PRO-ELLIOTT-WAVER

On Friday we posted an update making a good case for a short term bearish scenario that would be followed by another rally to all-time-highs one more time. Today we are going to give traders the alternate scenario which is much more bearish than just short term. After 39 years of operating in the world of futures and options trading (with 35 years of that time spent studying the Elliott Wave) I learn one important lesson very early, which was, no matter how good the technicals and wave formations point to an indisputable conclusion for price movement going forward...there is always an alternate scenario that can happen instead. Once a trader identifies the correct wave count that the market is working in it then becomes rather easy to follow using all the rules and guidelines. These same Elliott rules will also alert you better than any other system known when you are wrong. Because of this we usually spend 90% of our time watching, looking for and calculating the alternate sce...

Early last year we were giving traders a lot of reasons to consider that the markets were still in a large correction that started from the January 2018 highs. In March last year our charts were labeled to show how a large "expanding triangle" pattern could be the wave formation that the market was working on. During the Thanksgiving and Christmas Holiday's we pointed out that markets rallied 85% of the time the week prior to each of those holiday's. With favorable economic conditions and the euphoria of the holiday's last year we saw big rallies in the stock market. The market was able to rally far enough for some of the technical indicators to shift and support a continuation of the rally. This would have meant that the December 2018 low was the end of the big correction and that the next impulse wave much higher was underway. However, for an impulse rally to be underway the market should have started a five wave pattern from the October 2019 low that c...

In the last update we were looking for gold futures to rally to a new high to complete five sub-waves of wave 5. This move would also complete (C) of the larger "primary" degree wave [B]. Today we got the push higher to prices that we have not seen in seven years. This chart of the April futures contract shows that wave 5 will equal wave 1 of the same degree at the 1630.00 area which is a good target. Today's high came close at 1626.00! We could see a smaller degree fourth and fifth up/down move to make the final high. The wave pattern down from the all time high in 2011, as five waves, to the low in 2015 is clear. The three wave corrective rally from that low over the past five years is now also clear. This means that the price of gold is ready to start the next large wave down which should be in the form of five waves. This move will take the price below 1000.00 with a perfect target being near 750.00. Once this move down completes, probably over the next...

Late Friday we saw a drop to a new low for the move down from the high that hit 3212.75. This was the first target as this was the 4th wave low of the lessor degree which is the common target after the termination of a five wave rally....indicated by the horizontal dashed blue line. The chart is labeled showing that Friday's low also completed a five wave pattern down from the high that came close to the 27.2% retracement of the previous wave [iii]...also a common wave four target. Since the decline formed five waves and since a correction can't be made up of a single five wave move we have labeled it as wave (a) of wave [iv]. We can now do a process of eliminations and assume that wave [iv] will eventually turn into a 5-3-5 "zig-zag" formation. Today's rally should be part of a retracement of the decline that is labeled as wave (b) that when complete will lead to another 5 wave decline as wave (c) of [iv]. This drop will most likely break below Frida...

Follow the Trend and "Trade Safe"

Fig 1 Gold got a spike higher on the coronavirus news as the stock market sold off, however, it was short lived and failed to make a new high. All we're waiting for here is to see if the "minor" wave 5 (blue) gives us five sub-waves to one last high above 1611.00 to complete the formation. Wave [iv] (green) can still be working but, the longer it takes the less likely it becomes. Fig 1 above shows the invalidation line which is the wave 4 low. Breaking below this low at anytime before making a new high will confirm a top is in place. The over 4 year long bear rally from the 2015 low will be complete as "intermediate" wave (C) (red) which will lead to much lower prices. Fig 2 Notice in Fig 2 that there is a large wave i (pink) in the top left corner and a large wave-ii (pink) in the lower right corner. These labels represent the "cycle" degree time frame (10 years or longer) with the high of wave-i marking the all-time high in the pr...

Prior to the holidays we posted an update that said..."the most bullish week of the year (Thanksgiving) didn't disappoint bulls this year. Veteran traders know that 85% of the time the markets rally during that week but, not all traders are aware that the wave count also has to be in a position to support the rally or it doesn't happen". Fig 1. Through all of last year the market traded in a wide, sideways range making it difficult to determine if the market was still correcting from the 2018 highs or if the January 2019 low marked the end of the correction. Days before and into Thanksgiving the market moved high enough to finally confirm that the "intermediate" degree wave (5) was underway and that the Jan 2019 low was in fact the end of " intermediate" wave (4). Fig 2. Our alternate count from last year moved to the primary count as price moved above the white dashed line. Notice in fig 2 price moved above the trend-line and i...

The most bullish week of the year (Thanksgiving) didn't disappoint bulls this year. Veteran traders know that 85% of the time the markets rally during that week but, not all traders are aware that the wave count also has to be in a position to support the rally or it doesn't happen. Coming up will be the next most bullish week of the year (Christmas) also with an 85% track record although the size of the rallies are not as big on average as Thanksgiving. Our last update showed how price had completed a small "triangle" that would be followed by a quick rally. The next morning the market gapped higher and rallied to a new high in an impulse five waves. Price then fell back to the area of wave-e of that "triangle" also described in the update. We labeled that chart showing that the rally would end an "extended" fifth wave but instead only completed a smaller degree wave-[5] of wave-iii shown on today's chart. The updated chart shows th...

The market has traded in a tight range for the past two days which fits with the wave four correction suggested in the last update. Our chart shows how a "running triangle" may  have completed at today's low to end a small degree "sub-minuet" wave-iv. Triangles sub-divide as five wave formations with the sub-waves each tracing three waves. Each leg in most cases will have a price relationship with a previous leg. This triangle has multiple wave relationships... (C= A)...(D= 61.8 of B)...(E= 61.8 of C). This will be confirmed if we see a sharp rally to new highs as wave-v. This new high price will complete a thirteen wave formation with wave (v) being the extended wave within the impulse pattern. Follow the Trend and "Trade Safe"

The Dow supports the same wave formation that we showed in the S&P on Friday....the "zig-zag" pattern from the December low to complete wave-D of the larger triangle. This chart shows an interesting price target that was hit on Friday that helps to confirm the triangle scenario. There are several ways to calculate price targets for where the five wave rally (thrust) as wave-[c] out of a triangle could terminate. In this case we use the maximum high and low at the beginning of the triangle...indicated by the small red up and down arrows. The first target for wave-[c] should be a 61.8% relationship to this calculation. Friday's high in the Dow met this exact calculation shown on the chart. This doesn't have to be the exact high but, the fact that traders did sell the market at this price helps to confirm our primary count. The initial decline from the high on Friday can count as a small five wave impulse on the 15 min chart which could be the first clue...

Yesterday we posted charts of the SPX showing the short term impulse rally underway now, along with a look at what has taken place over the past year. We label the rally from the December low to show a "double three" (w-x-y) that is currently finishing wave (c) of [y]. This will also complete either wave D of the much larger "expanding triangle" (that we've been updating for most of this year) or wave B of a large "flat." If the market traces out a "flat" it will be in the form of a "running" or "expanding" which will be determined once it's underway. Today we are showing another way to count the rally from last December which is our primary count. It is hard to ignore, visually, that the sideways grind since May has the look of a "running triangle" formation.  Under the "triangle" interpretation the rally from December would count as a "zig-zag" with five waves of [a]......

Follow the Trend and "Trade Safe"

Follow the Trend and "Trade Safe"

Gold is still in the process of forming an impulse five wave structure that started from the low made in August last year. Price is currently working on "minor" wave 4 within the formation and once complete will see a rally to a new high for "minor" wave 5. The last Gold update showed that "minor" wave 3 had reached the price where 3 was equal to 1.618 x 1. That remained the high and price has been in a "minor" wave 4 correction since. So far, wave 4 has declined in three waves to the Fib 27.2% retracement of wave 3 that we have labeled as "minute" wave [a] of 4. A three wave bounce from there is labeled as wave [b] of 4. Expectations now would be to see another three or five wave decline to complete a "flat" for wave [c] of 4 with targets being 38.2% or 50.0% of wave 3. Price could also continue in the same range to eventually form a wave 4 "triangle." Once wave 4 completes we should see the start of a...

Back from a two week vacation that seems to have been timed perfectly because the market hasn't hardly moved. In our last update we were tracking a five wave structure that would complete wave-c. With today's low it appears that this is still the primary count with the exception that we can now see extended sub-waves of the formation. Today's chart is labeled showing how the market is sub-dividing with near perfect Elliott/Fibonacci sub-waves. 1) "micro" wave [3] of iii was 1.618 > i 2) "micro" wave [5] was equal to [1] being only a couple tics above [3] to maintain the 1.618 for all of iii 3) Today's low was 38.2 of wave iii to complete wave-iv 4) Today's low also hit the Elliott lower channel line This would all indicate that "sub-minuet" wave-v to a new high began at today's wave-iv low. Targets for this move would be to the 3023.00 area where wave-v would be .618 of wave-i. This would barely be a new high abov...

Follow the Trend and  "Trade Safe"

In the previous update we outlined a potential triangle structure for wave (b) that completed into Thursdays close. However, overnight trade broke above the maximum price allowed at 2039.75 invalidating the potential triangle. This now confirms that wave-c/y of (b) becomes the primary count which is in the very late stage. The two charts are labeled to show that the only options here are whether wave (b) will end as w-x-y or a-b-c. If the complete pattern ends with wave-y then the high today makes wave (b) complete. If the correction off the high today is a small degree wave [4] then we will see another small rally early next week for wave [5] to complete wave-c and to further complete wave (b). Once complete Wave (c) down will still have targets to or below 2720.00. Follow the Trend and "Trade Safe"

Today's gap up open violated the wave-i of (c) down shown in the last update but, brought an interesting pattern we have been watching to the primary count. At the end of wave-c  we noticed that there was a 4-1/2 point relationship, shown in the blue circles, with the low of wave-b and the top of wave-c. This was an early sign that a "triangle" structure could be forming for wave (b). When the decline from wave-c finished we measured 9 points from the wave-b low and then with this mornings gap up we eagerly watched the 2930.75 price target where wave-e would also be 9 points from the top of wave-c. The exact high today was 2930.75 and then price declined. So, there is a good chance that today marked the end of a three week long correction that formed a "contracting triangle" for wave (b). Price did drop but not far and also failed to form a small impulse wave. For now we need to see a further move down below 2900.00 to confirm that wave (c) is under...