Flaky is As Flaky Does

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Lower High, Lower Low, Lower Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

We have been writing about the lower equity volume over the last week, yesterday at about 3.0 billion, up from 2.7 billion, on the NYSE. Today did not burn the barns doors off either at only 3.2 billion shares, but it is coming back a bit.

Prices, as measured by the S&P500 Cash Index, dipped, then rose, then dipped again, and rose again creating another red doji candle which might be another weak hammer candle. But it is not reliable yet, and, as we said yesterday, prices would need to first overcome the hourly descending trend line along the recent tops to start to provide some confidence that the next wave higher was underway. That has not happened yet.

S&P500 Cash Index - Daily - Bounce off Channel Mid-line

Wave .iv has now gotten down to 0.618 x wave .iii - which is a very, very deep fourth wave indeed. It almost overlapped wave .i (but didn't), and it currently bounced off the mid-line of the channel. That is the limit for the wave, as much more travel lower and it would likely overlap.

The deep fourth wave is a symptom of the awful momentum we said we would expect as this Minor 5th wave progresses. It's not letting us down in that department. The Elliott Wave Oscillator is red and declining for the second day in a row, but is still well above the zero line.

Keep your eye on the line down across the most recently five daily bars, and see if it can be exceeded. Until then, flaky is as flaky does. 

Have a good start to your evening.
TraderJoe

Another Flaky Day

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

The equity markets on Thursday and Friday were trading about 2.7 & 2.9 billion shares respectively (light) on the NYSE, and we termed the price action flaky. With another day in the 3.0 billion share range price action remained flaky.

The market, as measured by the S&P500 cash index, closed Friday at 2,901, and was not open for business on Monday. Due to weekend news, the market gapped down at the open four points to 2,897, and continued to trade down to 2,886 (down -15 pts). At 10 pm, the morning economic numbers were published and, while the ISM Index was much higher than expected (61.3 vs 58.1), Construction Spending was much lighter than expected, up only 0.1% vs 0,5% expected. Stocks then staged a rally attempt that failed to close the opening gap, getting to only 2,900, and then began to fall off again, making a new lower low at 2,885. Beginning around 12:15 pm ET, again, stocks staged another rally attempt but fell short of closing the gap again, closing the day at 2,897. 

Here is the daily chart of the cash S&P500 Index for reference.

S&P500 Cash Index - Daily - Another Flaky Day

Today's red price candle is a doji candle, and 'possibly' a weak hammer candle, as it did not close green.  The low of the candle is at the prior gap support from wave .iii, and measures just 50% x wave .iii with no overlap on wave .i (in the S&P). The 50% level is about the limit for a fourth wave.

There is a clear line down from the tops of the four daily candles, and the first step to resuming minuet wave v up is to exceed that line (draw it out on a 15-minute cash chart for practice).

The Elliott Wave Oscillator turned in a red histogram today, but that is not unexpected given the price action. Remember, the all-important payroll report is at the end of the week.

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

Flaky Day

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Lower High, Lower Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

Yesterday we said that, because of the holiday, that today could be a flaky day. It was. Stocks as measured by the cash S&P500 Index had closed Thursday at 2,901. Initially, stocks had a small gap down at the outset and traded down five points to 2,896. Immediately after the open, the market reversed, filled the opening gap, and traded higher to 2,906, a ten point swing. 

Then, around 10:15 am, a decline began to a new lower low at 2,891, a fifteen point swing, and making a new daily lower low. Beginning at around 12:30 pm ET, a couple of rally attempts lifted the market to close at 2,901; virtually unchanged.

S&P500 Cash Index - Daily - Doji Candle

The Elliott Wave Oscillator is still green, rising and above the zero line. It has not broken higher yet, but could, in the next couple of trading sessions.

We have often noted here, that the last trading day of the month is often 'sloppy' due to window dressing. This day was no exception. We have also noted the first trading day of the new month (Tuesday, for cash equities) is often positive due to the typical influx of funds from pension plans, retirement funds, 401k's, company bonuses, dividend reinvestment plans, etc. 

If that should be the case again, then, it is highly possible wave .iv wrapped up this morning at the low. That would likely mean any higher all-time high wave would confirm the onset of a sub-minuet wave .v of minuet v of wave minute (iii).

Have a very good start to your evening, and to your long weekend. See you on Tuesday.
TraderJoe

Backing Off

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close -  Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

Yesterday we wrote, "There are now enough waves within sub-minuet wave .iii to call it complete, but it could have smaller degree waves if it intends to sub-divide. Regardless, we need to be on watch for the onset of sub-minuet wave .iv of minuet wave v."

With today's gap down opening, and further follow-through, the onset of wave .iv appears to be in the market. Stocks, as measured by the S&P500 Index, had closed yesterday at 2,914. This morning, they opened down at 2,909, and fell to 2,907, before a brief rally to 2,912, and another fade to 2,904 by about 11:30 am ET. At that time a rally attempt to surpass 2,912 failed, and stocks headed lower in earnest on a news story that another $200 billion in tariffs against China was about to roll out. (Whether that is true or not remains to be seen). Stocks fell to the 2,895 level, the level of a prior wave four, closing an up gap, and found some support there, closing at 2,901. Here is the daily chart of the cash S&P500 Index for reference.

S&P500 Cash Index - Daily - Backing Off

  
The market is most likely now in sub-minuet wave .iv, as shown. Being a fourth wave, being subject to The Fourth Wave Conundrum, and it being near a holiday weekend, make the progress of this wave very uncertain. This wave can take a lot more time if it wants. It can go over the top again (in a 'b' wave portion), or it could form a triangle. That much is unpredictable. However, wave .iv should not overlap wave .i for this count to hold.

The Elliott Wave Oscillator remains green, rising and above the zero line. It has not broken-out to new local highs yet, and so is still on a divergence. By the time wave minute (iii) is over, the EWO may have broken out. Time will tell.

For now, the S&P500 has another cash gap at the top of the market. The Dow missed filling it's cash gap from Feb 1 to Feb 2 by 20 points, yesterday, and backed off further today. Stock market volume has gotten quite light at only 2.7 billion shares on the NYSE. That can make for some flaky trade, along with the likely fourth wave.

Have a good start to your evening, and a good start to your long weekend if you have left already!
TraderJoe 

Nearing Upper Parallel

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

In yesterday's post, we wrote, "we would still expect to see new highs within wave .iii. This could happen fairly quickly - within the next day or so." Today provided the higher high needed.

S&P500 Cash Index - Daily - Nearing Upper Parallel

As we have been writing about, this is still within the context of making minuet wave v of minute wave (iii). We have expected - per our previous posts - that wave minute (iii) will likely hit or exceed the upper parallel to show it's power as a third wave. Today got the wave structure still closer to that upper parallel line.

There are now enough waves within sub-minuet wave .iii to call it complete, but it could have smaller degree waves if it intends to sub-divide. Regardless, we need to be on watch for the onset of sub-minuet wave .iv of minuet wave v.

The Elliott Wave Oscillator is still green, rising and above the zero line. Since fourth waves tend to be more unpredictable, there could be new highs within the wave .iv: we'll simply have to watch and do our best with it.

Have a very good start to your evening.
TraderJoe

Narrow Consolidation Day

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; DJTrans, DJUtil lower
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

Today was a narrow range consolidation day, after the recent market days that gapped up. We had warned "that there could be backing and filling at any time". That's apparently what we got today.

The market, as measured by the cash S&P500 Index, had closed yesterday at 2,897, and at the open, the market gapped up in it's first foray over the 2,900 level to 2,901. This high, as best we can tell is the high of an internal sub-wave three still of sub-minuet wave .iii on the daily chart, which is below for reference. Then prices dropped to 2,893 by around 12:30 pm, and traded up to close at 2,897 again.

S&P500 Cash Index - Daily - Higher High Day

Since today's low was likely then the fourth sub-wave within that sub-minuet wave .iii, we would still expect to see new highs within wave .iii. This could happen fairly quickly - within the next day or so. Then a somewhat larger pull-back would occur for the sub-minuet .ivth wave, before completing minuet v, within minute (iii).

With today's higher high, sub-minuet wave .iii became longer in price than sub-minuet wave .i within minuet wave v. And according to our count, it still has a little ways to go. The Elliott Wave Oscillator remains green, above the zero line and rising.

While the exercise continues to be to attempt to count the waves to a top, my market outlook is shifting from neutral to cautious. I am not bullish. I am neutral and wary of a top. (This is not to be taken as trading or investment advice. It is only a sign that most of the countable waves to a top are in place. Not all of them but many of them.) 

Have a very good start to your evening. 
TraderJoe

S&P500, NASDAQ 100 and Russell Futures new Historic Highs

Market Outlook: Now Getting Higher Volatility  
Market Indexes: Major U.S. Equity Indexes closed higher; DJUtil lower.
SPX Candle: Higher High, Higher Low, Higher Close -  Trend Candle
FED Posture: Quantitative Tightening (QT)

We said on our Friday post, "With today's gap up, and follow-through, we think it signals the start of wave sub-minuet .iii of minuet v of minute (iii) within the Minor 5th wave. If so, the upper channel boundary should be the first price target. A wave .iii needs to get enough distance in it so that a wave .iv does not overlap wave .i. "

Today provided all the more evidence for that view, with a gap up, follow-through and overall +22 point gain for the market as measured by the S&P500 cash index. Here is the daily chart for reference.

S&P500 Cash Index - Daily - Gap Up

The gaps and near vertical nature of the rise likely indicate the third wave character. The Elliott Wave Oscillator is still green, above zero, and rising. An eventual target of the upper Elliott parallel trend channel remains in place for wave (iii). There can be backing and filling at any time. We indicated that wave .ii of this wave v of minute (iii) should not travel below wave .e of the wave iv triangle. It did not. We do not yet conclude that it is over for upward price action, although backing-and-filling can occur at any time. When a wave .iv of v of (iii) begins, it should not overlap it's wave .i.

Today, the Dow Jones Industrial Average entered an important downward price gap area from it's February 1 close to it's February 2 open. The expectation is that the gap will be filled.

Have a very good start to your evening, and to your week.
TraderJoe