Temporarily Ambiguous - 20% Odds

The ES Hourly futures this morning made a lower low. They can legitimately be counted as 'five-down' with the extension in the first wave. BUT, they can also legitimately be counted as just 'three-down' with a triangle in the middle as in the second of the two ES hourly charts, below, with two roughly equal segments.

ES Futures - 1 Hr - Ambiguous

 

As a result, the five-count could be an 'a' wave down, or the bullish falling wedge that ends a fourth wave of an impulse (in the ES nothing was overlapped). 

Similarly, the three-count could end the (X) wave, just start a double-zigzag downward, or it can be part of a triangle (X) wave.

There are five possibilities here, one of which involves making a new high in some short order. So, the odds of getting this right (by random chance) are about 20%. These are not great odds. What will help is to see how long the up wave takes, and what pattern begins to form. 

Looking at today's up wave is equally ambiguous. It can be interpreted as one wave up, and a flat correction in progress, or it can be interpreted as a potential diagonal in progress, although the retraces are shallow. More waves are needed.

One needs to be flexible, patient and calm and look for some clues. Wave counting does this from time to time. When it does, one just recognizes that battleships don't turn on a time. The jumbled count is likely due to the conflict created by the money being pumped into the system by Central Banks, versus the perceived value it is providing. It would have been more telling if the five-waves-down took out an important low. They did not.

Have a good start to the evening.

TraderJoe

Breech of Up Trend Line

As prices continued lower today, we noted during the day that price was down to the daily closing up trend line. As the daily closing chart, below, shows, price pierced it lower.

Assuming the Intermediate (Y) wave is completed, then it ended on a double-divergence with the MACD on the (W) wave. 

 

ES Futures - 30 Min Close - Three waves down

During the day, wave counting downward continued. So far, to today's settle there appear to be only three waves down: a/i, b/ii, c/iii. These waves are to be counted completely equivalently until or unless there is a reason not too. The two biggest reasons not to count them equivalently would be 1) if there was a clear non-overlapping fourth wave up and fifth wave down, or 2) there was upward overlap which would indicate either the end of the down move, or a possible diagonal lower. (At this point in time there is completely insufficient evidence for any diagonal lower.)

So, we will see how these waves develop in the near term. It will be important to know if they form a five-wave or a three-wave sequence lower.

Have a good start to the evening.

TraderJoe

Simplest of the Counts - 3

During the day, I said I would have a look after the close to see whether there was anything that rules out this down wave as being a (c) rule of minute ((iv)). Have a look at the chart below, and I'll explain why degree labeling tends to but does not completely rule out a longer minute fourth wave in time.

ES Futures - 8 Hr - 'Probably' Completed

If you look at the length in time of the minute ((i)) wave on the right, you see it is 28 bars (8 hrs per candle). So, on the right, giving the up wave a longer in time (a) to (b) wave as the longest (a), and the shortest (b) wave possible, then you see that sequence is longer in time to minuet (b) than all of minute ((i)) took to form. This would tend to rule out the longer minute ((iv)) wave based on degree labeling. The new wave (b) location and minute ((i)) are in the same direction, so to preserve the definition of the degrees, then minuet (b) should not become longer than a minute wave in the same direction.

The only caveat is that the immediately preceding minute ((iii)) wave is a lot longer in price and time. Yet, if one would allow a (b) wave to become as long in time as a minute ((iii)) wave, then that would seem to grossly distort the common wave shape and not provide a wave with the right look.

The result is likely that it rules out the new wave ((iv)) location at today's low with about 80% or greater probability. There isn't much data developed yet on comparing expanded flat (b) waves to their first or third waves, however, this line of reasoning seems valid. We won't know for sure unless or until there is a retrace wave that does not go over the top again. But, based on this reasoning, there is a good shot at it.

Have a good start to your evening.

TraderJoe

Simplest of the Counts - 2

Today's down wave at the end of the day was quite strong. We were on the look-out for wave completion or a fourth wave with a final fifth wave to follow. It appears to be the former.

ES Futures - 8 Hr - Possible Completion of (Y)

The time frame for this wave is a longer and more difficult one at 8-Hr, but it is what it is. It is not yet for certain that the up wave is over. Wave minute ((v)) could subdivide. In other words, today's drop could only be wave (ii) of minute ((v)). But, it can not do so if price drops below the 4,120 level that we noted yesterday. IF the wave has completed, it has finished the Intermediate (Y) label, upwards. 

Keep in mind that another alternate can be that since the wave hasn't contacted the lower boundary, yet, it could be a much larger in time wave minute ((iv)). As of this point, I can see nothing that absolutely rules that out.

So, we possibly have a completed wave count, but we do not have confirmation. Better confirmation would come from trading well below the lower parallel, then back-testing it and failing. That could be a ways off yet.

This chart was added after the beginning of the evening session. I think if you clear away some of the clutter, the proportions are looking pretty good, and the wedge shape remains in tact.

ES Futures - 2 Day - Close Only Wedge

 

Have a good start to the evening,

TraderJoe

Simplest of the Counts

This is the simplest of the Minor C waves to the Intermediate (Y) wave, upward. It only requires completion of the minute wave ((v)).

ES Futures - 8 Hr - Simplest Count

 

It must be freely admitted that the exact location of minute ((iv)) wave could be disputed. It 'may be' an awkward triangle. And, in that event, the up wave may even be simpler. In either case, the completion of the up wave would likely best be confirmed by trading below the 4,120 level.

Have an excellent rest of the weekend.

TJ

Playing Out?

As noted in prior posts, there was a lot of 'whip and foam' in this market. It was entirely possible that a downward minute ((iv)) wave was playing out as a diagonal. It appears to be a diagonal of the expanding variety as shown in the ES 2-Hr chart, below.

Yesterday's downward wave was greater than a 1.618 wave, and is likely a third wave. Today is likely wave iv, and has already overlapped wave i, upward. It has also taken enough time to be longer in time than wave ii, but it could take more to meet the trend line if it wants, but does not have too. It has already satisfied the requirements, but can go further to make a larger zigzag. Then, there should be a fifth wave down that is longer in price and time than the third wave.

Have an excellent rest of the day.

TraderJoe

Odds a Little Better Yet

Just like on Friday, where we expected sloppiness due to the end-of-month so-called 'window-dressing', today we alerted readers to watch for 'first of the month money' resulting from the inflows seen from pension funds, 401k's, company bonus plans, dividend reinvestment schemes and the like. That money did come in the overnight futures as they 'front-ran' these likely automatically required purchases and, then, into the cash open. But, today's pop was not enough to send prices over the prior high. In the after hours tonight, the ES daily futures appear to be losing the slow stochastic as per the chart below.

Prices sold off a bit towards the end of yesterday's session, and are continuing a bit tonight. If they continue lower, the 18-day SMA (or line-in-the-sand) may be the first target, with the lower daily Bollinger Band the second target.

Intraday, we showed a way to count the money inflow. So, it remains to be seen if a lower low day will result sending the swing-line lower, and whether there will be a close below the 18-day SMA to suggest a trend lower on the swing line.

Have a good start to the evening.

TraderJoe