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Saturday, July 4, 2020

Solving the NASDAQ Count (and thus the 2020 market)

I have been pounding my head trying to make sense of the NASDAQ count. If you look back over the last month the counts are all over the place. Elliott Wave International never seem to post a full count from the March lows either (not that I would have the same count). I think they are just as confused.

Why is this important? Well if we can solve the NASDAQ count, we can gleam important clues on how that ties into other index counts.  Find the NASDAQ top, and you've solved the 2020 market...well that's been my thinking anyways.

And then it finally dawned on me. It's not much different than our Wilshire count. Why would it be? The market has surged and retreated together its just that the NASDAQ is catching more of a bid at certain spots, But otherwise, replace A and B with 1 and 2 on the NASDAQ and C with 3 and viola!

Once I did the above, it fell into place rather quickly.  Its not a true ending diagonal pattern as was suggested in Thursday's update. (doesn't mean it won't drop like a post-wedge).

And oh yeah, it may have peaked.   The top ALT to this count is that Thursday's high was wave [i] of 5.   The count is that Thursday was [i] of 5 peak.  The ALT is 5 has peaked.  Since wave 3 is shorter than wave 1, wave 5 cannot be longer than 3 by Elliott Wave rule. This is the one unbreakable rule. Therefore if this count is correct there is an upside limit in price.

One thing about this rebound off the March low is that wave one's of all degrees seem to be the big waves, wave threes, not so much, and wave fives kind of short.

Looking for some kind of upper trendline strike would be ideal.
Here is the composite off the 2009 low. This took much longer in time obviously so the wave dynamics a little different, but overall it seems a repeat more or less.
I'll add to this post. I'm going to make some Fibonacci computations and add some detailed counts since the Minor 4 low and add comments down here later.

Ok here is the proposed wave 4 upward 3-3-5 flat and subsequent breakout. My best guess is only [i] of 5 has peaked.  Note the ALT: 5 count.  Wave [i] would be the longest wave in wave 5 is my logical guess because again, every wave one of any degree seems to be the longest.
And yet another look using the 15 minute chart.  10,601 makes a good target.  If these final surges happen where will the Wilshire be at in price? That's hard to say. Bidding is getting more narrower to the NASDAQ only. EWI mentioned that the volume level ratio between NASDAQ and NYSE keep surging to more and more record spreads. 

That reflects in price on both indexes obviously.
If the NASDAQ surges to 10,601, the Wilshire (and SPX) would likely come very close to its wave (2) peak within a few points.  But my bet is the (2) will hold on the Wilshire because the market bidding probably would have narrowed even more by then.

Here is a chart comparing the 2 recent surges from last. The NASDAQ is running hotter of course  by about about 1.2%. If we project another surge to the 10,601 spot on the trendline, and compute that surge with the Wilshire lagging in % as last week, the Wilshire would likely not take out its peak.  It would be close, but the June 8th high should hold on the Wilshire.
Of course if and when that happens, I'll get all kinds of hate mail.

Ok some more based on the NASDAQ count. The VIX would to a new low. Which means I was missing the final wave after all.

Friday, July 3, 2020

Weekend Charts and Stuff

Some random charts. We'll start with e-minis which of course has been trading overnight and today.  Three notable things perhaps.
1.) the 4 day uptrend line was broken just as was on the cash index on Thursday.
2.) E-minis made an eventual lower low than Thursday's afternoon lows on the cash index.
3.) It seems all indexes (SPX, DOW, NAS100) confirmed the lower lows just as they all confirmed them on Thursday in the afternoon. 

So all three have the same look (as of now). 3 lower lows from Thursday's peak which means they all are in current agreement. I show the e-mini S&P500.

Wave (c) of [ii] beat the price of wave (a) by a mere .25 points. That was all that was required for this to be a 5-3-5 zigzag.
Tesla. Tesla caught my eye because Elon Musk was dunking shorts on Twitter Thursday.
Zooming in closer. It counts well. And thrust up on Thursday out of a triangle. High of Day on first candle.  And Elon dunking on the Securities and Exchange Commission and shorts on Twitter likely made some enemies.  I mean the count and sentiment scream "top tick". Just who the heck bought this on Thursday during the day?
I'll just keep tacking on stuff here as the weekend goes on.

10 year treasury yield.
Seems a tringle is forming.
A slight variation on the count. Either way, both charts imply the same thing eventually.
30 year yield pretty much the same count.
Gold. It has enough waves in place to count complete however, it would seem an unfitting ending for having rallied so hard for 5 years.  I think it goes higher.
And a special treat for you gold bugs out there, I'll be charting the Gold every day using TOS charts.

We can see it clearly made 5 waves out of the (e) of [iv] triangle. Now we are looking for a pullback for (ii). $1754 is clear support.

UPDATED CHART. Thanks to reader Mike for pointing out I had (e) low labeled at the wrong spot (had it at (c) instead) on the TOS chart.  (That explains how I couldn't figure out why i and iv were overlapping by a point. Now they are properly labeled.)

It wouldn't take much price drop to break under the lower channel line.  Having 5 touches makes that line important. Note that Apple didn't confirm the Composite new all-time high on Thursday.
For those that want to see the best guess counts to new market highs, here they are for now.  I'll update if required and post if they break higher than where 3 is marked. They would become primary counts in that case.

There are 2 variations.  When it comes to 5 wave moves, I'm a big believer in channeling.  They have to connect in a way that suggests 1 and 3 and 2 and 4 connect on a channel and 5 falls somewhere in between. The problem here is 3 is such a distinct top (its an island - which is usually not seen at tops of a wave 3!) that when I moved the channel lines to accommodate the recent price break, I cut right under the island top.  There are lots of technical and sentiment reasons I think this won't happen, but we have to be prepared so here they are.

The first supposes the market has to continue sideways and shake our more sellers. Best guess is the old reliable [w]-[x]-[y] pattern with triangle in final position.  In effect, this is re-forming our wave 4 minor triangle.  You could label it either way in the end. That makes sense and we made a new lower channel line to accommodate. This option gives the market more time overall.
A more detailed look. 
The other pattern is that the market has already spun up the energy of [i]-[ii], and now working on (i)-(ii). This implies "upside surprise" or iii of (iii) of [iii] is not too far away, likely next week.   

At least we'll get to see Portney picking stocks by throwing darts, blindfolded, at a dartboard with the NASDAQ 100 stocks on a piece of paper. 

Thursday, July 2, 2020

Elliott Wave Update ~ 2 July 2020 [Update Thurs 9:15PM]

[Update Thurs 9:15PM EST]   The May jobs report was the 5th of June but (2) peaked on Monday the 8th. In that light, If we have one more squiggle coming likely it would fulfill on Monday also. This would be where (c) = (a) of [ii] and would close the island gap on the SPX but probably not the DJIA nor the NYSE. In fact they probably wouldn't make new pivot highs.

The low points on the flat was an upward configuration so we have to assume perhaps one more squiggle to make the top of the flat in an upward situation.

I like this count maybe better. It stretches out wave iii and places the virgin space at the 50% mark. We are ready for Monday either way.
Actually the squiggles would have to count like this due to wave three violations. I don't ever recommend shorting usually, but if this last squiggle occurs on suspect internals, it would be a good place to put a short once (c) = (a) - see chart above.
The primary count is that Intermediate wave (2) peaked on June 8th on Monday after the Friday monthly jobs report. The unemployment dropped unexpectantly to 13.3% that day. The market then sold off viciously a few days later with a 90%++ down day. We marked that eventual low Minute [i] of Minor 1 of Intermediate (3) down. That daily candle has been basically the entire trading range of the market ever since....and that's a quite normal thing!

After peaking in wave (a) and then downdrafting in (b), the market has rallied furiously over the last 4 days heading into the July 4th weekend.  The structure counts as complete and Minute [ii] counts as peaked today on yet another "good news" jobs report. This time unemployment unexpectantly dropped again to 11.1%.

Therefore shouldn't the market be higher than the June 5th high? Is not that a significant divergence? Why yes Dan, it is! Ok, so maybe I'm stretching things here, but is it not a negative divergence?

The proposed Minute [ii] wave counts as a 3-3-5 flat. Three waves to (a) - (counted as a 5-3-5 zigzag), three waves to (b) - (counted as another 5-3-5 zigzag), and a nested 5 wave move to (c). Hence the 3-3-5 flat pattern. (This is the same pattern that traced Minute [ii] after Intermediate (2) peak in May 2008 as shown a few posts ago.)
The market jumped over the channel line this morning it couldn't wait to get higher.  And then at the end of day, it fell back under the channel and pretty much finished near its low of day.

And its on an island at the moment.
The complete count of (1) and (2) so far.
Proposed waves [i] and [ii]
As far as the NASDAQ, I'll take another stab at the count. You can see after wave 4, it broke to a new high. This would have been the perfect spot for "5". (yeah it was marked a 5 at the time). But its a greedy freaking market and it decided to extend further after dropping back lower.  And then it did make another high, but it was only wave [iii]. So after dropping yet again in horrible overlap, it fulfilled its [v] wave duties.  

So it finds itself in yet another potential bearish ending diagonal triangle wedge pattern.  And there was no overthrow today just a perfect kiss of the upper trendline.  Maybe its too exhausted to overthrow. Or maybe its not done, who knows. But the wedge is now staring us again in the face and it cannot be ignored. Price collapse follows afterwards if its a wedge.

And yes, its been since February since pretty much anything else made an all-time high.  Its over 4 months of non-confirmation going on 5.
NYSE count, which is basically a proxy for the DJIA count more or less. I rather use the NYSE. And yes, non-confirmation with SPX, Wilshire, NASDAQ, etc.
Its been a holiday week more or less. The vaunted 50/200 crossover event should be coming up soon, even if the market tanks.
VIX squiggle count.
The VIX uptrend line. Its an important line, the market knows this. I will say, if this trendline breaks decisively, then the big VIX gap underneath probably will be closed or partially closed.  That implies the June 5th (2) peak would likely be seriously price challenged on the Wilshire 5000.
BPSPX 2008 vs today in Minute [ii] flat patterns post (2) peak(s). Technically very similar setups.
Apple non-confirmation.
The big, big picture
Oh and you can throw out the contracting Minor 4 triangle as a count.

And a little bit of mini-Dow theory signaling turns. You don't want a major signal at this point because they have already diverged at the all-time peaks of each.  You want them in agreement with each other. The March lows confirmed that they both agree a bear market has started. However, the minor divergences can be helpful for the smaller turns.

We triggered a minor divergence again today which suggests markets down unless the divergence gets corrected.
Fractured market. The banks have caught no bid since they peaked.  Everyone has forgotten that the world is loaded with quadrillions in derivatives. The interest rate derivatives alone would blow up the entire system if something goes haywire. Negative interest rates would signal massive asset deflation.

At any rate, this is not a healthy picture. yes I keep telling myself that, and you dear reader, but surely it must mean something.  The banks are leading everything down, followed by the NYSE and Global Dow.

The indexes on this chart are important both for the US and globally. Everything else is mostly just noise.

Elliott Wave Intraday 2 July 2020

Looking to run to the parallel trendline perhaps for an upward flat.

Ending [ii] on "great job news".  Seems fitting.
5 minute charts show v = i depending on where you place the Fib tool. And it jumped the channel which in this case is bearish of course in the context of the primary count.
Yet another possible NASDAQ wedge
NYSE count.
There's the trendline touch
Banks got a rocket booster shot huh? Ok that was sarcasm.
The e-minis, all-hours now has a higher (c) than (a) by .25 points.  This would be a zigzag pattern. 5 waves to (a), 3 waves to (b) - in this case an expanding triangle - and 5 waves to (c) which must finish higher than (a) which so far it did.

Wednesday, July 1, 2020

Elliott Wave Update ~ 1 July 2020

I was going to open the post with a lot of babbling (well, that's below this chart) but here is the count on the NYSE which, as has been pointed out, seems to be silently leading the way lower with its own valid Elliott Wave count that greatly diverges from the overall market.

Again, it diverged with the rest of the market today by not making that afternoon high.

Waves [i] and [ii] and now (i) and (ii) seem fully developed or nearly so.
The primary count (variation 1) for the Wilshire5000 is that wave [ii] is tracing wave (c) in either a flat pattern or a slightly upward flat pattern which is basically the same thing. This was one of the count options shown in last night's update.

A small market burst higher may finally close the VIX gap created at the peak island top. This would create our new Wilshire 5000 wave (c) of [ii] even if it comes up short in price it would be an acceptable flat pattern. But we would need that final burst higher. Otherwise see primary count (variation 2) chart further down the update.
The wave structure over the 3 days is an awesome structure.  Wave iii is nearly a perfect Fibonacci 1.618 x price length of wave i. There is alternation between corrective waves, and the channeling is excellent so far.

The market however is running on fumes.  If they can keep it together overnight, it has a chance to run up to our new wave [ii] peak.  If wave v makes a normal run where v = i, or even a lesser ratio, we should get our new wave [ii] peak.

Again it's probably dependent on how the market opens.  This squiggle count below suggests that a gap up open and run higher to peak would work well.  Anything other than that starts to break the very nice price channeling.
But as was mentioned, the market seems to be stretched thin and on shaky ground.  Market internals were very narrow (toward NASDAQ only) and as mentioned on Elliott Wave International on tonight's update (click my links to left and become a Free Club Member), 57.8% of stocks on the SPX closed lower than higher.

There is a perfect count in place if the market decides right then and here that its had enough. There are enough squiggles to consider the impulse over the last 3 days over.  It would count still as an expanded flat wave ii peak in that case. Actually, wave i and ii on the chart below should probably be bumped up to (i) and (ii) due to length of time and strength in price.  (This would match the NYSE count 1st chart of the post). But I'm too lazy to do that right now, its not terribly important. What matters is the wave structure no matter what wave degree its given at the moment.
I could write some more about the Minor 4 triangle situation  but I would be repeating myself from last night's post. All that is still in play. Read last night's post to see how the dynamics work.

In fact here is the updated Minor 4 triangle count. [d] has broken above the contracting triangle line.
Maybe the VIX needs a simple trendline strike.
I always hated counting the NASDAQ it simply doesn't count great. But we may have a classic Head and Shoulders. And yes, we have yet another non-confirmation event with the NASDAQ's closing high on an all-time record today.

A simple RSI double divergence is going on also.
Gold may be due for a wave (iii) of [iii] of 5 higher. That would stretch things upwards nicely. There are enough waves in place, however, wouldn't it look great to burst toward that upper trendline?
Oh and the banks. What have the banks done over the last 3 days of Wilshire 5000 rally? Oh yeah they managed not to completely fall apart.
CPCE data. Very bullish sentiment.
Check this VIX count. It counts as finished, at least for now. Note where the VIX "third of a third" on the long wave VIX (v) down occurs. It is right at the middle. All the subwaves appear to be there.

The VIX collapsed in price by 22.4% in 3 days.  It's also diverging again significantly.  It diverged during Minor wave B when (b) of B failed to make a higher high, the VIX had shrunk significantly compared to the A wave peak.  Then when (c) of B went to its low, the VIX didn't make a higher spike. It turned out to be bullish.

Now its diverging again. The VIX is lower in price than at the wave [ii] peak.  This could be signaling that the market will follow higher as what occurred in the B wave. However, this time the market is much more fractured than it was at the B wave low.  So its not necessarily a bullish thing this time.

The flipside is that sentiment is getting comfortable and is wholly unprepared for a strong market reversal.  Combined with the CPCE chart, these are actual actions of the market not guesses at sentiment. This is real money. People are betting big on continued market upside, and people are getting comfortable placing those bets because the strikes are starting to get closer together. Its 22% less frazzled in only 3 trading days. And we just had another .46 CPCE daily print. 

Yet the gap down is not even closed on the Wilshire5000 on the VIX chart.

(You can't see the gap because the way it prints on Stockcharts which I think is a conspiracy anyway but I digress.  Ok here is the conspiracy: When the Wilshire prints an open gap, its a trading target for the algo's. When the Wilshire doesn't print a gap, its not a target and the market doesn't have to close it. If anyone knows why the Wilshire prints like it does - at least on Stockcharts - , please email me).

I view it as bearish overall, but I'm probably biased.