Higher High, Lower Close

Nothing too serious. It looks like the bars up from the recent low are a five-wave-sequence. It was possible to count it that way. But the retrace was quite shallow, so far.

ES Futures - Daily - Higher High & Lower Close

The measured retrace from the high is not even 23.6%. The daily slow stochastic is in over-bought territory. The monthly payroll report is tomorrow morning. It could be a market mover, so we'll just post-pone discussion until we see more in those results.

Have an excellent start to the evening,

TraderJoe

Too Many Waves!

I mean that in a kind way. Markets are allowed to have whatever waves work. Counting them is another issue. The DJIA having broken out to a new higher high forces us to count a little differently - still with an extended first wave xⓘ. That is because some of the recent down waves were longer than other ones, and by degree-labeling definitions, then, they should be larger degree waves. I won't belabor - the weekly chart and count are below.

DJIA (YM) Futures - Weekly - Diagonal, Possibly Leading

The problem is that the Nov 2025 down wave, ((ii)), circle-ii, or minute-ii, is too large for the wave at minuet (b), and for the previous wave at brown ii, so that means it is likely of higher degree. I think the only way that happens is if the entire Minor A wave is a diagonal with minute-ii, circle-ii, as the second wave of the diagonal. It is outlined with blue trend lines. Otherwise, there are too many waves for a motive sequence. The down waves are almost impossibly short waves to be in a typical impulse structure. We could clearly see the impulse sequence within wave minuet (a), and we have labeled those waves i -> v. But now the (c) wave of minute-i, xⓘ, looks like it is a diagonal too, with overlaps galore but always trending higher. It is outlined with brown trend lines.

We don't make this wave count lightly. First, we note that the $NYAD (NY Advance/Decline Line) is at yet a new higher high on Friday. Again, we don't think a major bear market starts while this line is making new highs.  Second, there is room yet for the ⓥth wave to continue higher. Recall, it can be almost as long as the third wave. Third, this count implies that if Minor A is a diagonal, then Minor C should be an impulse wave. Fourth, we have recently commented that the DJIA divergence with the transports was cured with all-time new highs in the transportation index. Lastly, we note that while many of the Mag-7 stocks are having difficulties, the FED's FOMC still has the spigots open - which might counter some decline, provide money for company buy-backs, etc.

So again, we are patient, calm and recognize how long a Primary-sized diagonal ⑤ could take. Meanwhile, we have not even seen a 38% retrace in these waves. Hopefully, such a wave, or larger, would be a Minor B wave. I realize that it is easy to make mistakes counting waves. If this labeling is a mistake, then it is the $NYAD which is providing the false signal. Time will tell. 

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

TraderJoe

Discount Double Triangles

On the ES daily chart, there is an outside day, up, with price tagging and over-shooting the 18-day SMA but eventually closing lower than it, as below.

ES Futures - Daily - Outside Day Up

From the truncation high, there is now a c = a, down, and potentially a c = a up. The problem is we don't know upward movement is over. It could be, and if so, great. If not, we'll continue the count upward since there are only three waves down.

ES/SPY (CFD) - 1 Hr - Three Waves Down

In the downward count, the parallel channel is pretty clear. The measurement of c = a downward is approximate, but pretty close. There are two triangles able to be located, the b wave one, and one for the ④th wave of c. Both would be in the correct place. We said the halting pace of the decline likely meant it could be a diagonal. Today, we were counting upward after the AMZN earnings drove the market lower in the after-market and then price swung around for the cash market session.

We understand other markets made new highs today. ES has not, yet. Today's upward count (in futures and CFD) can be counted like this.

ES/SPY (CFD) - 15 min - Three-waves Up

The wave starts out with a diagonal wave which converts to an impulse a wave, followed by a short in time b wave, followed by a potential c wave which starts when the cash market opens. The measurements are uncanny, at present, but again, we have no confirmation that the wave is over. It is suggested that the a wave, up, has to be overlapped to claim an end to the c wave.

It can be seen on this timescale that the MACD diverges, but this needs to be monitored. If a downtrend resumes, it will likely be in the form of a diagonal due to the degree of retrace.

We remain flexible. The only perplexing item at this time is the failure to make a new on Tues 03 Feb, as it seemed to indicate a truncation. We are keeping this in mind in the count. Perhaps we'll have more on the weekend.

Have a good start to the evening,

TraderJoe

Bearish Engulfer with A Lower Wick

There is nothing yet proven in the wave count. Today, the SPY cash index made a slight new daily lower low while the ES did not (yet). So, the main count is shown below on the SPY daily chart.

SPY Cash - Daily - Potential Diagonal

Note today that the local prior low (purple) was exceeded lower. And the daily alternate is shown below with red labels. 

SPY Cash - Daily - Alternate

Diagonals (or potential diagonals, better said) are always tricky. We will note, though, that the MACD is diverging and that is one sign to pay attention to. We want to give the potential diagonal all the time it wants, but we have certain limits. If the wave-counting stop is exceeded lower, that would be a serious wake-up call. The wave-counting stop is the same in both counts. Given the bizarre differences between cash and futures, we think, if today's low holds, then it would best count as a b wave.

There are currently no cash gaps above the market, but there are numerous ones below the market.

Have an excellent rest of the evening,

TraderJoe

GOLD - The Next Parallel

It has been stated several times in this blog that I am counting GOLD in parallels until that is no longer possible. This brings up two views on the question of the count. The first view is that price movement since the 2011 Cycle Wave III top is a very compressed triangle as Cycle Wave IV. That view is shown below on the log scale 3-monthly chart, below. It has been presented before. The measuring objective for this triangle "the widest width of the triangle added to the breakout point" has been met and exceeded, as shown. It is astonishing that GOLD has been up in nearly every quarter since October 2023 (still recognizing this quarter is only just started).

GOLD (GC Futures) - 3 Month - Log Scale Triangle Target

So, it is entirely plausible we had a top in the vicinity of the target. But is it the top? Well, two nagging problems abound. The first is that the internal ratios of this barrier triangle just seem "too compressed". While it is a 'legal' triangle under the rules, usually, not always, triangles have 62 - 78% legs. This triangle does not. One is free to ask, "why not?". The next problem is the "indicator problem". Most of the indicators - whether Elliott Wave Oscillator, MACD, or RSI, etc. - are still screaming "third wave!" if we can believe them. So, what then?

If we look at a slightly shorter-term chart, the one-monthly view, we can see a possible answer to this conundrum. 

GOLD (GC Futures) - Monthly Log Scale - Running Cycle IV

In order to find that next parallel, what IF Cycle Wave IV actually ended back in Jul-Aug 2018 as a "running fourth wave", instead of as a triangle? On a log chart that produces the potentially acceptable channel shown above and provides for reasonably sized Primary waves. Notice, the indicator problem in this chart: both indicators are at highs in 89 candles. Bear in mind Mr. Elliott would applaud you for using a parallel on a long-term log chart.

So, what does this mean? Given such a stellar advance, what if GOLD largely traded sideways or made a large properly shaped triangle for its Primary ④th wave? Notice the lower rising parallel trend line and EMA-34 are both now high enough to prevent overlap - especially if there is more sideways wave travel. If this count is not adopted, notice the otherwise difficult problem of trying to find the Primary waves within Cycle Wave V.

Could GOLD go over the high again in this scenario? It certainly could: the Intermediate (B) wave of a Flat, an expanded flat, or a "running triangle" for Primary ④ could certainly go over the high. From a trading perspective, "range traders" might find it ideal (not trading or investment advice), but so might the algos that revel in creating havoc in the volatility. So, the utmost caution and low position sizing would seem prudent for retail traders. And, lastly, the Weekly Chart below helps provide more information.

GOLD (GC Futures) - Weekly - Spinning Top Candle

Note that price is still over the 18-week SMA, so the bias is up, and the weekly slow stochastic is still embedded. Yes, there is a red "spinning top" candle here which is not confirmed on a weekly basis, and confirmation is always needed of a single candle pattern. But note also, price has not been back to the 18-week SMA since the beginning of 2025. And price has not been back to the lower weekly Bollinger Band since October 2023 (not shown but interested readers should look it up).

Further, notice how broker Ira Epstein's advice of "not buying new" over an upper Bollinger Band was quite savvy in this instance. Now he is largely talking about trend trading, but if one bought new positions at the high outside the Bollinger Band two weeks ago, then the close this week is lower. Yes, he might say (imitatingly), "sure you would have ridden the rocket perfectly, and gotten out at the top... um, not likely. I wouldn't have, only you would have." This is distinctly different advice than I heard Peter Schiff (Gold Dealer) give hours before the high on YouTube (paraphrase). "Buyers must buy the all-time-high. Because if they don't, then the all-time-high is only going to get higher." And that was right before the $926 excursion from high-to-low in the last two days of this week. Let's hear it for sentiment.

Please be careful out there. Be patient & flexible. If you don't know what a wave count is at the moment, that is a good time to 1) stop, 2) take measurements, and 3) use the Principle of Equivalence to determine what wave patterns best fit those measurements. I've done what I can do. Now, it's up to you.

Have an excellent rest of the weekend.

TraderJoe

Chuck Wood

How much wood would a woodchuck chuck if a woodchuck could chuck wood? Chair Powell did an awful lot of wood-chucking today - dispelling everyone's concerns about every conceivable thing. There was an awful lot of jaw-flapping for not changing interest rates at all. Inflation? Not a problem. Employment? Not a problem. Artificial-Intelligence? Not a problem. Energy prices? Not a problem. Gold & Silver and Asset prices? Not a problem, as GOLD reportedly goes up over $100 per day now.

Yea, well, he doesn't mention too pointedly how the enormous $34 Trillion in debt he helped create has destroyed some/much of our purchasing power. He doesn't mention that the $40 Billion each month he now just gives to the banksters is largely responsible for the great wealth inequality, while they laugh "tee-hee" in the Press Conference about how the wealthy are 'mostly' responsible for creating the economic growth. Yes folks, don't ask the hard questions. Don't be investigative reporters. Go along for the ride. Don't make it seem like there are real people out there who are really, seriously hurting. As for the next FED chair, I'd vote for Chuck Wood, PHD (Pile it Higher & Deeper).

For my part, today's chart is of the contracting ending diagonal I called in real time and documented in 2014/2015. I recreated this chart, below, that I recalled so well, so it might be instructive to you. I'll have a couple of notes below the chart.

SP500 Cash Index - Weekly - Contracting Diagonal

First & foremost, look at how long it took for this diagonal to form. It took forty weeks! A full eight months. Consider: would you have had the patience to sit through this thing? Next, note the retraces were not the 62%+ that would be indicated by the guidelines for a diagonal. That is exactly why they are guidelines and not rules. Third, note that interior to the larger diagonal (blue lines) is what looks like a diagonal, (itself shown with brown lines) except it is more properly a running 'b' wave. All these things serve to confuse and confound the wave count - which is why one must remain patient, flexible and calm.

Next note the declining MACD throughout the pattern and finally note that the start of the diagonal was eventually exceeded in less time than the diagonal took to form.

Will this happen again at this possible top, some 12-to-Fibonacci-13 years later? Will FED Chairs continue to say, "no problem" as they hand out cash to the bankers and corporations? Only time will tell.

Have an excellent rest of the evening,

TraderJoe

Bias Flip

Today was an outside day up, and a close over the 18-day SMA. So, the daily bias - at least temporarily - flipped to up, as the ES daily chart below shows. In the process, the prior downward gap in the SPY cash and ES futures was filled.

But the swing line now has a higher high after a lower low, and therefore a new trend is not in force yet. So "outside day up" guidelines are in place in which the low of an outside-day-up should not be taken out in the next two sessions or it constitutes a trap for the bulls. The daily slow stochastic is not embedded. Neither is it over-bought at this time.

IFF a new all-time high is made it would be possible to say that the contracting diagonal higher is still on the table. It would just be extending with the prior high as (i), and Wednesday's low as (ii). But this is yet to be seen.

We remain calm, patient and flexible.

Have an excellent start to the evening,

TraderJoe

Fives or Not ?

Are we trying to count by fives in the upward direction or not? That is the very basis of the Elliott Wave Principle. The Eight-Fold-Path-Method tries to better quantify a chaotic and non-linear wave form by always examining the time frame that looks for between 120 - 160 candles. (If you have questions, see the post in the upper right-hand-corner of the main blog page under the Purpose and Ground Rules). This chart has been shown several times in the past. The bar count is currently up to about 153 two-weekly candles.

The chart is of the S&P500 Cash Index using just the Zigzag indicator to provide accurate wave termination points and illustrate the overall form of the wave.  The RSI indicator and the Elliott Wave Oscillator (EWO or AO) are shown and are currently diverging. The distinctive fourth wave signature can clearly be seen with the EWO briefly dipping below zero before quickly rebounding.

Although it is possible to count a top here long-time readers of this blog will understand that one objection to doing that is the NY Advance/Decline line is at an all-time high this week and last. Few, if any, true bear markets have started in this condition - with the advance broadening out and little divergence seen.

Countering this, though, is the NASDAQ Advance/Decline line which is diverging.  And, remembering that it was the "A.I. trade" that largely built this wave segment, one could wonder if just a few high-tech stocks were largely responsible for the advance, what will happen if they seriously decline? And, we're not even entirely convinced every Mag-7 stock has topped for good.

With that in mind, the Principle of Equivalence says to be patient, be calm, and be flexible as the market overlaps in this area. As the red arrow towards the end of the price series, above, indicates we could easily see a deeper drop for a B wave, before a final C wave advance that provides more in the way of divergence.

The bottom line is 1) we are attempting to count-by-fives, 2) it is possible we are topping now, but we question only how likely that is at this time, and 3) therefore no amount of downside will provide a surprise to us as the risks continue to mount and mount.

Just remember, if we are attempting to count by fives, then this up wave, when over, would be (5) of ⑤ of V of [III] with [IV], ahead, and [V] after that. If you would like to see the difference between counting by fives, and not counting by fives, you should have a look at a fairly recent free NeoWave blog post at this LINK. I have learned a lot from Glenn Neely, but it's very hard to say Elliott would agree with his counting technique.

Have an excellent rest of the weekend,

TraderJoe

Just A Couple of Notes

On the SPY Cash 4-hr chart below, it is possible that the last wave up is a truncation. That is because it 1) counts better as an upward wave, 2) it is still inside the lower trend line, and 3) it did retrace over 78% of the prior up wave. Today's wave is the one that broke the more pertinent three-touch trend line.

As you probably know, today's up movement after the open did not close the gap shown by the blue bar. So that down gap is open as is its companion up gap after the first of the year. So, too, is the gap after 17 Dec still open, and many others.

As far as a downward count, I'm just counting as a tentative a/i for the moment until there is a meaningful upward retrace, a potential lower low, and/or a more definitive channel to work with.

Have an excellent start to the evening,

TraderJoe

It's Not My Fault ...

It's theirs. In the 1990's I invented my own proprietary sentiment indicator and have religiously updated it every week for which the data was available. Luckily, the data source I used remained stable over that time, so no changes were required to the formulas or to the data sets used. Here is what the weekly data show in the chart below.

For 2026, the Weekly Bullish % now stands at 64.8% bulls, across a wide swath of investors from professionals to newsletter writers to small investors. It was not higher at any point in 2025. This level took a big 3-point jump in this past week, which is no small feat. And, in pure simple terms, investors as a collective group are now more bullish than they have been at what is labeled the "B Wave High" which is the 2007 stock market top, before the 2008-9 debacle. Can this measure go higher? It can. People can feel what they wish. And, certainly, sentiment is currently lower than the 68.9% registered at what is labeled the "Minor Wave 3 High" - just before the peak in 2018. Can sentiment go there? It can. Can it go higher than that? It can. Still, it should be clear from the data comparison that we are reaching rarefied air and that risks continue to abound.

Along with a simple percent bullishness, there used to be a sentiment indicator called The Magazine Cover Indicator, which was said to fire when a number of prominent magazines (Time, Newsweek, Barrons, etc.) featured bullish stock market stories on their covers. Of course, most of these magazines have now gone from print to on-line presence, both reducing the effectiveness of their impact and of that of the indicator. Still, we will note that the Time Magazine 2025 Person of the Year, was, of course A-I, as below on its cover.

And you know that just recently, possibly as a result, the A-I stocks (or a lot of the Mag7, anyway) have been flailing and not yet making new highs along with the rest of the market. How, could it be worse than this? 

Easy. 

Below is just a mere sampling of what you can see when you scour social media even slightly and think about what you are seeing and what they are presenting you with.

Apparently almost everyone is now a self-styled investment guru willing to teach you how make money in stocks or avoid fees, or how to live a comfortable retirement life. No problem, right? The kids in the upper left and lower left lived through major bear markets, right? Not.

So be cool. Be cautious. Be patient and be flexible. In the words of some of the old-timers on Wall Street, 'the boat is getting a little heavy on one side'. It's not my fault. It's theirs. I'm just showing some evidence. It happens almost every time. People get excited when they win or make a lot of money. And the opposite will be true at a bear market bottom.  Sentiment will decidedly go the other way - like the 25.3% bullish in the first chart which occurred at or near the "C Wave Low" of the 2009 bear market bottom.

And to be fair, there is a problem with sentiment. It often precedes a top (or a bottom). That means that even though opinions are getting stretched right now, it doesn't mean people will head for the exits tomorrow. But, like a passenger strapped in on a jet airplane, while you don't want to prematurely open the cabin door and jump, you might just want to amble around the plane a bit - like if you're surveying where the lavatories are - and at least check out how many exits there are, where they are located, and how they operate without being obvious, of course. Because nobody likes a fidgety seatmate. Right?

Tomorrow is not scheduled to be a cash stock market session as it is the MLK Holiday, although there may be some futures trading hours. Have an excellent rest of the day, weekend and holiday. 

TraderJoe

A Couple of Wedges

As we have shown over the last several days, the ES futures currently appear to be wedging in an up trend. It is difficult to say that a wedge is over until key lengths are exceeded lower.

Yesterday's break of the initial wedge line still looks like a three-wave affair. So, the lower wedge line has been redrawn. Two key lengths to watch are the lengths of the 02 Jan down leg, and the 18 Dec down leg. Only if these are exceeded might it possibly have downward implications.

GOLD (futures GC) have been wedging on the two-hour chart, and the wedge was recently broken lower. Key lengths need to be monitored here, too. A GC 2-hr chart is below.

Have an excellent start to the day.

TraderJoe

Lots of Things

A lot of things are going on the ES daily chart which are worth pointing out. The first is that the daily slow stochastic has (at least temporarily) lost its embedded status. Along with this, price has struck the 18-day SMA, as below.

ES Futures - Daily - Line in the Sand Hit

Another observation is that the swing line indicator with today's lower low has turned lower. Two items to confirm are 1) whether the close remains below the 18-day SMA, and 2) whether the daily slow stochastic remains below the 80 level or not.

A further item to note is that the daily Bollinger Bands are curling in and beginning to wrap around price.

From an Elliott Wave perspective, can the diagonal be over? Yes. But can it also form a diagonal with deeper legs - like 62% or more - as we pointed out earlier? This is also possible with currently about equal odds.

Have an excellent start to the day.

TraderJoe

A Rare Bird

The chart below, the daily chart of the ES futures (roll-over contract) shows where one old Wall $treet adage comes from. That adage is, "IF the bears have Thanksgiving... then the bulls will eat Christmas dinner." As you can see from the chart, prices declined before the typical third week in November (although Thanksgiving was a little later this year on the 27th instead of the more typical 23 - 25th). Then, they rallied into Christmas.

And prices continued on with the Santa Claus rally into the New Year. Hopefully, the turkey was not undercooked, or half-baked! Keep in mind, it is pretty rare to get an eight-month rally without so much as a 38% retracement.

But now, the Christmas ornaments (the red & green fractals) can outline some of the risks involved in this up wave. Yes, the wedge can get wedgier. But, the down (red) fractals can break, too.

Have an excellent start to the evening,

TraderJoe

The Risks are Piling Up

The OHLC version of the chart in the prior post for the weekly ES futures is below. Yes, there are ways that higher highs can be made. But the risks are piling up. Even a 38% retrace shown is almost 1,000 ES points from here. And deeper retraces are certainly possible.

Besides retrace risk, there is also the risk that the entire upward movement is over. If the up wave sequence is an A,B,C instead of the five waves shown, then there is a (likely lesser) risk that Intermediate wave (4) could be undercut.

For the short term, it is suggested to pay close attention to the 18-day SMA, and whether price closes above it or below it on a daily basis.

Have an excellent start to the evening,

TraderJoe

Mikey Likes It!

Hey Mikey. With all apologies to the Life cereal commercial from the 1980's, we noted in the prior post we were not a huge fan of indicators like the RSI, or PPO - which are implying a decline - for counting waves. There are several other factors that currently say, "well if a decline does happen, it may still not be the onset of the bear market". One of those factors is the NYSE Advance/Decline Line ($NYAD). Readers of this blog should look up the cumulative value of the indicator if they are interested, but it has recently reached a new high in the last couple of weeks. I have written several times before that major bear markets have rarely started with such little divergence indicated. With that in mind, we must still allow this count of the extended first wave in Minor A. The count is shown below in the weekly closing chart of the New York Composite Index (NYA).

NY Composite Index - Weekly - Minor A

In the extended first wave count, the third wave is shorter than the first, minute ⓘ. So, as long as the fifth wave, minute ⓥ, stays less than the third wave, this count can be valid. We will note that while the Sep - Nov period brought some level of decline, it was quite meager. It could be, but just doesn't seem like, a Minor B wave that really causes significant market vexations, like, say, a long in time Minor B triangle. So, maybe that decline is just a fourth wave. Cautionary note: while this down wave does not have closing overlap, it does have a tad bit of intraday overlap.

None of this completely discounts what the RSI and PPO are saying. There may be a significant decline ahead soon. Sentiment is still fairly overheated. And, for example, if Minor B should turn out to be a triangle, a three-wave ⓐ wave lower could be the most dramatic of the lot. It's just that this up wave count may not be the final one of the bunch. Perhaps a Minor B wave will provide the necessary $NYAD deterioration to create a significant divergence.

So, we remain flexible, calm and patient going into the New Year. We remain on notice for significant declines, and nothing to the downside will surprise us. If a triangle does occur, it might turn out to be a great range-trading opportunity. We shall see.

This is the second post since Wednesday. Have an excellent rest of the weekend and start to the New Year.

TraderJoe

They Don't Like It

I'm talking about two indicators. I'm not a real big fan of indicators but do use the Elliott Wave Oscillator as a guide in wave counting. In this post, I'm primarily referring to two indicators - the RSI or Relative Strength Index, and the PPO or Percentage Price Oscillator, although the price is shown using the Zigzag indicator just for clarity and accurate terminal points.  The first chart clearly shows that the RSI does not like this up wave. It is currently diverging.

The second chart below shows what the same chart provides in terms of the PPO oscillator.  It is also diverging at this time.

Both charts seem to be sending the same message. In terms of these indicators, "it's time". The contracting diagonal, if it is one, should end soon. It is hard to ignore such a message. But keep in mind these are log scale charts. They 'just barely' work on the ES/SPX, although they work better on the Dow.

Looking at the recent action, we must still be incredibly flexible and allow two possibilities for a Minor C wave. The first one is shown in the ES 8-hr chart, and the trend lines tend to indicate a diagonal may be in progress.

We note this chart can be interpreted as three-wave sequences. There is now overlap. Price is along the lower trend line. It could break it a tad but must not go beyond 6,835 in order to keep a diagonal going. Yes, it is also possible to get a nested wave sequence up, if price does not go below 6,385.

But this second ES 8-hr chart shows another alternate for an upward diagonal. This one would have truly wild swings with at least a 62% retrace for the second wave.

The Principle of Equivalence requires that we cool our jets, try not to be over-reactive, and look at reasonable potential alternates provided that degree labeling definitions are not compromised. 

Still, one of the problems with an impending bear market, where the majority of the shorts have thrown in the towel is not to get caught on the "Slope of Hope", playing for up waves when they don't arrive.

So, we are still just patient calm and flexible. We see clear alternatives. We will watch for them. But the risks are piling up (in terms of what the RSI and PPO are saying), and we don't want to ignore them.

Have an excellent start to the New Year.

TraderJoe