S&P 5000

Friday, the S&P500 closed above 5,000 for the first time. Shall we call it the S&P5000, now? Clearly, just joshing. Now, using OHLC prices, we look for the following Fibonacci confluence on the 2-weekly chart of the ES futures. That confluence is in the narrow band between 5,116 and 5,130. Price closed at 5,044 on Friday.

The confluence results from the 0.618 extension on wave (1), and the 1.236 external retrace on wave (2). Will such a confluence hold? Well, the daily Bollinger Bands are still above the market and will likely be there on Monday, too. Further if you examine the chart at this LINK, the seasonal tendency for the month of February tends to be that the market is soft beginning around Feb 12 - 13.

Despite the "feel" of a third wave - which is why it is labeled as a "three" - the divergence on the Elliott Wave Oscillator on this time frame is still holding. If it seems like forever for those who monitor the markets daily one must remember that these are two-weekly candles!

The best alternate for this count would be: (1) = V, (2) = (A) and (3) = (B). But there is no need to invoke the alternate just now. Price is not to targets yet. If there is a fourth wave, (4), then there should almost certainly be overlap with wave (1). And sometimes, the fourth wave breaks the 0 - (2) trend line in order to create enough bearishness for wave (5).

Again, this two-weekly diagonal count is favored because there has not yet been a proven significant ending sequence (like a triangle or diagonal) on the weekly time frame unless one counts 2018 - 2022 as an expanding triangle. This is possible, but it also may just be an expanded flat, then giving rise to the diagonal above. Whereas, if that period 'was' a triangle, it should have been quickly retraced after the thrust out of the triangle. That did not happen.

As before, caution, patience and flexibility remain the requirements of the week. If a mass of traders goes with the seasonality ("past history is no guarantee of future returns...") then it could look like the turn is coming out of nowhere - even though we have shown how mature the daily count is. Three points must be emphasized on the daily chart below.

First, there is not even a trend line break of the most recent three-touch trend line. Neither is there an attempt to back-test the line nor a failure of that back-test. Second, there is not so much as a true signal candle let alone a follow-through candle to the downside. A true signal candle could be an evening star or a bearish engulfing or a spinning top. None of those are seen. Rather, what we have is a 'stub' candle. Now, to be fair other red bars after stub candles are shown at the blue down arrows. So, a top could happen in this manner, it is just less likely. And third, there is not yet a lower low on the daily RSI indicator.

So, it is all true that sentiment is overblown. The daily put-call ratio is down to 0.48 as of Friday - a recent low. The percent bullishness is quite high. The CNN Fear & Greed Index is back in "Extreme Greed". The NYSE advance-decline line is not at new all-time-highs while major indexes are. The widely followed McClellan Oscillator has been diverging for weeks. And High-Yield-Bonds (HYG) have an unprecedented weekly divergence. Yes, all of that is true. So, we are on alert. But that is different than doing anything in a disciplined manner.

Have an excellent rest of the weekend.

TraderJoe

S&P 5000 - Minus (Con't)

The S&P crossed the 5,000.00 mark today but couldn't close above it. We showed the following two-weekly chart for the Dow earlier. We note the ES futures are nearing the 0.618 extension of wave (1). That price is 5,034.25 and is only about 15 - 20 points away depending on how exact you want to be given closing-only prices.

Still, although the wave count is getting very, very mature there isn't a sign of a turn yet, and one needs to just be aware that downside risks are piling up. Sentiment, narrowing breadth, and unfilled gaps are just a few that we've covered. Further, intraday price action is getting exceptionally overlapping making triangles, or parts of flats, and/or diagonals.

Caution flags are up. Patience & flexibility are the requirements of the moment. 

Have an excellent start to the evening.

TraderJoe

S&P 5000 - Minus

Yep, you read it right. Should we now call the S&P500 the S&P5,000 ? It's amazing that the Smart Money that has accounts large enough to move markets couldn't find 0.11 of an S&P point today. The S&P intraday high was 4,999.89, which is 0.11 shy of the mystical round number. Still, regardless of what they did (and they might hit it or pass through it tomorrow), the market's Elliott Wave count is getting very mature on the 4-Hr cash chart below.

There are five clear, non-overlapping waves up in a channel with the waves 2 & 4 (degrees shown are just relative, for now) showing alternation. Wave 2 is a Flat, and wave 4 is a zigzag. The market is also 'torn up'.

We are showing with dashed red lines the locations of fully seven unfilled close-to-open gaps on the chart. Some - or all - of these could fill on the way down. But first we must wait for a decent turn. There are a few upward squiggles that could still play out. Fifth waves can extend. But we'll watch, wait and be patient. 

Meanwhile, over in the Crude Oil market (WTI CL futures) we showed this daily chart a couple of times now which suggests Crude is in the process of making five-waves-down if it completes properly.

So, we're on the watch out for a lower low or a failure before perhaps a turn higher. Either way it should be interesting.

Have an excellent start to the evening,

TraderJoe

Tic-Toc

No, not the movie clip kind; the clock-sound kind. The NQ & EQ futures have the possibility of making a further higher high. So far, they have refused to do so and have only moved sideways. Both futures charts can be counted with triangles on their two-hour time frames.

NQ Futures - 2 Hr - Triangle

There is a smaller version of the triangle that can be considered complete at iv. There is a larger version which could complete later in time. If either triangle plays out, it often signifies that the last up wave in the series is dead-ahead. If the NQ makes a barrier triangle, as above, then sometimes, the move out of the triangle is somewhat shorter than the usual technical triangle target of the largest width of the triangle added to the breakout point.

In the NQ, the triangle suggests that 18,000+ is do-able but not required. For now, though, we wait tic-toc inside the potential larger triangle. And, as the candle tails show, one wrong move and the triangle tends to move against the trader. And that why the expression arose, "trading in triangles can be treacherous".

Have a good start to the evening,

TraderJoe

Cycle Degree Over-Throw

Back in 2022 we published the chart at this LINK that indicated one of the two likely monthly scenarios was that we were in a Cycle V overthrow of a long-term channel. Please remember that - with these even higher prices - we are now even further into that over-throw. In this Friday's price action, higher all-time highs were made even as twice as many stocks declined as advanced! With that in mind, we focus in on the two-weekly closing price chart. This chart has about 109 candles on it, and it may come in around 120 - 160 when the chart is completed.

This recent up wave has been dynamic, even though it started out with overlapping sequences. Given the new all-time high price action, it registers like a 'third' wave and that is the way it is labeled above as Intermediate (3). Again, the advance-decline line is really diverging here. So, it may mean that a fourth wave will begin sometime in the next week. If a fourth wave begins, then the EWO would also put in a divergent high, as well.

If that occurs then wave (4) 'must' be a zigzag, although the B wave in the zigzag could be a flat or a triangle. But, overall, the sequence must count like a zigzag. So, now let's focus in on the Minor Y wave since the October 2023 low of the Minor X wave using the ES 8-hr close-only chart.

If we use the following factors in the analysis 1) degree labeling, 2) shallow depth of retraces for extended first waves, and 3) RSI divergence along with advance-decline divergence, we see we might count the Y wave as a zigzag. Note that wave minute ⓑ is the deepest retrace on the chart, and so - by degree labeling - it should be the largest downward degree label. On this chart it is.

As we said on Friday, the NQ futures have not yet gotten over the all-time-high. It would be great if they did to put the major indexes in gear. So, wave minuette (v), up, may still be unfinished. But cracks are starting to appear, so be alert.

Have an excellent rest of the weekend.

TraderJoe

Hit the Upper Band

ES daily prices went up to the upper daily Bollinger band - and then some - before backing off to below the band a bit later in the session.

 

In the process, the daily slow stochastic lost its embedded reading. This may only be a 'crack' in the hull and not sufficient to sink the ship. While the ES and YM futures have new all-time highs, the NQ futures do not. It would be nice to see the main futures in gear. We'll see if that situation rights itself on Monday and/or Tuesday of next week.

We'll have more to say about the wave count this weekend, but until price loses the 18-day SMA the daily bias is up. It would also be great at some point to see an actual reversal candle pattern on the daily chart, so we'll be on the watch for that. Even though the current action is bullish, the location of the upper band - and the lower low, higher high pattern - makes 'me' very cautious, anyway.

Have an excellent start to evening and the weekend.

TraderJoe

Above ATH

Today we were counting upward after the possible fourth wave down. First, it was a fourth wave down. It didn't overlap. It hit the lower channel line. Then, after the close today, the ES futures went over the prior high to validate a likely fifth wave higher in the after-hours. The ES 4-hr chart showing the new high is below.

The Elliott Wave Oscillator has turned green and will likely be back above the zero line by tomorrow. In this wave, a reminder in provided that 4,995 is an important level. It is now about 35 points away. If that level is exceeded, then the extended first wave count does not apply any more. If it holds, there could still be a turn within the 13-week turn window. If 4,995 does not hold, the alternate count we showed on Tuesday 30 January's daily chart will apply.

Regardless of any person's market opinion at this point, our count and The Eight-Fold-Path Method did a terrific job of not getting too negative until a fifth wave was seen or not.

At this point, it is only the invalidation point that will tell us what to do. Yes, today was both 1) the first of the month money phenomenon we have pointed out several times in the past, and 2) a slew of large company earnings.

But it is only a valid wave count that gives clear invalidation points to serve as definite anchors for action. Rest assured the Smart Money can count Elliott Waves, too. They know where the invalidation points are too. The problem with bad wave counts is their practitioners don't know where they invalidate. If a wave extends, it extends. It just means that more money is being conjured from a) printing, b) bailing out banks, and/or c) fiscal stimulus.

It is not likely people can set market targets from these fundamentals. Remember, we said that IF the Dow and/or the S&P were to form an ending contracting diagonal then this wave would have to go over the high. It did. That, too, is a benefit of the wave principle.

Have a good start to the evening,

TraderJoe