DOW Makes another new Recovery High

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; $NAS, $NDX, DJUtil lower
SPX Candle: Higher High, Lower Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

In another narrow, and low volume day, the cash S&P500 Index made a new marginal higher high for the .b wave, but not a new higher high overall. Then, when news about the Paul Manafort deal was released the market quickly headed lower, made a new daily low, and recovered to just about unchanged, but slightly higher on the day. Here is the daily chart for reference.

S&P500 Cash Index - Narrow Range - Doji

The .b wave has been intractable, as was suggested. There are a couple of ways to count it. We may have had an ending contracting diagonal at today's high - or it might have just been the smaller degree -b wave of an internal flat wave iv which means another high can not be ruled out. The lower low today could have been the -c wave of that flat internal fourth wave. Of note, today the .b wave became longer in time (in hours) than the .a wave, providing much better time proportionality.

If we had a diagonal, it hasn't met it's target by exceeding the start of the diagonal in much less time than the diagonal took to build. The diagonal likely started at the 2,880 level. Here is an explanatory chart below.

S&P500 Cash Index - Half Hourly - Potential Diagonal

Right now, such a .b wave counts best as a double zigzag. Try it as w-x-y (a,b,c,x,a,b,c) and see why because of the overlapping wave and which wave has the large gap in it - shown in red circle. The count would be invalid if the .b wave exceeds the prior high of August 30.

Trading below today's low would likely mean the short term trend has turned.

Have a very good start to your evening and to your weekend.
TraderJoe

DOW New Recovery High

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; $RUT, DJTrans lower
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

The Dow Jones Industrial Average made a new recovery high today. In doing so it filled the down gap left open from the decline on February 2, 2018 from February 1 at the 26,187 level. This affected neither our count on the Dow (see the second chart in this previous post HERE) or the count on the S&P500.

Stocks, as measured by the S&P500 Index, however, did not make a new high. They had closed yesterday at 2,889, and gapped up to 2,897 (+8 points) on the open. They traded higher to 2,907 until approximately 10 AM. At that point, the .b wave hit the 78.6% Fibonacci retracement level of the .a down wave. Prices stalled there, and traded down to the 2,896 level (down about -11 points) until about 11:30 am ET. Prices then spiked higher into the noon hour, but could not make a new high. Prices then went range-bound  for much of the afternoon, trading between 2,900 and 2,906 making an apparent regular contracting triangle for most of the afternoon. As of the end of the cash session, there was a rally attempt, but neither the Dow nor the S&P could make a further high. It could be the triangle has not finished yet.

S&P500 Cash Index - Daily - 78.6% Retrace of .a by .b

  
So, far, the .b wave has a fairly typical 78.6% retrace on it's .a wave, and a few more points are possible. However, price action was very, very choppy today, and the potential triangle could indicate "last wave in the series dead ahead" (not trading or investment advice). For those interested, by comparison the $RUT futures have only a 50% retrace on their down wave.

While price closed one gap today - see the black circle below (iii) - it opened another gap to do it. See the latest red circle. Stock exchange volume continued as moderately light with only 3.2 billion shares traded on the NYSE.

The Elliott Wave Oscillator turned green, as it rose today. Price is over the mid-line of the channel which is somewhat positive for prices.

Have a good start to your evening.
TraderJoe

Still More B Wave

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Higher High, Higher Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

In likely more of a continuing .b wave, stocks were lower, then higher, then closed about unchanged. It would not be good to read too much more into it that that at the moment. Here is the daily chart of the S&P500 cash index for reference again.

S&P500 Cash Index - Daily - Doji Day

The Elliott Wave Oscillator continued as red, declining, and above zero. Internally, the .b wave can have the beginnings of an hourly triangle, but it would have more work to do to prove out such a triangle, and it does not have to. So far, the wave continues to find both resistance and support at the mid-line of the channel we have shown above, with four closes very near to it now.

The .b wave can go on for quite a while, if it wants to - perhaps even up to the next FOMC meeting. But again. There are no requirements (other than a three-wave sequence). It is most likely that minute (iv) would have a notable "three wave" look to it, and that is not the case yet.

Have a very good start to your evening and stay as safe as possible.
TraderJoe

More B Wave

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Lower Low, Higher Close - Outside Candle Up
FED Posture: Quantitative Tightening (QT)

In typical "B" wave fashion, and for no apparent reason, the stock market made a lower low day, then a higher high day, but had difficulty following through at the end of the day.

The market, as measured by the S&P500 cash index, closed yesterday at 2,877. It opened on a six point gap down to  2,871 and then traded lower to 2,867, or roughly 10 points lower. After the first half-hour, prices started a spirited rally, and climbed to 2,892 (+25 points from the low) by noon. At that point some sideways to lower trading set in, and cash closed at roughly 2,888, or four points from the high of the day. Here is the daily chart of the cash S&P500 Index for reference.

S&P500 Cash Index - Daily - Outside Day Up

Again, it is unclear what form the .b wave may take. As a 'simple' zigzag it could be over today, but that seems too short in time. As a triangle it could take more time. However, given that wave minute (ii) is a flat wave, it would not be expected for the .b wave of minute (iv) to travel over the high of the pattern, as that would represent poor alternation in the count.  Therefore, I am showing an alternate minute (iv) location in the event the high is again exceeded. (There is absolutely no evidence for that yet, but I promised to keep you apprised of the best alternate when I see it.) Price had gotten back to the mid-line of the channel, and then stalled there.

The Elliott Wave Oscillator is still red, declining and above the zero line. It should be clear from the dotted black circle to the right of the indicator that it would make sense for the EWO to re-approach the zero line sometime within minute (iv), and therefore I am also allowing the possibility that all of wave minute (iv) may develop into a larger more time-consuming triangle, even though that is not a requirement to complete the count.

It would be nice to see some part of minute (iv) strike the lower channel boundary - as a sign of waning momentum. NYSE volume was again very lack-luster at only 2.9 billion shared traded.

Have a very good start to your evening.
TrderJoe

Even Lighter Volume

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; DJIA lower
SPX Candle: Higher High, Higher Low, Higher Close - Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

Absent significant economic news, save for the level of Consumer Credit - which almost doubled over the prior period to $16.6B from $8.5B, markets were significantly slower than even Friday. Volume on the NYSE fell to about 2.7 Bil shares. It could be that worries of an East Coast hurricane kept people away while making  preparations. We hope for the best.

Stocks, as measured by the S&P500 Index, had closed Friday at 2,872. With the overnight futures up as much as +13 points, they gapped about +9 points higher at the open, and traded up to 2,887 (or +15 points) within the first half-hour. This was enough for the S&P500 to break the declining hourly tops we asked you to keep an eye on, and therefore indicate the likely entry into the minuet .b wave of the minute wave (iv). See the chart below. As the day wore on, stocks traded largely sideways-to-lower and closed up a little more than +5 points, while the DOW closed down.

S&P500 Cash Index - Daily - Entrance into .b wave

As a general rule, "B" waves can be very intractable and hard to predict. Because "B" waves can be literally "any three", including zigzag, flat or triangle, provided they do not exceed the start of their "A" wave in a zigzag, it is of dubious use to try to predict how long this one will last. We'll do our best, internally, trying to count it.

The Elliott Wave Oscillator remains red, declining and above the zero line.

Have a very good start to the week, and focus on the true priorities as they arise.
TraderJoe

Back to Light Volume

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

It was yet another light day for trading in U.S. equities, today with only 2.9 billion shares traded. Stock prices were in a bit of trouble from before the open. The Labor Department reported an increase in wage pressures which leans in favor of higher interest rates (even though there were substantial downward revisions to job totals in prior months). 

Stocks, as measured by the S&P500 Index, had closed Thursday at 2,878. They gapped lower by -10 points at the open, dropped four more points to 2,864, making a new daily lower low, and then rallied to +5 points around 11:30 am. About that time, comments hit the news wires that more tariffs were potentially ready for China, and stocks began to slip again. They fell to within two points of the low, and then had a six point rally to close at 2,872, or down roughly 6 points on the day. All-in-all a very whippy day with a downside bias.

Here is the daily chart of the cash S&P500 Index.

S&P500 Cash Index - Daily - Lower Low Day

Downward wave counting within minute (iv) continues. Price has now lost the support of the mid-line of the channel which argues even for a higher probability that the larger degree wave (iv) is now being constructed.

The Elliott Wave Oscillator continues with red histogram bars, is declining and still above the zero line.

Avid readers of this blog might like to try three exercises. First, try drawing a line from the exact high of wave (i) to the exact high of wave (iii). You'll note it is still roughly parallel to the lower boundary of the channel shown. Next, draw a line across the tops of the hourly candles for the last seven days. That line needs to be exceeded upward before additional wave labels are placed. And thirdly, have a look at the Russell 2000 Index futures on the hourly chart. You'll note the diagonal we pointed out yesterday for it's wave v of ((v)) was proved out by prices this morning closing lower than the start of the diagonal - in less time than it took the diagonal to build.

Have a very good start to your evening.
TraderJoe

Bifurcated Market, Overlap & And More

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

On Tuesday August 28th I wrote in the blog post, "While the exercise continues to be to attempt to count the waves to a top, my market outlook is shifting from neutral to cautious. I am not bullish. I am neutral and wary of a top. (This is not to be taken as trading or investment advice. It is only a sign that most of the countable waves to a top are in place. Not all of them but many of them.)"

Today illustrates why. While the Dow did not make a new lower low today, and made new highs today - not only over that of yesterday but of the day before - the S&P500 not only made new lows today, but also failed to make a higher high day, or exceed the downward hourly trend line we have been writing about in the last few days.
 
Because of today's downward overlap in the S&P500 cash index, the chart has a revision as follows.

S&P500 Cash - Daily - Minute (iii) Completed

The red daily bars within minuet v have now been designated as sub-minuet waves .ii and .iv within minuet wave v, of wave minute (iii). This means we are likely now in the minute (iv)th wave. And this wave can either be a simple zigzag (sharp) or a triangle to alternate with flat wave for minute (ii). As you know, we don't like to do count revisions, but the overlap in this case requires it, and it seems to fit best with the position of the Elliott Wave Oscillator.

The Elliott Wave Oscillator, is red, declining, but still above zero. The position of the market is decidedly mixed. For example, the Russell 2000 may have topped. Here's why.

On our post of Sunday, August 12th, we outlined the case for a regular contracting triangle in the Russell 2000. You can view the link HERE if you wish. That triangle did complete satisfactorily, including new all time highs. See the chart, below.

Russell 2000 - Daily - Triangle Completed

Besides the triangle completing as we called it, there is even the very distinct possibility of an ending diagonal triangle within wave ((v))! Any trading below the (e) wave of the triangle at 1,660 likely gives a trend change.

While there may be one more up wave in the DOW and the S&P, be very careful here as the wave counting is becoming subject to much more error in the larger indexes.

Have a very good start to your evening.
TraderJoe