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Saturday, October 14, 2017

Saturday, 10/14/17 update

Last week's action in the ES/SPX served to obscure more than illuminate.  It looks somewhat like an ending diagonal - upward sloping wedge kind of shape, so it could be a 5th wave as labeled in the chart.  If not then it's a "b" wave of an expanded flat.  Either way the indications are to expect a down stroke in prices in the next day or two.  If selling does materialize the other message from the current EW count is that it should be a very short lived correction.  BTFD baby. NOT TRADING ADVICE

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   

Sunday, October 8, 2017

Sunday, 10/8/17 update

Time for some long term perspective.

The above long term weekly chart has been published in the update from time to time.  Although it's never been mentioned in the discussion the chart has displayed a target of ES 2569 for Primary W III for some time.  The ES is very near to that target with last week's strong ramp up.  Primary W III started at the lows of 2010.  Note that the ES is right up to the top of the channel that's defined Primary W III  since 2011.  Finally, the current count has the ES in wave 5 of 5 of Primary W III.

All this IS NOT to say that a crash is imminent.  What it does say is that a major turn is possible.  But momentum is pretty strong right now, and the ES could quite easily extend and blow through that 2569 target and the top of the long term channel.  So what's a trader to do? The trend has been up and remains so, so until there are definite signs of a change of trend the bull must be respected.  Equity markets tend to form rounded tops, so whenever that Primary W III top is established there should be time to identify it and respond appropriately.

Daily chart:

Speaking of strong momentum, the ramp up from the ST low of Sep 25 looks a lot more like a 3rd wave than a 5th wave.  Coming into last week it looked as if Minute Waves 1, 2, 3 & 4 of Minor W3 off the late August low were done and Minute W5 was in progress.  However, the rally from the Sep 25 low has been stronger and longer than the preceding rally leg.  There is therefore the possibility that Minute W3 is extending and that we are currently seeing Micro W3 of Minute W3.  Thus the labeling on the short term chart:     

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   

Saturday, September 30, 2017

Saturday, 9/30/17 update

The bull keeps grinding away.  Possible top of at least intermediate degree in October.

Alternate #1

Alternate #2

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   

Saturday, September 16, 2017

Saturday, 9/16/17 update

The ES closed at an even 2500.00 on Friday.  Ding!!  One more milepost on the way to ES 10000.00.  Bears are extinct, go long or be wrong!!

Obviously, the trend continues to be up.  The question as to what degree to assign to the early August correction remains open.  Was it Intermediate W4 as in alternate #1 below?  If so a major top is nearby.  Or was it a Minute W4 of an extended Minor W5 as in alternate #2?  In that case there's a lot more bull market yet to occur before that major top comes into view.  Right now alternate #2 seems more likely given the relative shallowness of that early August correction.

Alternate #1

Alternate #2 

A major top will be accompanied by some type of panic.  If alternate #1 is correct there should be a significant negative financial and/or geopolitical development that occurs in the very near future.  Some things of note in this regard are the recent moves by major world Central Banks to more restrictive postures and of course the North Korean situation.  Worth watching these.

Monday, September 4, 2017

Monday 9/4/17 update

My Grandpa was an Italian immigrant.  I remember him as a formidable figure.  I also remember that when he got animated he would pepper his heavily accented speech with the phrase "sonnamabitch!!"  I can still hear him saying it.  This last week I heard myself muttering that phrase a number of times as the ES/SPX blew my bearish socks off.


The ramp up this last week has opened up several possibilities.  It could be that Inter W3, which started at the election day low last November, may have concluded on Aug 8 with a top at ES 2488.50 as in Alternate #1 below.  In that possibility the 3 wave zig-zag into the low on Aug 21 may be the entirety of Inter W4 or Minor Wave "a" of Inter W4.  EW rules are that waves 2 & 4 in an impulse should alternate in form, from that standpoint the zig-zag type sell off into the Aug 21st low alternates nicely with the flat formed by Inter W2 in June, 2016.  If that zig-zag was only the 1st leg of Inter W4 then we should expect to see a triangle or multiple zig-zag formation for the balance of Inter W4.

Alternate #1

One observation of note is the relative shallowness of the Aug 8 to Aug 21 sell-off in comparison to Inter W2, which gives rise to the idea that the correction was not Inter W4 but part of an extended Minor W5 of Inter W3.  This thought is outlined in Alternate #2.

 Alternate #2

So how can we evaluate which of these possibilities is in play as events unfold?  Unfortunately the only possibility that can be easily eliminated is the idea that Inter W4 is still in progress - that alternate will be effectively eliminated with a run to new all time highs.  The question as to whether Inter W3 is extending cannot be easily answered without a lot more information - i.e. market activity.

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   

Saturday, August 19, 2017

Saturday, 8/19/17 update

If you're a bear (count me in that camp) your resolve was tested this last week with the strong ramp up that started the prior Friday and topped on Wednesday.  But Thursday brought confirmation of that bearish posture and the idea that the 4th wave (Intermediate W4) of a bull sequence that commenced in Feb, 2016 is underway.

Thus far we've had 3 waves since the Aug 8th top through Friday's low - a 5 wave impulse into the low of Aug 11 followed by a 3 wave correction into Wednesday morning's high and thence another 5 wave impulse into Friday's low.  This sequence is either an a-b-c zig-zag with Friday's low either the completion of the "c" leg or the bottom of the 1st wave of the "c" leg OR it's waves 1, 2 & 3 (in progress) of a much larger "a" wave off the Aug 8th top.  It's difficult to say which possibility is unfolding, but there are some considerations which point to the likelihood that there's more bear activity yet to occur.  First consideration is the depth and duration of Inter W2 (which occurred in June of last year) which lasted three weeks and dropped roughly 140 points in the ES.  So far we're less than 2 weeks and roughly 70 points from the Aug 8 top.  Second is the position of some longer term momentum indicators which have not yet reached the "oversold" territory normally seen at IT bottoms.  However, it's important to note that there are enough waves in place for Inter W4 to be complete at Friday's low, so from an EW standpoint it would be acceptable to have that as the termination of Inter W4.  The market was oversold on a short term basis at Friday's low so the resulting bounce was no surprise, and it's likely that the move up from that low has more to go.  If the rally gather's steam and tops the ES 2474 high of Wednesday in an impulsive fashion then the odds that Inter W4 is complete mount quite a bit.

If the sell off resumes there are two areas of potential chart support to watch as potential bottoms for Inter W4: ES 2400 and below that ES 2317-2322.

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts   

Sunday, August 13, 2017

Sunday, 8/13/17 update

The Intermediate Term top anticipated in last weekend's update materialized on Tuesday with a spike high into ES 2488.50/SPX 2490.87 followed by an immediate and steep 30 point drop.  Current EW count has this high as the top of the 3rd wave (Intermediate W3 to be precise) of a bull impulse that started in Feb, 2016.  Inter W4 is thus underway.  Inter W2 was a simple flat, so by the EW rule of alternation this sell-off should take the form of a zig-zag, triangle or some sort of complex corrective sequence.  Preliminary target for the move is in the area of the prior Minor W4 lows around ES 2317 - 2322.

On the hourly chart of the ES, Elliott Wave purists will object to the labeling of the torturous 8 day sideways grind that ended last Tuesday as a triangle - but the cash market (SPX) shows the same pattern and is more proportionate.  Also, the culmination of the sequence with a short lived spike to new highs followed by an immediate collapse is right out of the Elliott textbook for this type of chart pattern.

So far since Tuesday's top we've had 3 waves down.  That could be it for the correction so far - i.e. the market may have concluded a zig-zag type "A" wave into Friday's low - or those waves are waves 1, 2 & 3 of a downwards impulse with the 4th wave in progress or completed.  If the move so far is an impulse then a possible target for a 5th wave low is at ES 2416.    

NOTE: dotted lines show potential EW structures and are not necessarily accurate price/time forecasts