Overlaps

Others have counted the chart below of the New York Composite Index differently. I thought it would be instructive to look at it today.

$NYA - Weekly - Fifth Wave Failure

Some have counted this wave as wave 1, down in February, 2018, and wave 2, up to the October, 2018 high. I believe that wave count to be in error based on where almost all of the other major stock indexes made their highs. As far as I can tell, the October, 2018 high was the fifth failure wave in the $NYA.  It is what Ralph Nelson Elliott would call the "Orthodox high of the move", versus the "Nominal High of the move".

More importantly, look now at where the $NYA has overlapped on the way down.

$NYA - Weekly - Overlap on Minute ((x))

Some think that minute ((x)) was actually the high of Minor 1. If that was the case and they are calling for a "fifth wave up, because this is the fourth wave down", the overlap suggests they are clearly in error. There are other reasons to rule this out - as I have stated before - based on degree labeling. But the above overlap is yet another reason.

OK, that is water under the bridge, but here is another overlap.

$NYA - Daily - Overlap at 2

The daily chart of the $NYA shows two interesting features. The first is that there is clear overlap at wave Minor 2. So, those now labeling this as a fourth wave in this index are likely incorrect. But, this chart also shows something else of note. Namely, there is no overlap in the minute ((a)) wave down, as there is in the S&P500 cash index. Instead, there is a rather clear wave (iv) triangle!

So, in the first instance, there is now a clear case for a diagonal downward. Such a diagonal could either be expanding or contracting! The market is doing its level best to keep the uncertainty in the wave count. 

But, in the second instance if the current three-waves up somehow expand into "five waves up", then the next best count (best alternate) will be Minor 1 down at the October minute ((a)) location, down, and then five waves up for a "running flat" for Minor 2. 

$NYA - Daily - Alternate Running Flat

While I have diagrammed the alternate, above, the reason it is the alternate is that the internals of the minute ((a)) are not really clear, in this case, and they already contain one upward failure. In addition, there is no clear evidence of five-waves-up to minute ((c)) of Minor 2. But there could be. It could be the upward waves just aren't finished yet.

So as always patience, calm and flexibility are needed until the market sorts things out. It should be clear that any downward overlap of 11.40 on this chart before making a fourth and fifth wave higher would help clearly rule out the alternate.

Have a good rest of the weekend.
TraderJoe

Inside Day

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Lower High, Higher Low, Higher Close - Inside Day
FED Posture: Quantitative Tightening Interim Patience (QTIP)

As the FED has sent all its messengers out to say how patient they can be, today resulted in an inside day - also requiring patience. The hourly chart of the S&P500 Cash Index is below.

SP500 Cash Index - Hourly - Minute ((c)) Nears Equality

One can see from the Fibonacci ruler that a minute ((c)) wave is now nearing equality with minute ((a)). One can also see that the tail end is wedging prominently and price is below the mid-line of the channel. Since the cash index did not form an over-lapping diagonal for minute ((a)), then it would be acceptable for minute ((c)) to have formed a diagonal in its entirety.

Did the diagonal fail, or will it continue? That is a good question. There is a way to count such a diagonal for either case, unfortunately. The waves are so compressed, they do not provide a good answer. Monday and Tuesday should bring some better information.

Have a good start to your evening.
TraderJoe

Diagonal 80: Impulse 20

Stocks as measured by either the S&P500 cash index, or the futures made a marginal new high today. Still, the closer they get to 2,604, cash, then the closer they get to invalidation of the impulse down. For this reason, and one other that was covered in yesterday's comment, the odds of a diagonal are increasing and the odds of the pure impulse count are falling off considerably.

Price remained above the 18-day SMA, and therefore still has a bullish bias, although the slow stochastic is in over-bought territory. And, the swing-line (higher highs and higher lows) is still up. More-than-likely, the "smart money", is still targeting the daily upper Bollinger Band, as below.

ES E-Mini S&P500 Futures - Daily - Outside Day Up

Today was actually an "outside-day-up", and it was again riddled with speeches from the FED Chair and other members. Being an outside-day-up, it would be significant only if the low of today was taken out in the next two trading sessions. The above analysis is the first reason the diagonal is gaining odds.

The second reason, as discussed in yesterday's comments, is 'there is no sign of a clear topping candle on the daily chart.' There is not an evening star, or an inverted hammer, or a bearish engulfing candle. The upper daily Bollinger Band coincides with minute ((c)) = minute ((a)). So, this level is likely to provide some still resistance to upward price movement. Is the 100 period SMA (the green line) out of the question? Since it is inside of 1.618 x ((a)), it is not. As a result, patience and flexibility are still greatly needed as the trading algorithms and the news continue to present overlap upon overlap. This 'slowed pace' of both down and up price movement may be well in-tune with the personality of a diagonal wave.

Have a very good start to the evening.
TraderJoe

For Planning Purposes

There have already been some overlaps in the overnight futures. The chart below would be triggered particularly if there is overlap on 2,603 in the daily futures. (Note: it also works without the overlap, but the overlap would be a clear signal.)

ES E-Mini S&P500 Futures - Daily - Start of a Diagonal as Alternate

Why this count? Within any diagonal, waves 2 and 4 simply 'must' be zigzags. The clearest upward zigzag on the chart is the present one. That 'likely' means it is wave 2.

The clear downward diagonal in October would be the minute ((a)) wave, as diagonals are 'often' A waves. The November correction counts best a a double zigzag, and while it 'could be' a second wave, if one fiddles with the count to get it to be a simple zigzag, as it is, it would count better as the minute ((b)) wave.

The December decline would be the minute ((c)) wave of the Minor 1 wave. It has no divergence on the daily Elliott Wave Oscillator. The entire zigzag lower would have formed in a neat channel.

This second wave up, Minor 2, if it did not form a triangle, would be a clear "degree violation" with the minute ((b)) wave. Therefore, it would have to be the larger degree wave.

I am not in favor of calling the diagonal down in October a three-wave sequence. The reason is that it's entire length down was needed to establish the lengths of the sub-waves in the December decline.

Clearly such a forming downward diagonal in no way implies that the entire bear market is over as some suggest. Once again, I do not like changing wave labels, but if overlap occurs, it would likely break rules that can not be broken, and I will always follow the rules.

Have a good start to the day.
TraderJoe

P.S. Based on the hourly futures, and all of it's overlaps, this is the only upward count I can get to work.

ES E-Mini S&P500 Futures - Hourly - Too Many Overlaps

Fewer Words Today

Primarily just a chart. Price has returned to the underside of the breakdown of the head-and-shoulders in the red line. And ...

Have a good weekend.
TraderJoe

Three for Three

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Three FED chair persons were interviewed today, and the result, so far, is 'three-waves-up". The three waves up, so far, are: 0 = 2,347, a = 2,521, b = 2,444, and c = 2,538. That's all well and good. We do not know for certain that the up waves are complete. There was not a good clear sign of reversal by the end of the day.

Daily ES prices had another outside reversal day; this one was to the upside. Prices tried to tag the 18-day SMA but just missed it.

If upward movement should end here, then the three waves up 'could' be part still of a minuet wave (iv) triangle. And if upward movement continues, then we'll look for the best count that fits it. Right now, it's a bit of a "wait and see" game.

So, remain flexible, calm and patient.

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

Still Nothing Preventing Wave Minuet (iv)

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil higher
SPX Candle: Lower High, Lower Low, Lower Close - Red Marubozu
FED Posture: Quantitative Tightening (QT)

After trying hard to break upwardly through the 2,520 resistance level, stock prices as measured by the S&P500 cash index gapped down and fell back today. They made a lower low, and began to display some of the 'post-pattern behavior' one would expect if the minuet (iv) wave count was correct. The Dow Jones Industrials were lower by some 660 points, and the S&P500 cash index by some 62 points.

S&P500 Cash - Daily - Minuet (iv) Likely Completed

Wave minuet (iv) is more involved and complicated than minuet (ii), although the shape is similar, and it takes considerably more time. Therefore, there is a minimum pattern of alternation shown.

Tomorrow are two significant pieces of information: 1) the employment report, and 2) a combined NY Times interview with FED chairs Powell, Yellen and Bernanke. Given all that, even though a lower low below minuet (iii) is expected, it could be bumpy as get all. A triangle for wave minuet (iv) is even a possibility, but so is a plain old impulse for wave minuet (v). It should be clear than if wave (v) = (i), then it would make a new low. But, it could go lower than that, too!

Best wishes for a good start to your evening.
TraderJoe