Nope, just Mayonnaise

Today was futures contract roll-over day (based on volume). Some people do actually roll over today. Some don't. A person can wait a few days if they want. But the free chart services show the roll-over as of today, so it created some confusion. Not a Miracle Whip, just Mayonnaise. We did our level best to talk traders through it. So far, so good. Here is the daily chart of the ES futures with just a few of the important features of today's trading.

Today's price was essentially turned lower by the resistance of the 100-day SMA (green crosses). Prices made a lower low on the day - which keeps the swing line indicator headed lower on the daily chart, and price is below the 18-day SMA so the daily bias is still down.

Today's price movement has now undercut the second daily down (red) fractal back, marked by both the red dotted line and the red up arrow. This is a sign of eventual weakness. The other down (red) fractals back at the late December lows are also marked, but they have not been exceeded lower yet. They could be. And further, the downward price movement overlapped the highs of those initial candles in late December that initiated the up trend (shown with the red arrow pointing down below the text). 

Yesterday was an outside day down. Today had some follow-through but, as we showed in comments in the prior post, there can be more price excursion lower from this wave. Bear in mind, though, that price is currently running into the lower daily Bollinger Band. So the Smart Money may look to take some profits there as the probability of being outside of the bands is only about 5% (not impossible, just lower odds), especially since the slow stochastic is only in over-sold territory.

Price is pushing the bands lower, and EW counting does allow for lower lows. But, eventually, we would like to see the bands narrow in or constrict so that they might also signal a larger impulse downward to follow. That would be the most ideal circumstance. Novice wave counters (and even some experienced ones) often wind up rushing the wave count. Few recognize fully that there are often a significant number of overlapping one's and two's before that third wave occurs. It really helps to become familiar with the degree labels so one can see how many waves might have to be worked through.

So far, we are trying to count five sub-minuette waves from the high as i, ii, iii, iv, v. Right now, we are only at wave iii, if it forms properly. If it does, and we get a well-formed iv and v, then we will only be at minuet wave (i), and, yes, traders and counters will have to work their way upward through a minuet wave (ii) whether they like it or not. That's the biz.

Have an excellent start to the evening and the weekend.

TraderJoe

Miracle Whip ? Likely Not

In the prior post, we said to track the daily bars for the next day, and if a higher high was not formed above Monday's high, a up (green) fractal would be valid. We had shown this potential fractal and the prior down (red) fractal in the chart in the daily chart that prior post. We said that a break of that down (red) fractal would likely be significant.

A higher high was not made, and so in the simplified Bollinger Band form of the chart, the new daily up (green) fractal is now shown. 

ES Futures - Daily - Down (Red) Fractal Broken Lower

The significance of the down (red) fractal break is that now a back test of that lower daily up trend line shown yesterday has resulted in a back-test failure. Today's up wave failed at the 18-day SMA, and on the SPY 5-minute chart, we detected another truncation which is now proven correct ..by the lower daily low.

Here is the SPY hourly intraday chart to show you where that new truncation is (red asterisk *).

SPY Cash - Hourly - New Swing Low & Wave Degrees Unfolding in Turn

As you can see prices are below both the prior hourly sub-minuette wave i, and the prior micro degree wave Ⓑ resulting in the swing failure. This post is titled Miracle Whip? because it is now the bulls that must find a way to get up above the new upper descending channel line and that micro wave ②.

As I have said and written before, no amount of price movement to the downside will surprise me. Extreme upward movement is not impossible, and it would be foolish not to be prepared for a surprise report. However, such is getting less and less likely with every passing day. Currently, the market is tracking degree labeling well. And one must keep in mind that wave threes can expand by simply making smaller and smaller degree waves - a lot of them. Often, this happens in the overnight, so the third waves have time to form gaps.

For the record, I said in response to a previous comment that the "sharp rallies" are a feature of true bear markets. I realize how easy it is for some to get bullish on them. But other features of true bear markets are "failure swings", and truncations. These latter two items are two of the weapons the market uses to keep traders from top-ticking swings. And it makes all scratch their head long enough wondering what "the correct EW count is at the moment" that it stalls entries. We're becoming more used to them, but they are still troublesome for all.

For now, as shown on the chart, be aware that in the local hourly count, there are no gaps in the upward direction from sub-minuette wave ii, down to the current low. That might make it more difficult for those pesky algorithms to set targets in that direction.

In any event tomorrow is the Payroll Employment Report and the response is likely to be fun. Let's see how it goes, 

Have a good start to the evening.

TraderJoe

Daily Update

A lot of short term counts appear in the comments of prior posts. This is just to back off from the minutiae to focus on the daily time frame.

Have a look at the recent fractals. If the down (red) fractals break under the blue EMA-34 that will likely be significant. Watch tomorrow to see if the prior high holds. If it does, then the most recent up (green) fractal becomes valid.

So far, there has been a back-test of the prior wedge up trend line and the EMA-34. Let's see if they hold or not. The daily RSI is back below the 50 level. A lower low on the RSI would be more convincing.

As far as I can tell, the degree labels follow the definitions.

Have an excellent rest of the evening.

TraderJoe

Fifty-fifty

Over the weekend, we said there was a risk that the downward channel could break. Sunday night the futures were initially lower, then higher. The cash market opened higher, the downward channel did break, and upward overlaps were created. Prices scurried higher but we showed how thin the rise was getting in terms of volume and divergences. The interim effect was that the cash market closed its gap and left a daily tail candle.

As a result, the only remaining down count we can see in involves moving the truncation position as shown below, as it is the last up wave still in the prior channel.

SPY Cash - 4 Hr - Truncation Moved

If the wave we experienced was a Flat - as it appears to be - then it is possible the retrace is a second wave ii, as shown above.

There is nothing definitive that says the Ⓒ wave of ii is completed yet. There could be overnight hijinks. So, the probabilities really look only 50-50 going into the close. There was not much down movement - just the closing of today's gap. Maybe Chair Powell can help bring some urgency to the situation in his testimony before Congress in the next two days. Until some further clarification occurs, we remain patient, flexible and cautious. As the chart says, there are upside options.

Have a good start to the evening.

TraderJoe

Hold 'Em or Fold 'Em

With now about 107 candles on the ES 4-Hr chart for the wave of interest the benefits of The Eight-Fold Path Methodology should become pretty apparent (see the Featured Post in the upper right of the main blog page if you are unfamiliar with this method).

ES Futures - 4 Hr - Channel Count

Wave iii downward was a 1.618 wave. I dreaded when that happened because the risk of overlap rises with such a mild extension. Blog readers will recognize that we were expecting a fourth wave, likely as a Flat, because the second wave is likely a failed double zigzag. And so, we have that: alternation. Further, the Elliott Wave Oscillator crept above the zero line as is often expected in a fourth wave. Too, the upper parallel trend line was pushed out a bit today but is not significantly cutting off the bars on the low side. This is as expected. This much is terrific. 

The only issue is this. If an impulse is not going to develop, then this is the location where the failure occurs from. If the market doesn't want to make that clean fourth and fifth wave, it won't. And it'll leave a mess instead of an impulse count.

There are relatively few ES points until we know - only about 8 points to the upside. So, we'll soon find out. The alternative is just an a, b, c down with a messy triangle after the current wave iii location.

I have relabeled the fourth wave as Ⓦ-Ⓧ-Ⓨ because of the internal count from the Ⓧ wave. It appears to be three waves in both the Dow and the ES futures. Here is the Dow.

YM (Dow) Futures - 15 Minute - Channel Count

It is very hard to count the expanding diagonal in the Dow any other way. And you can note a crisp c = a Fibonacci relationship as things currently stand. In the ES futures it measures as a 1.272 relationship, again as things closed.

On the subject of Fibonacci, the Ⓨ wave = 1.618 x Ⓦ, when added to the Ⓧ. So, all these things are in place between a 38 - 50% retrace of wave iii. And now we wait to see if the market will do its thing. Either way, we're prepared with the needed information.

Have an excellent start to the weekend.

TraderJoe

The Night Desk Does it Again

Below is the daily chart of the ES futures. Today made an outside day up. The morning started with lower lows that attacked both the 100-day SMA (green crosses), and the lower daily Bollinger Band. We said price could find some short-term support at that location. It did.

What was interesting to me was the time the rally started. If you are a cash session trader, it looks to you like the rally started within a bar or two after the open. It didn't. Overnight, there was a lower futures low on the day. The lowest price in the ES futures was again around 3 AM - when someone or some machine is working the night desk.  There were no lower prices in the futures, and it was an all-choppy morning rally from there until a veritable impulsion of prices in the mid-to-late afternoon.

We were fortunate to count the diagonal rally, a retrace, and get some/most of the third wave up correct. The thrust continued into the last half-hour and the current wave looks like a smaller degree third wave, with possibly the smaller degree fourth wave beginning. Those of you interested in how we counted the intraday, and the rationale, can review the comments in the prior post. It really was fascinating.

So now there is an outside day up, which is below the 18-day SMA. It is to be respected with the caveat that "if the low of an outside day up is undercut within two days, it can constitute a trap for the bulls." Remember, the daily bias is still down, and the daily slow stochastic (regular calculation) is still embedded.

From an Elliott Wave perspective, this wave seems like it is indeed the Ⓒ wave up of wave iv on the ES 4-Hr chart in yesterday's post. It might retrace 38 - 50% of wave iii. As an exercise, readers of this blog should do the measurements in terms of points, and look for where such a wave count would work, and where it wouldn't. For information the Ⓑ wave external retrace measured 1.236 times the Ⓐ wave, well within the normal parameters for a Flat wave.

Have an excellent start to the evening.

TraderJoe

ES 4-Hr Count - Update

This morning the ES futures made a lower low. The wave structure in the downward direction is choppy and overlapping and it may be a Ⓑ wave, or part of one. It may also be counted as an expanding diagonal from what is currently labeled as the Ⓐ wave.

ES Futures - 4 Hr - Ⓑ or iii

As a result, there is no reason yet to stop counting downward - but there may be soon. With only 95 candles on the chart for the wave of interest, lower lows could result and make a more apparent red wave iii. Five waves up today could not be confirmed by the end of the cash session. The Elliott Wave Oscillator (EWO) is not yet above the zero line.

Looking at the ES daily chart, below, the daily slow stochastic (regular calculation) is fully embedded.

ES Futures - Daily - Embedded Stochastic

Price also got quite near the 100-day SMA. The combination of the lower daily Bollinger Band and the 100-day SMA may provide some near-term support.

Have an excellent start to the evening.

TraderJoe