Threes

I wish I could be more clear at this time, but wave structure prevents it. This is all I see in the present moment.

S&P500 Cash Index - 15-Minutes - Two Sets of Threes

Of course the 'threes' could start a diagonal to the down side. If so, there would be a gap down tomorrow. But, we don't know for sure that the second three to the upside is finished yet. I have to keep it simple until we see which way the gaps go.

Have a good start to your evening.
TraderJoe

Two Good Options

Friday, the Dow Jones Industrial Average made a new recovery high late in the session. The S&P500 cash did not, the Russell futures did not. The ES E-Mini S&P 500 futures did.

Pending a review of some additional wave label degree work, it is 'possible' that Minor 2 ended on Friday, as minute ((a)), minute ((b)) and minute ((c)) as in  the chart below.

S&P500 Cash Index - Hourly - Three Waves Up to Minor 2

I am still studying this situation from a degree labeling perspective, but the question has to be asked, "why did the waves fail?". There is a remarkable Fibonacci relationship in this count : minute ((c)) = 38.2% x minute ((a)) to the pip. And clear Fibonacci relationships are common in corrective waves.

Price is now just shy of that daily declining trend line from the high. But certainly close enough, and diagonals like to adhere to their trend lines.

The very clear 50:50 alternate until there is further price development has to be that only the minute ((a)) wave completed at Friday's high, and we are now in the minute ((b)) wave down. We must take it step by step. If the ES futures find support at the 18-day SMA, then it is possible it would be a target for the minute ((b)) wave.

One precedence for the kind of count shown above might be the fact that both Prechter and Neely cite that there can be a wave such as a "failed zigzag". How can that happen if some of the internal waves of the ((a)) wave are not longer than the ((c)) wave - which fails? Interesting stuff.

Have a very good start to your evening.
TraderJoe

P.S. This morning's note is that there is a potential ending contracting diagonal to end the flat wave called from yesterday. The chart as it stands now, is below. The fourth wave of the diagonal has already been exceeded lower.

ES E-Mini S&P500 Index Futures - 30 Min - Potential Ending Contracting Diagonal

Please keep in mind that due to the overall uncertainty in the count that (1) down, and (2), up, at this time might be (A), down and (B) up.

Revision to Short Term

Thanks to two of the regular commenters on here, the short term chart has been revised for a particular reason. I couldn't find the specific reason why for several days, but now I have. First, here is the chart.

S&P500 Cash Index - Half Hourly - Revision

So, again, as per yesterday's comments, the time of the wave labeled as T (iii) is simply "too long in time" to be a sub-wave of a minute ((c)) wave up. That is because it is "longer in time" than what was formerly the minute ((a)) wave, up, and now shown as minuet (i). And that is not allowed. That means this whole wave up is more likely an impulse wave up as halting and awful as it was - and is.

In the above count, wave (iv) is also just slightly longer in time than wave (ii). And you know what that means too! It means that in the prior ((a)), ((b)), ((c)) count upward - yesterday's 30-minute chart, then, as second wave, a sub-wave,  it would also have been longer in time than it's larger degree ((b)) wave which is also not allowed. And, that problem gets worse if you try - in the old ((a)), ((b)), ((c)) count - to move (i) of ((c)) backward in time. Then, you violate the degree labeling between ((b)) and (ii) all the more. That is simply not allowed.

The time relationships above are: T(iii) > T(i), and T(iv) > T(ii). That is not a problem because these waves are of the same degree. And I don't see any time or price degree violations in wave (v), as long as wave blue ii is a FLAT wave. This chart also resolves the issue with the (iv) to ii trend line not cutting off any part of wave iii of (v).

Further, I want to assure you that wave (iii) is NOT being counted as a diagonal, just an impulse in which it's wave iv has a higher -b wave. We know it is not a diagonal because it's low was not exceeded lower.

So, the assumption is this wave is now the minute ((a)) wave of the diagonal wave 2.

Again, just as in the diagonal count, I do not like altering the count. But, when the potential diagonal invalidated, the count had to be changed. And when price or degree labels have been violated, then the count must similarly be changed. However, the count does make a particular prediction, and that is that since wave (iii) is shorter than wave (i), that wave (v) must be shorter than wave (iii). So I have shown wave (iii) at it's absolute maximum possible height for measuring purposes.

Thanks to the proponents of the impulse count for sticking to their guns. For those of you that have not seen one before, the wave (iv) triangle - in which price goes right into the apex - is what Neely calls a "non-limiting triangle". That means, on exit, price is NOT limited to the width of the triangle. Prechter also cites a triangle of this type in his book.

Have a fantastic rest of the Martin Luther King holiday and celebration of his life!
TJ

P.S. After the open on Tuesday, the market fell such that the widest width of the triangle (iv) was exceeded lower. As far as I can see, this calls for a change of wave degree, and minute ((b)) may be underway. Chart below.

S&P500 Cash Index - 30-Minute Chart - Width of wave (iv) Triangle Exceeded Lower

P.S. # 2 - Only posting this one because it is one of the finest examples of a leading contracting diagonal off of the top you will see,

ES E-Mini S&P500 Futures - Half Hour - Leading Diagonal and Five Count

Current count is good until 2,615, or 5 becomes 3. Notice in the above chart, the time relationships in the waves. Wave ((v)) down, consumes less time than wave ((iii)), down. And wave ((iii)) down is shorter in time than wave ((i)). Further, wave ((iv)) is shorter in time than wave ((ii)). Of course, the same is true of the price relationships, but one should really cement in their mind this picture of a contracting diagonal as it really is 'ideal' in every manner.

Bigger Picture

If you weren't able to follow the comments yesterday, last night in the pre-market, the count of a diagonal wave was invalidated. That meant we were likely in a third wave. So, that provided this shorter term count. The third wave (iii) can still be in progress as there is no concrete overlap yet.

S&P500 Cash Index - Half Hourly - Still in Minute ((c))

Then, yesterday, Elliott Wave International posted this incredulous statement regarding the current wave count, (paraphrase), "our best wave count is that we are in (1), (2), 1, 2" - which readers will recognize means they think we have had Intermediate (1), and Intermediate (2), and Minor 1, and Minor 2. This current wave up would be Minor 2.

The reason this proposed count is incredulous is that Minor 2 would already be a larger wave in points than Intermediate (2) - which simply flies in the face of degree labeling! You can't call a wave a smaller degree if it is, in fact, larger than it's larger degree counterpart. And it is! They think (2) where is we show minute ((b)) at the beginning of December, 2018; and (1) is where we show ((a)) at the end of October in the daily chart, below.

To counteract whatever is going on over there, I thought I would show you my proposal for the beginning of this bear market.

S&P500 Cash Index - Daily - Contracting Diagonal Lead off to Bear Market

The reason is thus: this up wave consumed more points that the prior minute ((b)) wave did by the end of November, 2018. Therefore, it simply must be a larger degree wave. There are only two ways this can happen, and both of them are diagonals. Right now, the market is so choppy, and the Federal Reserve has implemented its "patience" plan. So it seems we might only get a choppy diagonal for the first Intermediate wave of the bear market - shown as (1) in the lower right.

I have drawn in some preliminary trend lines. They are just that. They will be adjusted as we get more waves. Perhaps Minor 3 will occur if/when the Special Counsel's report is released, and/or if Congress takes any action on it.

Until we get more information, this is the best I can do. I was dismayed to read yesterday what the professionals at the wave service thought of the count. It makes it hard for all to learn.

Have a good start to your evening.
TraderJoe

Still the One - 2

We should know soon enough if this count of minute ((c)) = minute ((a)) is the correct one or not. Every wave occurred just about as we expected- with the few twists and turns along the way that are characteristic of potential diagonal waves.

ES E-Mini S&P500 Futures - 4 hr - Minute ((c)) = Minute ((a))

The orange box is drawn so ((c)) = ((a)), and it fits like a glove at the moment. If the count is correct then, there should be a gap lower in the morning, and the minute ((b)) wave should be exceeded lower in less time than it took to complete the overlapping diagonal ((c)) wave, up. The diagonal has all of the correct measurements, and this one has the nice "throw-over" of the top of the trend line.

The diagonal would invalidate if wave (v) became longer than wave (iii) above 2,655.75.

Have a good start to your evening.
TraderJoe

P.S. The futures count was invalidated in the overnight. The only count I can find that still follows the rules for all those overlaps is this one.

ES E-Mini S&P500 Futures - 4 Hr - Only Count that Follows the Rules for the Overlaps

So, the overlapping waves must have been a leading diagonal first wave, and we are now in a third wave.

Still The One

There were initial marginal higher highs in the stock indexes today, followed by a somewhat weaker close.  The S&P500 did have a second higher high in the day that was not confirmed by the Russell 2000 futures. The count below still remains the best one at this  time..

ES E-Mini S&P500 Index Futures - 4 Hr Chart - Diagonal Still Possible for Minute ((c))

The potential diagonal remains solidly on the table. As of the ES settlement, by measurement, there were still five points of possible overlap with waves (iv) and (i) based on the length shown for a third wave. Again, a fourth wave (iv) should remain shorter in time than wave (ii) to maintain a diagonal. As always, a diagonal must form properly in every detail or an alternate would have to be selected. But, we will address that issue if it should come to it.

Today, price got very, very close to the 50-period SMA on the daily chart.

Have a very good start to your evening.
TraderJoe

Brexit Defeat

Today the British Parliament voted down Ms. May's proposal for a Brexit, and this generated a call for a "No Confidence" vote in the government. Stocks here initially rose, then see-sawed on the news.

The best count for the S&P500 cash index remains this one on the four-hourly chart of the futures, below.

ES E-Mini S&P500 Futures - Four Hourly - Diagonal minute ((c))

It's 'possible' wave (iv) down began at the tail end of the session. It should take less total time than (ii) to maintain a diagonal. (This is not a rule but a guideline). The Elliott Wave Oscillator continues to diverge but the green histogram bars for today likely indicate the third wave.

In order to maintain this count, in no case may wave (iv) travel below the low of wave (ii). So far, this wave is just 'grinding and grinding' and there is no clear wave-counting topping signal such as an outside day down, or a bearish engulfing candle. One can also see the the trend line from the 26 Dec lows is also still being maintained. Price is still above the 18-day SMA, so, it has a positive bias, the upper Bollinger Band is not too far away, and the daily slow stochastic is now embedded.

With today's higher high and overlap of 2,603 for the S&P500, it likely means the diagonal count is activated - just as with the $NYA we showed on the previous post.

Have a good start to the evening.
TraderJoe