There is No Emergency; Stay Calm

Unlike others trying to sell subscriptions, newsletters and trading services that try to get your emotions going so you will buy their products & services, we have always just urged calm and an educated approach to try to count waves in the best spirit of the wave principle as aligned with the rules. If you would have listened to every time a major EW service 'screamed from the top' with suggestions to go 'double-short', 'or max short', the market would have proved them wrong and your account would be the worse for it. Part of staying calm is to actually take the time to review the information at hand. There just aren't that many pieces of available data on which to make a judgement, but one should not throw away the key ones by forgetting to consider them. The chart below is an example.

Daily Put-Call Ratio Five & Twenty Day Moving Averages

This chart shows the 5-day (blue) and 20-day (red) moving average of the equity only put-to-call ratio (symbol $CPCE on Stockcharts.com). And one can see that the 5-day (blue) made a new yearly low during April. OK. But now the 20-day (red) has not only made a new yearly low, it has also made a new three-year low. That means for about a month of trading days options players have been aggressively purchasing more calls than puts. And more so than in the past three years. So, it is becoming clear there are more players on one-side of the boat (as they say).

Keep in mind this is a market-related measure. It is timely, and it is not subject to the wave counting techniques of an individual or company. It simply is what it is.

Am I urging you to do anything with this information? Well, nothing more than put this information arrow in your information quiver as you make decisions.

It is much like the fact that the daily ES (and the weekly) are bumping up their upper daily and weekly Bollinger Bands - like in the daily chart below. More arrows for your quiver. 

ES Futures - Daily - Bollinger Band ~95% of the Time

The chart is only telling you that the odds of closing outside of the band are about, roughly, nearly only 5% of the time. This is a statistically based approximation founded on the standard-deviations from a moving average, adjusting for market volatility. It's not exact. Nassim Nicholas Taleb, author of The Black Swan, would argue with the loose statistics involved and blow them out of the water as not properly accounting for the market's tendency to make 'fat-tailed distributions'. OK. I get that, too. But when used as a 'rule-of-thumb' the algorithm does a good job of containing the market 95% of the time or more. The algorithm doesn't regard the market as an 'emergency'. You shouldn't either. And if you combine it with knowledge of what Ira Epstein determines as "the strongest market technical signal", that of the embedded daily slow stochastic - also shown above - you might avoid some pre-mature market signals, too.

If you want to be a trader that FOMO's in and out of the market, then listen to the subscription services and the financial news networks for recommendations (as opposed to just for information) and let them make up your mind for you. You'll be like a weathervane snapping back & forth in the wind.

But if you want to make more confident decisions, then learn to do the work for yourself. Learn to count. Review the few indicators the market has of sentiment, and of momentum-strength and make your observations in an organized and documented manner. Practice counting. Maybe put some of your counts out in public to get feedback on them (from a counting viewpoint).

Or don't. The only difference between traders and investors is their timeframe. Maybe investing is better for you. Maybe some of both. But I thought an investor was supposed to "buy low & sell high". The market is making all-time highs, not recognized bear-market lows.

Have an excellent rest of the day.

TraderJoe

For the First Time

Long-term readers of this blog know that for about the last five years the favored wave count proposed has been the Contracting Ending Diagonal (CED) to end Cycle V of Supercycle Wave [III]. We have posted; we have showed chart after chart. But, this week, for the first time you can actually see on the monthly log chart all of the Minor waves that may be involved in the Intermediate waves to make up the Primary waves. That is because this current wave, if it is correct, would be the Minor C wave in the count.

I don't know about you, but it is gratifying to me to see it. It is much better than repeatedly calling for tops that don't occur. So, here it is. On the chart. And Intermediate wave (5) is currently shorter - in log format - than is Intermediate wave (3) so the count has some merit. The invalidation of the Minor B wave did not occur, so this marker will be removed from the chart.

The next marker is the invalidation level of the pattern which is above 8,513. At that price wave (5) would become log longer than wave (3). And that would simply break the 'rules' for a contracting diagonal.

The price action this week actually feels like a throw-over. It's been gappy, non-stop, and very, very news related. Further, price is nearing both the upper daily and weekly Bollinger Bands, where the Smart Players often take some profits off the table.  The technical indication on the monthly chart is that the PPO is diverging as the market is making new highs. The technical indication on the two-weekly chart is that the Elliott Wave Oscillator (EWO or AO) is diverging at these new higher highs after having signaled the fourth Intermediate wave (4) by dropping below the zero line with the requisite 160 candles on the chart. (Interested readers of this blog should verify this finding on the two-weekly chart).

So, this count is on track at present. But it could invalidate. It hasn't yet. But if it does, then the Elliott analyst just moves on to the next most likely pattern. As we have covered before this would be the expanding ending diagonal. But, right now, the subdivisions of those waves just don't add up in this pattern. Maybe they will at some point. They just don't now.

So, we are faced with this staring at this chart and wondering, "Hmmm?". It isn't yet a great idea to act on this uncertainty. The first confirmatory indications would be 1) significant reversal candles, 2) filling of up gaps, and 3) price closing below the 18-day SMA. Maybe this would be accompanied by a covering news story. Maybe not.

For now, it is enough to see the picture and to wonder, "just how in the world did this get here"?

Have an excellent start to the evening,

TraderJoe

A Key Item

Here's a simple thing to watch tonight and tomorrow. Does the daily chart of the ES futures wind up losing the embedded slow stochastic or not? Already, it is wobbly and below 79.

ES Futures - Daily - %D less than 79

One key is tomorrow's close. If the %K, the red line of the lower indicator above, remains below 79 then it is possible a quick trip back to the 18-day SMA might occur. And recall broker Ira Epstein's caution that IFF the embedded reading is lost on the close tomorrow, Tuesday, the only way to get the reading back is if both numbers are over 80, again, on Wednesday, the next day after losing the reading. Otherwise, the slow stochastic would have to go through the whole three-day process of embedding again (assuming the market does not move substantially lower and prohibit that).

Tonight & tomorrow to gauge progress on that front one might also watch The Intraday Wave-Counting-Screen, shown below, which was created to be a more responsive guide on the ES 30-min chart.

Right now, things are sideways below the intraday 18-period. So, the short term is fighting with the long term a bit.

We addressed the EW count in the comments for the prior post. While a fourth wave became a little less likely with the down movement this morning, it was not ruled out. And a fourth wave triangle is still a possibility as we only counted three waves down. Trading above the R1 level tomorrow might indicate a triangle pattern is kicking in. But we are also keenly watching for downward overlap as we showed in the comments. So far, that hasn't happened yet.

And once again we are in a newsy market. So, give it the caution it deserves to help avoid being whiplashed.

Have an excellent rest of the evening,

TraderJoe

A 'Possible' Leading Indicator

I'll just post the daily chart of SPY (cash) versus HYG - the Corporate High Yield Bond fund, and pretty much let it speak for itself.

The recent data is one of the larger divergences we've seen in a while, and one can note how it 'generally' has been tracking the index. So maybe what we are getting now is a 'leading' indicator of the risk appetite of the smartest money - and we'll see this week whether the huge divergence gets repaired (and HYG rises), or whether it is acting as a valid warning for SPY to begin at least a retrace sometime this week to react to account for the potential mood change among the whales.

Market technical oscillators (such as MACD, slow stochastic, etc.) tend to be a bit lagging. This is a search to find a slightly better true 'leading' signal; meaning that - to be useful - its turn should come slightly before that of the equity market without being too premature.

Have an excellent rest of the weekend.

TraderJoe

Friday of Distrust

Unlike so many Fridays before - when the market was saying it was supremely confident - and the machines would literally jam the market to a Friday closing high - this Friday was different. The market was confident enough to make a new intraday high of 7,300 on the ES futures, primarily from the 'first-of-the-month' passive inflows, as we had clearly suggested, but it could not hold on to that level. And when word got around that a new truce proposal was advanced to the U.S., but was disliked, price actually sold off into the close. What? Price actually sold off on some mild profit-taking on a Friday?! Well, kiss my grits. The daily chart of the SPY cash index is below, reflecting the close.

As shown in the prior day's comments, we think we are counting a fourth wave very high up in the wave count until proven differently. Clearly, there is no outside reversal bar, yet, nor is there a lower low confirming candle yet. We outlined the options from The Fourth Wave Conundrum and cited that after only three-waves down there were a lot of options. But then the news broke making the upside less tenable than the downside.

So, in the chart above there is a trend line of interest that should be watched closely to provide more information. Are higher highs possible? They are. Can the price structure fall apart if some really adverse news is announced? It can.

Once again, I am taking things very gingerly. As of about 4:30 pm the ES futures are still well-above the 18-day SMA with an embedded daily slow stochastic. So, the price bias is still up along with one of the strongest technical market signals, the embedded slow stochastic. Until these situations change one must respect where the market is, but clearly with a skeptical eye.

I may have some further information on EW counting options later in the weekend.

Have an excellent start to the evening.

TraderJoe

Count So Far - 2

Phasers on Stun! The whippy after-hours trading caused by galactically stellar earnings beats & misses appears to have created a sub-wave as follows on the 4 Hr chart of the ES/SPY (CFD) below.

On the prior post I didn't draw the parallel in for nothing. This count was possible by reducing the degree of the diagonal by one degree and suggesting that it might be a leading diagonal. Notice that ii is smaller than (iv) in price and time, so the degree labeling still works.

We don't 'know' that this parallel is the case yet but a clear invalidation level for the count exists. Remember, tomorrow is the last day of the month which often, not always, sees end-of-the-month window dressing before the potential first-of-the-month passive inflows from the usual sources.

Have an excellent rest of the evening. Be cautious, patient, calm and flexible this evening as traders around the world - in all time zones - give Chairman Powell his Intermezzo Curtain Call.

TraderJoe

Count So Far

The ES/SPY (CFD) futures have declined in the overnight sufficiently to overlap the first wave, i, in a diagonal sequence. Therefore, the appearance is that the diagonal five waves in the futures resulted in five waves in the cash market. The diagonal is shown below in the ES/SPY (CFD) 2-hr chart below.

In the diagonal wave v < iii < i, and wave iv is shorter than ii, with wave iv overlapping wave i. Cash can be counted without overlap.

Now the only questions are 1) the degree of the waves, and 2) is the diagonal leading or ending? With regard to the second question first, it seems atrocious to suggest a leading diagonal this high in the wave count, but the simple fact is that major earnings are still due this week, along with a FOMC meeting. So, I am just keeping an open - but skeptical - mind. Further, there is no announced complete resolution to what is occurring in the middle east.

With regard to the degree of the waves, the question is whether this is a minute degree wave, minute ⓘ, or whether the whole wave constitutes the alternate Minor C which is shown in red. The only way to tell would be if certain levels were exceeded, including the start of the entire wave on 31 March 2026.

Have an excellent start of the day,

TraderJoe

fire danger? !

When you see this sign in the woods, it's not a good idea to light new campfires. A similar situation exists now on the ES 4-hr futures. Yesterday we suggested counting upwards, and we did that today. The market went a bit higher and hit ES 7,200. But our equivalent count on this contract indicates that with 110 candles on the chart, The Eight-Fold-Path Method suggests a five-count is best on this wave largely in a channel.

The wave includes a completely acceptable fourth wave retrace in this timeframe that we called the end of.

Yes, there can be more upside. The (v)th up wave could become as long as wave (iii) since the first wave is the extended wave in the sequence. Maybe the wave goes on into Monday or Tuesday, pending news. But when the wave turns down, there could be a steep correction, and possibly, but not certainly, a complete retrace depending on whether the degree labels are the correct size. In other words, this wave could be all of Minor C, or it could just be minute ⓘ of Minor C. It's a very difficult call, but I've gone with the most conservative view until we know more. Either way the risks are pretty high.

Just thought I'd share the count. Have an excellent start to the evening and the weekend.

TraderJoe

Possible Set Up for v of (c).

Today's wave structure was difficult unless you were possibly expecting a crazy (meaning multiple segment) fourth wave. These can sometimes happen in the market. Those of you that followed the market intraday know that a bout of selling hit that drove the market to a small outside reversal day down. Readers of this blog should confirm that on the ES daily chart. The SPY cash market got to within -0.03 of a new high, shown below, but couldn't do it today. At 712.35 the SPY could not get over the prior high of 712.38 and then headed lower in five waves. So, the ivth wave looks to be a compound flat. That's fine, nothing wrong with it at these length dimensions. The reason we think it's a Flat is that the highs are well within the 90% level of the prior highs required by the 'rule' for a flat wave.

Then, after the decline on the SPY 10-min chart, there was a quick retrace followed by sideways action as shown above. So, until we know more, this can be a setup for a vth wave higher in the minuet (c) wave of Minute ⓘ. I would watch something like the parallel shown - which should be adjusted when the second wave, ②, is known. Then a third wave of v might take us over the prior high.

As far as I can tell, today's low should hold or the downward wave would likely overlap and cause complications to have to deal with. So far, it hasn't but it is marked as invalidation for that reason.

If the vth wave can hold its length dimensions, then it might be possible to call minuet (c) and minute ⓘ done and over. If not, we'll look to the alternate impulse count of Minor C, not the diagonal count.

The trading is whippy and choppy and still calling for much patience and flexibility. For example, anyone that thought we were going directly over the high today had a big surprise handed to them until about 14:00 hrs. That shouldn't be us. We know the character of fourth waves to be 1) complicated, 2) mis-leading, and 3) do everything but overlap their prior first waves. It certainly feels like that is the wave personality we are dealing with. So, take it slow & comfortable. The market will let you know.

Have an excellent rest of the evening.

TraderJoe

Bias Still Up

Today in the ES futures was another inside day, still with the price bias up and the close over the 18-day SMA. The day opened on a gap up, chopped around for much of the day, tried to head higher towards the futures close but could not yet break out of the prior range. The daily chart is below.

ES Futures - Daily - Bias Up

The daily slow stochastic is still embedded over the 80 level, and until its red line closes back under 79 it remains embedded.

The wave count remains intact, so far - as per the prior post. One can see that the nearby up (green) fractal might be the first to break higher. One can also see just how far back the market has placed the prior down (red) fractal - all the way back at the 200-day SMA.

The market feels somewhat shredded by or similarly ruled by the news cycle but so be it. Those are the market conditions at the moment, and they are what they are.

Have a good start to the evening,

TraderJoe

Still No Overlaps

Here is the ES futures 4-hr channel count & the alternate count (in red) to follow The Principle of Equivalence. There are still no good overlaps to play off of. There are, as yet, no sizeable downward waves, and there are not really very good signal bars at the high, yet. The count does its best to follow degree labeling definitions. It may be there was extreme alternation in ii vs iv, with iv being a triangle in wave (a)/(i) instead of a diagonal.

ES Futures - 4 Hr - Price in a Channel

I lean towards the blue count as equality has not necessarily yet been reached in the up wave. Further, the $NYAD (NYSE Advance/Decline Line) made another new high today. That needs to be different if any bear market is to begin. I did not fight that signal in the last wave, and I'm not fighting it now. Price is still in a channel, so the up wave looks corrective at this time. That could change, but it hasn't yet.

While the bull/bear survey sentiment data has not gone wildly higher, the Equity Put-Call Options ($CPCE) indicator dropped to 0.41, the lowest for the year and tying the lowest for several years. The five-day moving average is also at a new low for the year. So, this indicator is definitely in the Speculative Zone as a contrary indicator.

Weekly and daily, the ES has hit the upper Bollinger Bands. This is a place where Ira's trading guidance suggests the Smart Money may take at least some profits off the table. So, some stiff pull-backs might be expected soon. Further, the news background remains volatile until more information is obtained. The presence of an inordinate number of gaps in this wave up on the cash charts also give rise to caution and the need for patience and flexibility.

Have an excellent rest of the weekend,

TraderJoe

Reminder: The Principle of Equivalence

This is just a reminder that The Principle of Equivalence suggests that there are two common forms of wave shape that a Minor C wave could take, as diagrammed below. First, Minor C could be a contracting diagonal unto itself as shown on the left.

Minor C Wave - Two Forms

Second, is an impulse C wave with a fifth wave diagonal - as shown on the right. Either of these would work, although the first one might have better alternation with the Minor A wave overall which appeared to be a non-overlapping impulse.

There is, of course, a third much more rare form of an overall expanding diagonal for this wave. But, as of this time there just isn't much evidence for that count. And - because it is more rare - it will be dealt with later, if needed.

With that in mind, The Principle of Equivalence also says that - without any current overlaps to work with - we must also consider these two counts on the four-hour chart on the way up.

Again, we have no overlaps to work off of, yet, and I am following degree labeling here as best as possible.

Have an excellent rest of the day.

TraderJoe

'Everybody' Does It !

Why violate degree-labeling definitions when you don't have to? A lot of people that have read this blog are starting to catch on to the idea of what the degree definitions really mean. But a lot of people, either have not, are skeptical, or just don't care a whit enough. So here is a real-life example of violating and not violating degree labeling definitions. And rather than examining your work, I will criticize the work of someone else that was freely published online. This example in the ORCL daily chart comes from Trader's Classroom - which is sponsored by none other than Elliott Wave International (EWI). Here is their chart, clipped from the video.

ORCL - Daily - EWI Awful Example

The first thing that should tip you off that the chart is incorrect that that brown wave (c) in the upper left, which is claimed to be a smaller degree wave, is actually larger than brown Minor 2 which is claimed to be the larger degree wave. This is what is meant by a violation of degree definitions. Note that, overall, the chart has a 'five-count' down. Now review at the following chart.

Now look at this chart starting in the upper left to the lower right. Still a five-count in which we have included the number of candles. But look at the difference in the upper left. Clearly those are very small degree (and actually small) choppy waves that make up a leading contracting diagonal as minute ⓘ. They look-like three-wave sequences, and I actually measured wave (iii) to make sure it was shorter than wave (i). It is - just - but the measurement is shown. Did they measure? I rather doubt it. Did they measure 'any' of the waves in the starting sequence. Again, I rather doubt it.

Now, look at the difference where the Minor labels 1 through 5 are placed. They have Minor 1 way up in the upper left looking very disproportional to the rest of the wave.  What evidence for that do they present? None. Absolutely none.

Now look at The Eight-Fold-Path Method. What evidence do I present for the position of Minor 1? Well, it is the first divergence in the Elliott Wave Oscillator (AO or EWO), after the first major trough.  It is an impulse of the Extended First-Wave variety, x1.

And what evidence do they present for the location of Minor 2? None. Absolutely none. But The Eight-Fold-Path Method presents the evidence of the first near-return to the zero line for the EWO (black circle on the left). So, the third wave - Minor 3 - occurs on the next trough of The Eight-Fold-Path-Method. And - look'ee there - wave 4 occurs with the EWO crossing slightly back up over the zero line without an overlap in price and all within 145 candles which is well within the recommendation of 120 - 160 candles for The Method. And now note that all of the degree labels are in the correct order from smallest to largest.

Do you see how much easier and more objective wave counting can become if the degree definitions are adhered to? Not only is the overall chart easier to label, but it is much clearer, less confusing, and provides more actual meaning to the count. What is the meaning? The meaning is that "the wave had an extended first wave". This can become critical to later portions of the count - like such a wave is often just the A wave of a further correction.

Well, kids, everyone seems to be doing this. But I am actually getting tired of seeing it. If you want to watch the Trader's Classroom episode for yourself, I'll still do EWI a solid and post it at this LINK because it was they that first taught me to count any waves at all. But why anyone would want to follow their methods with these incredibly obvious errors is beyond me. I have written to them over & over again. They have repeatedly ignored this guidance. They don't care. They are making money on subscriptions. I am not and don't wish to. I may write them a last time, but TBD. I have also warned them that such errors are likely to be encoded in their EWaves software if they don't take particular care to avoid it.

This is the second weekend post, and if you have not read the first one yet, you may wish to.

Have an excellent rest of the weekend.

TraderJoe

Interestingly Enough ...

Here are just a couple of facts to be aware of. Both the Dow Jones Transports on a weekly basis and the Semiconductor ETF on a weekly basis have just broken out to new highs as in the two-block chart below.

And even though this is the case, it is possible from an EW perspective that they count differently due to internal overlaps and prior wave structures. It is possible the semi's better represent the monthly diagonal we are likely in. The transports may be finishing a fifth wave of some type.

And while neither of the wave structures may be exactly finished yet, it is worth watching their developments from here, especially as it relates to the formation of the major averages going forward.

It is especially interesting in light of Dow Theory that the transports have made a new higher monthly high without the Dow Industrials yet.  It is also interesting that the NYSE Advance/Decline line has not yet made a new high, either.

Have an excellent rest of the weekend,

TraderJoe

To The Upper Band

On the daily chart, price on the ES futures contract went up to the upper daily Bollinger Band. We 'can' count five waves up, which may not exactly be done yet, but they could be. The daily chart of the ES futures is below. Note that this up wave exceeded a prior high in "less time" than the down wave took to form from the point shown (blue arrow to dashed line).

So, this could be minute-ⓘ of Minor C, or just minuet (i) of Minor C. Time will tell. The hourly chart is below.

It looks live five-up with an extended first wave, as we suspected. Of course, the upper band is just where Ira's method would expect profit-taking from the Smart Money.

Have an excellent start to the evening,

TraderJoe

Can It ?

In recent days, we proposed that it was possible a diagonal was forming on the daily chart, as bias had flipped to upwards, and there was a contracting sequence. That sequence is diagrammed below on the chart of the ES/SPY (CFD) in the 4-hr time frame.

Clearly, with tonight's "Pakistan Proposal Pop" entered before the 8 PM deadline, there is now a 5-3-5 sequence upward. Tonight price is still over the 18-day SMA with the bias still positive, although the daily slow stochastic has now entered the over-bought region. And this post is also being made before the 8 PM deadline.

Today in the comments for the prior post, we clearly stated to handle this up wave with care and posted an a-b-c with a strong, clear warning that the 'c' wave could morph into a wave iii given the news background. That happened and more.

Now the question is with the 5-3-5, up, will a non-overlapping fourth and fifth wave form to convert the diagonal into a full-on impulse. That, too, depends on the news, I guess. So, there is no need to get too fancy here. Again, let me be clear, depending on tonight's news, this up wave could fall apart without forming an impulse. But it could just as well add the -3-5 to make a 5-3-5-3-5 impulse.

And that's why one is patient, calm and flexible in the current environment. It is very difficult for retail to flip the switch and/or reverse as quickly as can the news-reading algorithms owned by the big players.

So, have a good evening. Let's see what happens from here.

TraderJoe

Bias Flip ?

Today the ES futures recorded a higher high, and a close over the 18-day SMA, as in the ES daily chart below. Therefore - at least temporarily - the bias has flipped to higher on the daily chart.

So, either the Minor B wave is over, or we are just getting a corrective up-leg to the diagonal-looking down trend. It is too early to tell, and the news could have a big impact on where things go. 

Price has not yet recaptured the 200-day SMA (brown rising curve) yet, but it could. I will also point out there is an open gap in the futures, shown, near the high. The daily slow stochastic has burned off its over-sold condition and is not yet in over-bought territory. The uptrend currently is sloppy, overlapping and difficult to count, but it might turn into a diagonal.

Therefore, once again, local technicals must be utilized until the count clears up a bit. However, any uptrend would invalidate below the March low, if a new all-time high is not made first. We are still patiently trying to count out the Minor B and Minor C waves of Intermediate (5) as a contracting diagonal. Nothing has ruled that out yet.

Have an excellent start to the evening,

TraderJoe

No Expectations

I have no expectations. I am open minded. In the ES (roll-over contract) 2-day line chart, below, there are other ways to draw this parallel. But this one is shown given the data available. Prices could always move lower first. I can even think of ways they can.

ES Futures (Roll Over Contract) - 2 Day - Parallel

Still, from Minor A, there is a clear three-waves down to minute ⓐ, three waves up to minute ⓑ, and arguably five waves down to minute ⓒ. And there is now upward overlap on minute ⓐ again. Further, the ⓒ wave reached a target of 1.618 x wave ⓐ, subtracted from wave ⓑ. This is shown by the Fibonacci ruler on the chart, and it is a very common flat target.

So, the instructions in The Elliott Wave Principle by Frost & Prechter are, "Draw a line from the start of A to the end of B, and place a parallel copy of the line on A to help find locations for the C wave." So that is what has been done, above.

Yes, this up movement could just be part of a second wave, but it is too early to draw that conclusion. It could also easily be a part of the Minor C wave up. Further, the decline so far has taken a Fibonacci five months (approximately from October to March, give-or-take).

So far, the B wave has only travelled 0.236 x the length of the Minor A wave. And this seems much too shallow for a true second wave. But this might fit the personality of a "B" wave in a "too-far, too fast diagonal". Look at how shallow the retraces were in the Minor A wave.

So, can new highs be made before new lows? They can. And can new lows be made before new highs? They can. Therefore, the local technicals rule until we know more. The wave counting is difficult. The trading is harder.

On the daily ES chart, price is not up over the 18-day SMA yet. So, for-the-moment, the daily bias remains down. But the daily slow stochastic is still in over-sold territory which is not supposed to attract a ton of new selling. And, as mentioned in the comments for the prior post, POTUS is speaking tonight so volatility is expected.

Further, Friday of this week, which is a holiday, the Non-Farm Payroll Report is scheduled to be released. Talk about a messy situation all the way around. Be careful. Be patient. Be flexible.

Have an excellent start to the evening,

TraderJoe

Second Close Under the Band

Overnight initially gapped lower, traded lower for a few hours, as we suspected, and then there was a gradual but steady rise into about 7 AM eastern time. This was in keeping with the guidance that initiating new naked short positions under the band is fraught with risk. The turn-around in this case was 120+ ES points. Then from 7 AM forward, after prices were back inside the band, prices declined all the way back down to the overnight low and exceeded it a bit, as shown on ES daily chart below.

ES Futures - Daily - 2nd Close Below the Lower Band

Thus, there is now a second close under the band, dropping the odds to about 4 - 6% of the next close being outside of the band (not impossible, just lower odds). The regular calculation of the daily slow stochastic is still over-sold only and not yet embedded.

From an Elliott Wave perspective today appears to be some or all of a fourth wave. I lean more towards some because of the brevity of the wave, so far. Fourth waves tend to be malingerers. This one isn't yet.

Have an excellent start to the evening,

TraderJoe

Cash in a Parallel

Ralph Nelson Elliott would say, "use a parallel to help find the count." While we were less confident of the count on early Friday, the count likely became clearer Friday afternoon as certain benchmarks were exceeded lower and we stated we were likely in wave (iii). So, here is a SPY (cash) 4-hr chart with the current count on it. We called the Expanding Diagonal as it was forming.

SPY Cash - 4 Hr - Line Chart in a Parallel

We used a line chart so the overall form of the waves could be seen but we have crossed checked for any wave violations on the OHLC version. There is some question of overlap in iv of (iii), but the final wave in iv does not appear to overlap. The rest looks good, including the waves in the diagonal which should overlap.

Note the MACD is still wide open to the downside. We do not yet have confirmation that wave (iii) is over. Maybe that will come Monday or Tuesday. But also note there is a greater than a (iii) = 1.618 x (i). Also, note in wave (iii) that wave iii > wave i.

Yes, the chart is still an uncomfortable one. There is one heck of a lot of room for a fourth wave (iv) to form. And it might try to come back to the fourth wave of one lower degree.

Since the daily chart of the ES closed below the lower Bollinger Band in just an over-sold condition, this, and the count both suggest the initiation of new naked short positions (using the paraphrase of Ira Epstein's Guidelines for trading) would be quite risky, and Ira wouldn't advise it. Here is that daily chart for your reference.

This chart does not mean that prices can't go lower, particularly overnight, it just means that it is likely that the Smart Money will take some profits against the lower band, and the small retail trader might wind up bucking their movements in the wash of their activities.

Again, price has exceeded the 150% rule in the cash market for a minute ⓔ wave of an expanding triangle. So, this wave down might better be labeled as minute ⓒ of Minor B.

So, the overall expanded flat might be counted like this on the daily chart.

ES Futures - Daily Close - Likely Expanded Flat

Again, the futures have not really violated the expanding triangle, so if we need to go back to it, we will. But, the cash market has, and that seems like the reason to take this view for now.

Have an excellent rest of the weekend,

TraderJoe

Redux

Trade all day, short and choppy lower, and then get this kind of move at the end of the session on the ES/SPY (CFD) 30-min chart, importantly, importantly after the close of the cash session.

Once again, someone is really working the thin volume, and if it weren't for me adhering to Ira's guidelines, they'd be working my last nerve, too. It's too bizarre that in five minutes someone gets to move the market almost half as much as it moved in the entire day. The day session has the volume, and this?

Avoiding this kind of scenario is what a recognition of chop will do for you.

Have an excellent rest of the evening,

TraderJoe

Goldman Told 'Em ?

The link between Goldman Sachs and Washington, D.C. is well-known. So many ex-Goldman employees have become Treasury Secretaries, NY FED Bank Presidents, etc. that the "circle" in infused with its culture. Goldman knows how to trade bear markets. Mere mortals don't. So, all that had to happen was to suggest that a well-timed story could create one of those truly stellar bear-market rallies, and it doesn't matter if the news is true or not, or if the news is confirmed or not, it simply doesn't matter. The machines take the input and mechanically provide the output. Pure & simple. So, here on today's intraday wave-counting screen, one can see the 7 am - 8 am bar which was based solely on a news comment - which may have been nonsensical or not. Mere mortals - without access to the inner circle - can't know.

The bar popped out of the intraday Bollinger Band (where statistics suggest new longs should not be initiated) and then ground sideways for the rest of the session.

The purpose of those prior up (green) fractals is to suggest points at which shorts might be stopped out, especially if prices exceed the 18-period intraday "line-in-the-sand", which they hadn't all night but did in short order. Prices went on to exceed the daily Pivot Point (PP), the daily R1 Resistance level, and to stall at the daily R2 Resistance level after banging on the daily S1 support level for most of the night.

The intraday slow stochastic went from over-sold, to over-bought, and back to over-sold near the end of the session. Price tended to find support around the daily pivot point and the 100-period intraday SMA.

It sounds like a lot of technical analysis here. What does this have to do with Elliott Wave? Well, the current keepers of the wave principle proclaim that the news has little to do with wave movement. That it is only or mostly investor sentiment that drives wave formation. 

From a more objective perspective than that of trying to sell monthly newsletters, which is itself a very old market paradigm, it is clear to me that a day like today simply disproves that hypothesis. I once learned that if your principle or law can be shown not to be true in certain circumstances, then it cannot be the complete story.

Here there are different constructions at work: 1) the cash market was not even open, yet, when the comment was made, 2) this is an exceptionally good way to let the thin volume force prices to spike higher as the machines trade and people don't, except perhaps stops get hit. 3) This insanity of "is it true, is it not true" is a great way to let one's friends get out of their long positions on the spike if they have been dying to do so in the market decline. 4) This is also a great way for the institutions (like Goldman?) to implement new shorts near the 18-day SMA, on the daily chart, if they wish to do so with less risk.  5) The market mechanics are as transparent as distilled water. Yet the meaning is insidious. The retail trader is disadvantaged not to have the bully pulpit operating for them, or the mega-millions required to co-locate servers at the exchanges and outfit them with news-reading algorithms that can operate faster than a person can even absorb or understand the news and its implications, let alone push a button. We have covered that aspect of trading several times on this blog.

Yet this is the game that the current SEC allows. It doesn't have to, but it does. Market manipulation has been going on since the dawn of time. How can one say that a news story is definitely market manipulation? Well, if the story comes out in a DM, e-message, or tweet without prior warning that there will be a story coming out at a certain time so people can prepare, one can almost guarantee it. FOMC announcements are a good case in point. People know when these occur, and they can sit out of a position and wait if they chose to. On the other hand, if one is subject to some newsmaker's' instantaneous outburst, without prior warning, this seems completely possible to be nothing other than manipulative. 

As quarterly company reports demonstrate, timing-is-everything. If major public officials are not constrained, the result is sheer bedlam in the markets - and without other tools to judge - investors will take the famed any port in the storm to find locations for operations. These might be Bollinger Bands, or Pivot Points, or a Fibonacci ratio, or a moving average or a price pattern. If bedlam can occur, why don't people care enough to create change with their lawmakers? Well, as long as the bedlam is to the upside and favors the bull case, the vast majority of investors will say, "whew, prices came back up a bit; nothing to complain about there". Again, that is a "majority" and that means most and in a democracy that often rules. 

It won't be until the bedlam is to the downside that there will be the cry & hew that, "something must be done and must be done now" as the long-term players bemoan their reduced holdings. Everything is great in a bull market. Everything is horrible in a bear market. And - eventually - bull markets turn into bear markets ... sure as the night follows day.

Have an excellent start to the evening,

TraderJoe

Three Years in a Channel

First, here is an update of the monthly count in the S&P500 Index. I am just reposting this from the prior comments in case some did not check them. In short, nothing has changed yet, except we can show the level that would have to be reached to invalidate the Minor B wave down. Price is nowhere near close. So, the five-plus year contracting diagonal remains intact to this date. Let's see if it continues.

But a chart I really wanted to show was this one of HYG (High-Yield Debt) on the 2-week time frame which shows prices in a three-year (+plus) "best-fit" channel that has not broken out to the upside.

It certainly looks as if prices have a failure at the mid-channel line, and as if the MACD has crossed lower, though it is not under the zero line just yet. The count would be a contracting leading diagonal for Intermediate wave (A), Flat for Intermediate (B), followed by an Impulse for Intermediate (C) which would show excellent alternation in a corrective wave. This suggests a path for high-yield-debt is lower, and possibly to retreat to the prior low, or more.

Note that HYG has a multiple divergence on a long-term chart with the S&P500's recent all-time high. This is because the HYG all-time-high was back in 2013 at the level of 96.

Have an excellent rest of the weekend.

TraderJoe

A Long Slog ..

The daily SPY cash chart now has about 108 candles since the Minor A wave top. It's been a very, very long slog but there are enough waves to claim that the Minor B wave formed as an expanding triangle, currently meeting all wave rules and guidelines.

SPY Cash - Daily - Expanding Triangle option for Minor B

Can this current wave go lower? It can. It has not yet reached the 150% length given as a 'rule' for each of the waves of the expanding triangle.

Just a couple of quick notes. Each wave of the triangle is longer-in-time than its prior wave in the same direction. The up waves never exceeded 150% of their prior waves, following the 'rules' for an expanding triangle.

Neely says he has never seen an expanding triangle for a fourth wave. Well, this one would be a B wave, concurring with his observations.

Further, we can only state that it is possible for the same waves that make up an expanding triangle to make up an expanded flat if price pressure really gives way.  But, so far, it hasn't so we need to see what upward retraces there are, and how far they go.

Lastly, this structure took place on the daily chart which carries some overall weight. It's not like this is a five-minute, or hourly chart. It's made up of lot & lots of individual and collective votes from around the world. So, if this structure holds up, it may play its part as occurring before the last wave in the sequence. In fact, Neely indicates that often the final wave after an expanded triangle fails to make a new high. This will likely be a good test of that observation.

Have an excellent start to the evening,

TraderJoe

Odds Get a Little Better

Today's seeming failure wave, and outside candle lower, increases the odds a bit for the completion of either the daily expanding triangle lower or the daily expanded flat lower. The ES daily chart (roll-over contract) is below.

IFF the diagonal that we sketched out in the overnight waves completed a c wave, up, of the minuet (b) wave, up, then the count, should it break the low, might go back down to complete the minute ⓔ wave of the Minor B wave lower. So far, the price structure keeps failing at the 18-day SMA, so this increases the odds as well.

Again, the prior daily low must be exceeded lower as must the 25 Nov 2025 low be exceeded lower for a valid expanding triangle to be claimed. And, if price keeps heading lower than certain levels, it is possible the expanded flat version of the wave will take over. We will sketch that out in days ahead, if it is needed.

As with all outside days lower (ODL), the high of the ODL should not be exceeded higher in the next two trading sessions or it might form a trap for the bears.

Have an excellent start to the evening,

TraderJoe

Back in the Bands

After a lower open overnight in the March 2026 ES futures contract, price turned around and tried to head for the high of the prior daily bar, as in the ES daily chart below (for the March contract). The lower open continued the swing-line downtrend, but that could change with a higher high bar.

ES Futures - Daily - Close Back in the Band

As we noted, Friday's close was the second consecutive close below the daily Bollinger Band. This diminished the odds of the next close being below the band, and today price did close back inside the band resetting the number of consecutive closes. But the day's action is a good illustration of why one should not (according to my paraphrase of Ira Epstein's trading guidelines) take new naked short positions in futures against the lower band. That is because price only stays outside of the band only about 5% of the time, and the Smart Money is likely at least taking profits on some previously established short positions at or below the bands.

Note, too, that the daily slow stochastic is only down in over-sold territory which often does not yet attract a lot of new money on the short side. It is not embedded. Also, the two most recent fractal locations have moved down to the bars shown.

We have in mind a count that could allow price to get back near/above the prior up (green) fractal. And we also have one that allows one to go lower and exceeded the prior down (red) fractal.

From an Elliott Wave perspective, we counted one way to get a 'five-up' today. We'll simply have to see if a retrace wave hold off of the lows or not, or whether that five wave continues into the overnight to make a larger wave.

Have an excellent rest of the evening,

TraderJoe

Friday was Fast

...but Tuesday through Friday overall was slow and overlapping in a channel. Therefore, it appears with the waves we have there is most or all of an a, b, c down. It may be a corrective wave with the basic form shown in the ES hourly chart, below. And, if it is a corrective wave, the structure would be diagonal for a, then impulse for c - which would be good alternation in a corrective wave.

But I caution, this is definitely not the only way to read the chart. The current b wave could be only part of a larger corrective flat, before making a larger wave down. Still, we'll count what is before us and, if the market says differently, we'll accept it and fit it into the larger picture. Remember - at minimum - on the daily chart we are still looking for a minute ⓔ wave that breaks the prior minute ⓒ wave low, for the expanding triangle, and maybe more if the expanded flat is to occur for the Minor B wave.

Interestingly, this count started out with a diagonal for the (A) wave, down, of wave ①, and it is a good illustration of a fractal-in-a-fractal, or a smaller degree wave being self-similar to the larger degree wave a which was also a diagonal, overall. And, wave-counters-beware, while it is tempting to count everything including Ⓑ down as part of the diagonal, there is a Flat in the futures (which makes a lower low) that prevents such a count as wave four in a diagonal cannot be a flat wave.

So, that's what we have at present. Could the wave go down to 90% of the prior up wave and make the larger b wave of a larger flat since 8th March? It could. Could the wave break the low again? It certainly could. Again, nothing to the downside will surprise us. If anything is surprising us at present it is the lack of upside. Even though short-term wave patterns like a double zigzag are being invalidated, the daily bias is still to the downside, and, as of Friday, the intraday bias is still to the downside as well.

Still, daily prices have made two consecutive closes below the lower daily Bollinger Band, dropping the odds to about 5 - 7% of the next close being lower than the band (not impossible - just lower odds). And the daily slow stochastic is in over-sold territory and not embedded. So, one should tread cautiously and patiently in the interim.

Have an excellent rest of the weekend.

TraderJoe

Watching for Activation

According to the daily ES chart, below, the wave count has been proceeding pretty much as anticipated given all the number of diagonals to fit into the picture and to figure out how they alternate.

ES Futures - Daily - Watching Prior Low

The wave degrees are noted in the chart. We are watching to see if either the expanding triangle or the expanded flat gets activated by prices moving below the low of the prior minute ⓒ wave this week or next. If it does, then the pattern becomes a matter of the length of the wave down because so far - from a time standpoint - this down wave has already consumed more time than the prior ⓒ wave which is what is classically expected in an expanding triangle.

We will note that tonight price filled the up gap in the futures from 25 Nov 2025 if you look back to the left. Still, there is a gap down tonight, and a gap down from 27 Feb 2026.

The daily MACD is currently headed lower, and the 200-day simple moving average in the futures has been tagged or broken, depending on whether one is using the lead-month contract or the roll-over contract. Further, price has broken the lower daily Bollinger Band for the second day and tagged the weekly one.

So, one might look for signs of the Smart Money to take profits on shorts near the bands, maybe letting some ride, and this may create some whippy action in this area.

P.S. I would put a wave-counting-stop (brown w.c.s) above the wave labeled (b)/(ii) as an indication that a different count is playing out.

Have an excellent start to the evening,

TraderJoe

Hourly Parallels

The whip in the ES futures is on in full force. Here are a couple of hourly parallels for your consideration. 

ES Futures - Hourly - Parallels

The wave structure up was a three-wave sequence. The wave structure down is in a parallel and might also be a three-wave structure or a complex in the futures. This makes prediction of the wave structure very tenuous. While it does feel like we might be in the minuet (b) wave, further confirmation of the form is required.

Today price finished in the middle of the range but still well below the daily 18-per SMA. So, the bias remains down at least temporarily. It can't be said often enough - calm, patience and flexibility are key requirements for this period of time.

Have an excellent start to the evening,

TraderJoe

Until Today ..

Until today, the lengths were not correct. Yes, everyone recognized the whippy, range-bound, overlapping nature of the wave-count. But, until today, the waves were not long enough to call the down structure an expanding diagonal, as in the ES 12-hr chart below. This is the case only in the futures and not in the cash market. The SPY contract has too many waves missing from the count.

It's an odd timeframe to have to be charting or even following. Yet today we can see that a fifth wave, v, is longer in price and time than the third wave iii. So, this could mean that if price is making the expanding triangle downward, then this wave could be the minuette (a) wave of the minute ⓔ wave yet to come of the Minor B wave.

Again, we don't know that that is the case, but its likelihood is growing every day. The downwardly biased chop feels like a diagonal grind. And, today, prices again overlapped upward which is hard to explain using pure impulse structures. We also know that prices got down and through the lower daily Bollinger Band on this contract - where the Smart Money likely lightened up at least some of their positions - and prices did not quite make it down to the 200-day SMA.

So, again, because of the whip & the chop, please be patient, calm and flexible. 

Have an excellent rest of the evening,

TraderJoe