Baked ?

For the last several posts I cited a likely downward mess - which we were treated to. I said there was a good possibility of making a diagonal. I think we did. As the chart below shows, there is a way to count a 5-3-5-3-5 expanding diagonal in the ES 4-Hr futures - done and complete.

This count would have the form (v) > (iii) > (i), and (iv) > (ii) with wave (iv) overlapping wave (i) and not traveling beyond the end of (ii). The main reasons for the count are the size of wave (v), and the precision by which wave (iv) was longer than (ii) but did not exceed it.

I have dropped the degree one degree for the time being and see the whole wave structure as a minute ⓘ wave. Alternatively, the whole structure is the Minor A wave, also done and complete - depending on which degree it turns out to be. The downward sequences are "5"'s and not "3"'s, and the upward minuet numbered structures, the parenthesis ( ) structures, are zigzags as they are required to be. Wave ii is a flat - which is acceptable in the impulse portion. The only element which raises question on the count is that (iii) is shorter in time than (i), while it is longer in price. But then, (v) is much longer in time again which seems a reasonable trade-off.

The trend lines are nearly perfect, and when I look at the whole structure on the daily chart, it just looks a little small to be the whole Minor A wave. I could be wrong about that. But no one knows what is coming tomorrow - not me, not you - so we'll see how the waves do.

There is nothing that forces the adoption of this count yet. There is still a way to consider a truncation high and wave (iii) at the bottom, but there isn't a great Fibonacci ratio in that count either. So, this fits best at the time, though I do reserve the option to see if it impulses by making a new divergent low first.

Have an excellent start to the evening,

TraderJoe

Big Picture Reminder

The ES 2-weekly chart is below with a reminder of what can be the big picture: we may be forming a 3-3-3-3-3 Contracting Ending Diagonal at Primary Degree.

ES Futures - 2 WK Close - Potential Contracting Diagonal at Primary Degree

Note that with 106 2-weekly candles on this chart, the Elliott Wave Oscillator diverges where it should. It is often the case that wave (4) will try to come down to undercut the rising trend line to set traders in the wrong direction before the turn for Intermediate (5), higher. In the process the EWO might come back down to the region of +10% to -40% of wave (3).

This count sets a specific invalidation in that price should not go over the current all time high before overlap with wave Intermediate (1) occurs. The overlap is expected in this case. Further, the lengths of the wave structure should be (5) < (3) < (1), (4) < (2) with (4) overlapping (1) without traveling below the low of wave (2).

Why? Because often a diagonal pattern signals that a market that has gone too far, too fast, and is near the end of a longer-term wave. And Primary ⑤ - if it forms properly - would be the end of a Cycle V wave.

Have an excellent rest of the weekend,

TraderJoe

Into the Real Mess - 7

In keeping with the theme of this wave being a real mess, I felt the best way to deal with it going into the weekend was to greatly oversimplify the count as the wave internals can be counted numerous ways.

ES Futures - Daily Close - 'Possible' Parallel

Bottom line: we are looking for the Minor A wave down, composed of five minute-degree waves. But, as this point - whether an impulse count or a diagonal count, there is insufficient retrace in the ES futures to allow us to place a fourth wave at this time. We do not 'know' the third minute wave is over, so it could go lower.

The ES price got down below the lower daily Bollinger Band and pierced the 100-day SMA in the overnight news regarding Israel's actions. Then, during the cash session today, price weaved around on both sides of that average, closing just slightly below it, and below the lower daily Bollinger Band for the sixth consecutive day.

We note that with 14-daily candles the RSI is not solidly in over-sold territory yet. "A" waves can be pretty atrocious so caution and flexibility are warranted until there are some clearer wave patterns and retraces.

Have an excellent rest of the evening and start of the weekend.

TraderJoe

Into the Real Mess - 6

Today marks the 5th consecutive day that the ES June futures have closed below the lower daily Bollinger Band as per the chart below. The close today was 5,049.00 compared to the lower band at 5,050.67 and this drops the odds to 1-to-3 percent that the next close will be below the band. In Ira's public videos he claims the most he has ever seen is seven-in-a-row.

However, of interest, the ordinary calculation of the daily slow stochastic has now attained embedded status on the downside.

Also of note, in any one of a couple of fashions, there are enough waves down to claim the Minor A wave has been made. And, yes, price could still attain the 100-day SMA and not ruin the count.

Another item is for certain. This decline since 01 April is already longer in price & time than the December 2023/January 2024 decline, and therefore it is of a higher degree. Remember we labeled that decline as minute ⓑ, and so labeling this decline as Minor A agrees that this degree label is larger than that one.

One also notes that the 18-day SMA is pointed downward and will likely act as resistance on the way up. With the embedded status, it is possible that Smart Money will continue to sell rallies until the embedded status is lost (and the %K red line of the daily slow stochastic crosses back up over the 21 level).

As we stated in the comments for the prior post, it is possible we completed the Minor A wave and are now into a messy B wave as a flat or combination. We'll see how tomorrow proceeds.

Have an excellent rest of the evening,

TraderJoe

Into the Real Mess - 5

We were expecting a messy wave downward. We're getting one. So far, in the ES futures, we may be getting a diagonal - as previously expressed. By far, the count that 1) is most proportional, 2) flows the best, and 3) does not involve degree violations is this expanding diagonal which a couple of us are counting. As well, this count follows the Elliott Wave Oscillator profile at the moment and can be clearly seen in the closing only chart below.

There are other ways to see the Minor A wave at today's low, but it does not quite look as proportional as this count. So, I'll hang on to that alternate for the time-being.

The above chart does provide a clean invalidation and it also suggests quite a wild snap-back from the current price lows. That is in agreement with today being the fourth consecutive close of price below the lower daily Bollinger Band, and the daily slow stochastic still in over-sold territory. And A waves can often be diagonals, particularly in corrections. So, we have to go with what looks best at present.

We'll keep you updated as best we can. The wave structures are very testy.

Have an excellent start to the evening,

TraderJoe

Into the Real Mess - 4

Just a word of caution for tomorrow. Today marked the third consecutive day of the ES futures closing below the lower daily Bollinger Band with the daily slow stochastic in over-sold territory as per the ES daily chart, below.

This means the odds of another close below the band is only about 2 - 5%. Some of the Smart Money is likely taking profits at the lower band. Yes, price could go down to fill the gap or hit the 100-day SMA. But, even as today showed (because of the profit-taking) whippy behavior could immediately follow. Price could certainly close back inside the band at any time.

From an Elliott-Wave perspective we are counting the Minor A wave down. We can see one way it could have completed, and another way for it to continue. See the comments from the prior post if you have the interest. So, we are patient until the length of price movement becomes more convincing.

Have an excellent start to the evening.

TraderJoe

Into the Real Mess - 3

A lot of people are expecting a wave three to "cut-loose" to the downside now (when some - not necessarily the same ones - were screaming for higher prices before). On the way up. I just urged caution, patience and flexibility, and on the way down - the same. Today ES futures prices DID complete the contracting diagonal from yesterday, and - so far - prices have not invalidated either lower or higher. So, let's give some credit where it was due. We saw whippy behavior, called it, and got it.

But what IF prices do cut loose tomorrow - say with an overnight gap and follow-through lower. This could happen. I am agnostic. But how would one count it? I can see two ways - which still makes this down wave part of the real mess.  Here is the first way: The Truncated Top.

In cash SPY, a contracting diagonal count does not work as well as it does in futures. This suggests the above option of a truncated top, followed by a minute-degree wave ⓘ, lower. Elliott himself, Prechter following him, and Neely following him all suggested major turns might see a truncation at the top. Then, following minute ⓘ, there would be a minuet (w), (x) and (y) wave up to the second minute wave, circle-ii, where minuet (y) is a failure wave. It is very important to pay attention to degree labels here, and not think every down wave is a "1" wave when it goes nowhere. 

The problem with the above scenario is that minuet (x) and minuet (i) - which are supposed to be smaller degree waves than minute ⓘ are actually longer in time than minute ⓘ is with the truncated top. This is not supposed to happen. This is why degree labels are important.

So, if this solution doesn't work, is there one that does? Well, first keep in mind we do have the valid contracting diagonal in the ES futures still on the table, which meets all guidelines in both price & time. And we simply do not know what the overnight and morning will bring yet. But here I think is the better alternate for cash.

As several of us discussed earlier, it is possible to get an expanding diagonal where wave minute-iii, circle-iii, is not completed yet. Notice the following attributes of this count:

1. The prior wave ends at the prior all-time high, where Minor C, and Intermediate (3) is shown. Then there are "three-wave" sequences downward as zigzags.
2. Following minute ⓘ, down, the minuet (a) wave diagonal, down, would be shorter in price & time than all of the minute ⓘ wave. Minuet (a) is supposed to be a smaller degree wave than minute ⓘ, and here it is in both price and time.
3. Next, notice the minuet (b) wave up. It is shorter than all of minute-ii, circle-ii in price and time. Fantastic, it follows degree definitions, too!
4. Then, notice sub-minuette i, down. It is shown looking slightly longer than (a), down, right? But that would violate degree label definitions, wouldn't it? YES! That's because the i portion of that wave actually ended at 512.00, and everything else after it in the correction is an expanded flat for sub-minuette ii! So, then degree definitions are not violated.
5. And so-on goes the minute-iii, circle-iii, wave until it maybe reaches the 1.618 Fibonacci extension - the level of which is shown on the chart.

Folks I simply can not do this every night, wave after wave, adjusting charts which do not consider wave degrees and Fibonacci ratios, so I simply will not. There are too many errors that others can make for me to suggest fixes. I have clearly outlined the problems with degree labeling that most ignore. (Refer to Neely interview if you haven't already at this LINK: Avoid the Top Five Mistakes Counting Elliott Waves.)

I am looking for people who put as much thought into a chart as went into the one above.  Notice "one thing" about the chart immediately above: it gives a clear & specific invalidation level to the count. If your charts do not do that because you don't consider Fibonacci levels or degree definitions then it could seriously hurt your trading also: because a bad wave-count can lead to a bad trade. And the second chart is just an alternate, too. It does not have to be the real deal. But it uses sound rationale and follows the rules, guidelines & degree definitions. So, if it busts it would likely not be because of something we did, but more likely because the Smart Money saw something we did not have access to.

Anyway, have an excellent rest of the evening,

TraderJoe