Proof Positive

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher; RUT, DJTrans Lower
SPX Candle: Lower High, Lower Low, Higher Close - Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

By undercutting wave minute ((i)) shown on the chart below, today was proof positive that the hourly diagonal we described at this LINK was, in fact, a Leading Contracting Diagonal. The market doesn't offer such proof too many times (except say when a first wave has been invalidated by price excursion above or below it's origin, or when a fourth wave has been invalidated by overlapping on the first wave). So when the market offers it, we must accept it. 

S&P500 Cash Index - Daily - Lower Low than ((i))

The proof is simple. There was a lower low following the diagonal. The diagonal was predictive, and those that were on the "slope of hope" asking why such a diagonal couldn't be an ending diagonal C wave, instead, have had the final straw placed on the camel's back.

While there is good reason to still think the market can "slosh around in here" between the daily Bollinger Bands, we must also note that today's price action took out the minute ((e)) wave of the Minor 4 triangle - which has been holding prices up so far. That ((e)) wave was presented to you almost as it happened when it occurred back in April/May of this year. This adds further confirmation that the last wave up, shown on the chart as Minor 5 of Intermediate (5) has been seen.

A number of us do suspect that today's down wave was part of a difficult to count b:3 wave of an expanded flat. And, the turn-around that began around 11::00 EST is likely at least the first wave of a c:5 wave of this flat, upward. That's kind of why the blue line starts where it does. We'll see how that goes.

I am done for the day, but I want you specifically to do some homework. Take a weekly chart of the cash S&P500. Look at the candles in OHLC form. Do you see any gaps so far in the downward direction from this high marked 5 of (5)?

Now, scroll that chart backward into 2017, and further into 2016. Do you see any gaps now? Mmmm..hmmm.

Well, that's it for me. Have a nice start to the evening and to the week.
TraderJoe

P.S. Chart added at about 1 PM on Tuesday, based on a) gap fill, b) position of EWO.

S&P500 Cash - 15-min - Possible Ending Diagonal C wave of (ii)

Downward count was in the ES futures.

Downward Count was A-B-C

Second Bold Prediction

I know my readers expect a lot more of me than just showing them when two moving averages cross. So I want to remind everyone that it was all the way back on July 1st, 2018 (at this LINK) when I posted that I could see the possibility of  a downward diagonal in Crude Oil, for the [C] wave to end the downward cycle.

The chart below updates you on the progress of that potential ending diagonal [C] wave.

Crude Oil Futures - Monthly -

From the above chart you can see that prices traded below the $50 level, and overlapped the Minor A wave upward. This rules out any upward impulse because if A were 1, instead, and C were 3, then wave 4 down would have overlapped 1/A which is not allowed in an impulse.

Prices have also broken down out of the perfect trend channel. And such a trend channel itself it more indicative of a zigzag wave than it is of an impulse (see The Eight Fold Path Method as to why.) That's quite a change from near $80 to under $50, so I hope the prediction showed the power of knowing the Elliott Wave patterns and their typical progress.

So, now it is time to suggest a path for stock market prices in the near term. The chart looks like this.

S&P500 Cash Index - Daily - Potential Path

It would be typical for wave ((iii)) to become 1.618 the length of wave ((i)), and that is because wave ((ii)) has taken more time than wave ((i)), already. This should set a sufficient base (or ceiling in this case) for the decline.

It is not clear that wave minute ((ii)) is over. There are ways it could extend in time. One way for it to extend in time is for the (y) wave to stretch out into a triangle - perhaps surrounding the holidays. However, the current waves are sufficient for minute ((ii)).

The next step is to draw the "base channel" around waves ((i)) and ((ii)), and the break of the base channel lower would likely be minute ((iii)), downward.

Following wave ((iii)) then should be a non-overlapping retracement for wave ((iv)) - length of time to be determined, followed by a fifth wave downward, which might approximately wave ((i)) in length.

One uncertain item is the degree of the current waves. I am currently showing them as minute waves. But I reserve the right to show them as Minor waves based on some considerations later in future. Time will tell if that becomes necessary.

Have an excellent rest of the weekend.
TraderJoe

P.S. For those trying to construct expanding diagonals, this is the more common form. Note how 'deep' wave two is, and wave four is greater than a 62% retrace.

ES Futures - 5 min - 'Potential Expanding Diagonal' - Must Prove Itself

A upward  wave of more that 1.618 occurred. Therefore, The Eight Fold Path Method may shed some light on this wave. Additional chart below.

EWO may come back to zero line. This is the only labeling that supports degree conformation.

 

Moving Average Cross on Close

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower; DJ Util Higher
SPX Candle: Lower High, Higher Low, Lower Close - Yin-Yang Candle
FED Posture: Quantitative Tightening (QT)

They are just numbers, and we do not want to get emotional at all about them. But today, in what will likely be a widely publicized bit of technical trivia, the S&P500 Daily Cash Index experienced a bear-cross. Some will term it a death-cross. I prefer the prior terminology. So while many readers have been asking, "why can't this still be a fourth wave?", the market's key trend indicators are offering a different view. Here is the daily chart. (By the way, for those who missed it, we offered our rationale for why this should not be a fourth wave at our post back in the beginning of November at this LINK.)

S&P500 Cash - Daily - Bear Cross

As many of you already know, the bear-cross is when the 50-day simple moving average (or SMA) crosses under the  200-day SMA. And while,  historically, prices often bounce from a level like this - due to all the hype surrounding the cross - the significance is that this area where the two cross should offer formidable resistance to upward price movement.

Today was a pretty bad day for the NASDAQ 100 futures (the NQ). There was actually an outside reversal day down in that market that resulted in a lower low. That did not occur in the S&P500. From a wave counting perspective - count each market on it's own. By contrast, this week the ES futures had an outside reversal week down.

What today's price action did accomplish in the S&P500 was getting within 90% of the bottom of the prior candle - which allows a legitimate flat wave to form for wave (ii), on yesterday's daily chart - if it wants to. 

The daily MACD has not crossed lower yet, but certainly could. Will prices "just let loose" from here and trade lower? They could, but it would seem like an incomplete upward correction for wave (ii) if they did. Further, prices are getting quite near the lower daily Bollinger Band, and that may offer some key support. So, we will maintain a vigilant watch out for that one if the upward correction is all done and over. Meanwhile, we will note as we did during some updates to yesterday's post, that if we formed a b:3 wave down, then it has taken more 'time' than the a:3 three-wave sequence, up, of yesterday and this morning. That could mean there is a c:5 wave, upward, yet to go.

Have a good start to your evening and to the weekend, and rest up.
TraderJoe

When Have You Ever Heard?

When have you ever heard in your lifetime, the U.S. Federal Reserve make a market assessment like this one?

Fed warns that a ‘particularly large’ plunge in market prices is possible if risks materialize

And when have you ever heard them say that, "asset prices appear high relative to their historic ranges"?!

If you have not heard or paid attention to this information, here is the LINK, so you can see it again.

This is not me saying something, this is the central bank. Why now? What do they know that you and I don't? They get information from banks all over the U.S. and all over the world. I don't.

All of that aside, from a wave counting perspective, we were able to count five waves down in very near real time this morning. The five waves have an extended first wave, and so appear in a wedge (see yesterday charts for the updates).

SP500 Cash - Daily - Minuet (i)

The daily chart above shows that the minute two wave ((ii)) did have the Elliott Wave Oscillator trace back above it's zero line indicating an excellent location for a second wave up.

Today's down wave undercut the prior (x) wave low, and shows the power of a 'motive wave'. It is shorter than the minute ((i)) wave down, and therefore, can be a valid sub-wave of wave minute ((iii)) in the downward direction. After morning,  the retracement of this wave of this wave began, and almost made for an unchanged close. but, not quite.

In order for wave minuet (ii) to remain a valid sub-wave, it must now remain shorter in price and time than the minute wave ((ii)). Further, it would be especially indicative if this up wave stops short of the down-trending upper channel line. 

That's it for now. You know about corrections, right? They are there to try to mess everything up. If you counted a,b,c up today, remember that c waves can get longer than c = a, and remember that to extend a correction, if the market wants, it could make a double zigzag instead of a single one.

Be careful and prudent. And have a good evening.

TraderJoe

P.S. Chart added at ~1:30 pm

Five Wave Impulse? (a) does not overlap (v) of ((1))

We said, if the low was take out, this would be reconfigured as a double-zigzag. The low was taken out. So here is a third chart.

ES 5-min - Reconfigured to Double Zigzag

Measurements Dear Glenn?

Since many of you watched the Neely video from the link yesterday, and since the cash equity market is closed today, let me cover one issue that I consider to be at issue in Neely's thinking.

In the video, Neely posed to us that the rise since 2009 is only a 'corrective wave' possibly of a triangle in some form. He called it wave "d". I understand why Neely is doing this based on his time rules, but what if one or more of Neely's time rules is not exactly correct, as he states it?

Let me pose this question to you with a different diagram, and a differently worded question. How long in price length does a wave have to be, before it simply can not be considered a wave of the same degree as the previous waves? Here is the diagram. Let me explain.

S&P500 Cash - Monthly - Measurements Matter

If you look at this monthly chart, and the Fibonacci ruler shown, you can see that the up wave since 2009 is more than 2.618 times the length of wave b. Is this really a wave d? I mean from price length perspective, how long can this go on? How long does Neely allow it to go on before saying something like, "Uncle!, OK you got me. It's really a new bull market."

And, if the length in price points alone doesn't do it, how about time? From 2009 - 2018 is nine years in length. But from 2002 to 2007 (the b wave ) is only 5 years. How does a wave become shorter, like the c wave, being only two years, and then become longer again like the purported d wave, and still be of the same degree? And if price and time don't do it, how about both of those together with a pretty clear five-wave form?! Not enough for you? What about if the "middle segment" of the rise from 2009 to 2018 is simply "too long" to be a sub-wave? That would be a degree violation. Conflict! (Here I am referring to the fact that from 2011 - 2015, price rises more than all of the b wave!)

This is not logical.

This is one of the reasons why - while I respect Neely very highly, and think he has made a number of vital contributions - either he hasn't finished his work or his reasoning, or doesn't explain why this should be so. Or, perhaps he is incorrect in the application of his own written rules to the current market situation. Remember, the new Neely patterns (such as diametrics, neutral triangles, etc.) were not invented when Mastering Elliott Wave was written. Did he 'invent' such patterns to 'cover his tracks'?

Neely runs a fund. Prechter runs a newsletter service.  I certainly have seen Prechter and Hochberg not follow even the rules of Elliott Wave analysis - let alone the guidelines. Is this possible for Neely too? I don't know for sure. I have nothing against either of these gentlemen, or their companies - just the opposite. I have a lot of respect for them.

But, when I see things that don't make sense or somehow leave a mysterious unexplained void, I will ask questions with ardent fervor.

Have a wonderful day.
TraderJoe
P.S. Chart below added after the open on Dec 06th.

SP500 Cash Index - 30 Minutes - Trend Line Break is Wave i

More than likely, as Neely suggests, the new trend starts after the failure - which we have discussed for many days now, and after the trend line break. Not before. The first wave down is wave i, and the deepest retrace since the trend line break is wave ii. It would then make sense that the gap is part of or most of wave iii. There is no evidence yet that wave three is over (that is what > means).

Each of the above waves would go into making wave minuet (i), down.

SP500 Cash - 5-minutes - v < iii < i

Chart added at end of day. Probable barrier triangle where d can be higher than b, as long as it does not close above b.

Probable Barrier Triangle to make b longer in time than a

Plunge

Market Outlook: Likely Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed lower
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

When the market meets our expectation, we simply don't want to argue with it. We just want to try to count it properly.  Over the weekend, we showed you the double zigzag count (w)-(x)-(y) to the potential minute (ii). We said that the 'c' wave must be allowed to fail.

Why did we say that? Because if there was another 'c' wave up to the (y) wave, it would have taken the second wave, minute ((ii))  well beyond the 62% retrace level. Ah, you say, "the Dow went almost to 78% - how can you say 62% is a problem?". Well, that is the difference between the Dow and the S&P500. The Dow has 30 stocks and the S&P500 has, well, 500 stocks,. They count a bit differently.

Wouldn't it be interesting if - when Frost & Prechter and even Elliott were first discovering diagonals - they did so primarily on the Dow? The S&P was not invented in Elliott's time. It was only getting started when Prechter was a technical analyst. This is likely where that 'deep retrace' for the downward diagonal came from.  The Dow did do the 78% so-called deep retrace in this cycle, the S&P did not. It has more deteriorating stocks, and can't do the higher levels.

So, as best I can tell, this remains the downward count.

SP500 Cash Index - Daily - Minute ((ii)) Completed

It should now be clear to most that this is not bull-market action. And while a lower low than minute ((i)) is needed to fully 'prove' that case, when else do you get 90+ point one day moves on the SP500 except perhaps at an election day or a very few times during the cycle. This one happens to be down.

I have to admit, it was a bear to figure out whether the up move had failed or not. It threw twists and turns in the cash market, but eventually the down wave got too long for a sub-wave. And, during the day, with the market down significantly, we published that this type of failure could likely have occurred.

SP500 Cash Index - 15 Minutes - 5th Wave Failure out of Triangle

The failure occurred along the futures upper daily Bollinger Band, and in proximity to the futures 100-day SMA. Many will see that as significant.

As we were even generating the chart above the market kept moving lower. It was hard to keep up with.

If and when the market begins retracement, it should now respect the down trend line from the top. Wave ((ii)) is longer in time than wave ((i)), and so there is very, very good proportionality at this point. Acceleration lower would be characteristic of minute ((iii)). 

My posts are a bit delayed and short as I am on a short trip.

Have a good start to your evening. 
TraderJoe

Gap Up Futures

Based on the large rise in the futures overnight, I have determined that this newer count does not break degree rules in the futures. So I am starting this new post. The count may make some sense in that it starts with the leading diagonal wave, and the b wave in time is not as long as the a wave in time, and that might make it distinct from a i, ii count upward.

ES E-Mini S&P500 Index Futures - Hourly - Large Gap Up

Again, the risks of a miscount remain high in this area. But, the triangle b wave might be signalling near the end of the rise. A very clear reversal sequence, including a failure to make a new higher high when c ends would be needed to provide the post-pattern behavior necessary for confirmation.

Here is a second post of the day. Because this wave might be so critical. Please note the time relationships in the down waves to (A). And note that (B) at the bottom is much greater than 62% which might eliminate it as a second wave. This count 'could' be incorrect. I am just trying to follow Neely's guidelines.

ES Futures - 5 Minutes - Neely Guidelines

It would be necessary for (B) to hold for a triangle count, and best if the green up fractal is broken.

For those reading later in the day, the green up fractal at B, at around 13:30 was, in fact, exceeded higher late in the day.

Third chart added on the Decline of 12/4.

SP500 Cash Index - 15 Minute Chart - Fifth Wave Failure of 'c' of (y)

Have a good start to the week.
TraderJoe