Daily - Outside Key-Reversal Bar

However, today's bar can be a "key reversal" bar taking out the high and low of the previous two bars after the highest high in the trend count (i.e. today). And, depending on where it closes, it might also come to be considered a double-close key reversal, closing below two of the prior closes.

Today was a 'turn-around Tuesday' which is interesting of itself. There is a way to consider a top in place, but more downside is needed. Today's bar just is not that long yet although it does overlap with the bars of 22 & 23 Sep. So, patience will rule. Loss of the embedded slow stochastic might be one factor to wait to observe, and a close below that line-in-the-sand might be another. 

With price having hit the upper daily Bollinger Band again, it might be a place where the Smart Money is at least lightening up on some positions. 

If we have finished the Minor A wave up, remember I am primarily looking for a Minor B wave down.

Have an excellent start to the evening,

TraderJoe

Day Three

Today is the 3rd day of the daily slow stochastic re-embedding in the ES E-mini daily futures, as in the chart below. Price is still above the 18-day SMA so the bias is still up.

The sole active up (green) fractal was hit. There are three local active down (red) fractals and numerous gaps below the market. Up progress can still be made by triangle or diagonal. Downward progress could only be made at this point by a failure top (today) but this is less likely.

Have an excellent start to the evening,

TraderJoe

An Original Fibonacci Study

Here's an original Fibonacci study done today on the Dow. I have not seen this idea elsewhere - just to expand the Dow 1929 top from its origin in the first prices available and 1932 bottom in "log Fibs" and see what that gets us. So, I worked this one up this morning and it has some interesting 'hits'. They absolutely are not 'precise', mind you, but they are very much in the neighborhood.

Keep in mind, regardless of the degree symbols used (I just chose these as if I was preliminarily studying any other chart) that the peak RSI is usually on the third-of-three, and the divergence is on five-of-three.

Further, we are up to and slightly past the 2.618 "log" expansion not to mention that price is squeezing out of the upper log trend line, depending on how you draw it (Gulp!).

Have an excellent rest of the weekend,

TraderJoe

Non-fatal Daily Dogi - Yet

With the government shutdown, the non-farm payrolls were not announced today. In the lack of serious news, equity prices - as measured by the ES E-mini futures - headed higher and attacked the upper daily Bollinger Band, exceeded it, and touched the 6,800 level, exactly, before backing off in the oft-cited round-number psychological something-or-other. The day created at Dogi candle, but didn't have a lot of power to it, yet, as on the chart, below.

The problem is that nothing significant has been downwardly overlapped, no significant prior daily lows have been exceeded, and no downward daily fractals are broken. While the daily slow stochastic is still over-bought only, price is still above the 18-day SMA. And so, yet again, the bias remains up.

There is an interesting pattern that might develop Monday morning. It is an expanding diagonal - if it forms properly with a longer fifth wave than third wave. The problem with that, of course, is that these patterns can be ending patterns as well as beginning patterns. So, even if the pattern forms properly, there could be a stiff partial or full retrace following it. So, higher highs might still be possible, and such might happen if important announcements occur, like the re-opening of government, etc. You can see this potential pattern in the comments for the prior post

Further, while it is speculative, it is also possible that NVDA is in the third wave of its fifth wave higher. This might drive other prices higher without the need for announcements.

So, we're taking it slowly and wave-by-wave. Also, we like to examine some of the data over the weekend, but it certainly appears like we are in the neighborhood of a top. Even though higher highs are possible, our assessment remains that the risks are skewed to the downside.

Have an excellent start to the evening,

TraderJoe

ODU

U.S. equity prices - as measured by the ES E-mini futures - declined overnight on the news of the government shutdown. On the daily chart, they closely approached the 18-day SMA, as in the chart below.

As we suggested yesterday, the "first-of-the-month" money had been front-run yesterday after the window-dressing. Then, today, after the cash open, the passive inflows began in earnest, and the ES futures made an outside-day-up (ODU) to a new higher high and near the upper daily Bollinger Band on a divergence with the slow stochastic, which is not embedded.

The higher closes are dragging the 18-day SMA up with them. And, yes, there are ways to be considering a top in this vicinity, but the daily bias is still up - until it isn't. In this instance, the low of an outside day up should not be taken out in the next two trading sessions, or it constitutes a trap for the bulls.

Because of length considerations, it is possible to consider a ivth wave located on the 25th Sep low, or a triangle in the futures that ended this morning as a ivth wave. It is also possible to consider an upward diagonal starting anew from the 25th Sep low, but this will have to be monitored in terms of overlaps and depth of any retraces.

In any case much better reversal signals are needed, along with a close below the 18-day SMA to consider that prices are serious about trading lower for a period.

Have an excellent start to the evening,

TraderJoe