E-mini S&P Elliott Wave Discussion

[JahDave]

Interesting day in that what appeared to be the start of something big to the downside fizzled. By 3:30 pm est., the market had clawed its way back up to challenge the near term top of wave (ii). Until a break of 1089.5, the current wave count stands (see chart). However, the deep retracement does cause some concern that a more complex wave (ii) is still unfolding opening the door to further upward prices (see chart 2). The chart is not drawn to scale for any projections but shows the general direction of an alternative wave structure that may play out. Until 1066.25 is broken, I can't take the alternative count off the board.

Best of Trading

Here's my DJIA hour chart. I only trade forex and I only get a dj feed from my broker. These indices react similarly. I also think the dow could stop at the 61.8% but I think it will most likely go to the 76.4%

 

[EWT]

JahDave - The wave interpretation of a flat b wave is certainly one scenario that could play out before reaching the upper retracement levels. We could also form a triangle, combination or zig-zag b wave that would also resolve up. What's important to note is that when all interpretations point in one direction, a high probability trade exists. We could also fall hard right from the current level. Let's see what happens today. Thanks for the post.

Best of Trading

Here's my DJIA hour chart. I only trade forex and I only get a dj feed from my broker. These indices react similarly. I also think the dow could stop at the 61.8% but I think it will most likely go to the 76.4%

 

[EWT]

The Market took off to the downside right after the negative Jobless Claims number was released at 8:30 EST. Prices traded heavy all day and in an impulsive manner. I have provided a chart tonight showing two possibilities. I realize that there is allot going on in the chart so let me explain. If anyone has any questions,please e-mail me.

First there is a base channel drawn from the top of wave 2 blue. It provided structural resistance at 1098.5. There is also another channel draw which is a corrective channel. Notice the upper boundary crosses 1100.75 (more on that in a minute).

I have depicted two possibilities here:

1. That we are working wave i blue of wave (iii) purple of 3 (blue). If this is the operative count, then we should see further selling in the overnight session or into the first part of Friday's trade.

2. I also have labeled the chart for a W-X-Y, "Double Three" flat pattern that would complete around 1100.75 whereas wave W=Wave Y. This aligns well with the upper boundary of the corrective pattern. I would look for the channel to provide resistance! Should this scenario play out, I'd expect trade to turn tail quickly from today's close as trade can't go beyond 1066.25 for a regular flat correction.

Here's the tricky part. If price exceeds 1066.25, there is still another alternative labeling (not shown) that would call for an expanded flat correction. Under this scenario, trade would make a new low, then retrace up beyond 1100.75.

In conclusion, we have two scenarios calling for a new low and one that calls trade higher. Tomorrow is Options expiration. Let's see.

Best of Trading

 

[EWT]

Often when several scenarios present a greater tendency for trade in one direction you have to play it. The odds favored a decline (66%) and a 33% chance that trade would move higher. I'm not going to go over the trade but there were several ways to enter the market to the downside. Let's look at what occurred.

What we got was #1 as price traded below 1066.25. Indeed the higher percentage played out. Scenario #2 was eliminated on the break of 1066.25 but it is still to be determined if the expanded flat alternative is still in play.

The Next Trade

Regardless of the current wave labeling, the count suggests that trade continues up from the lows set on Friday. Current price action looks choppy and contains overlap ... a classical signature of countertrend moves. So the question to be answered it what's the hypothetical trade. We'll, if the current labeling is correct, price can't overlap 1083.75. If it did, the possibly of the expanded flat interpretation may still have some life. Traders should be looking for sell signals against critical resistance (1083.75). The ideal stop rests just above this level (1084). How one accomplishes this is determined by your trade plan with the underlying wave count confirming the completion of 3 wave up from Friday's low of 1061.75.



Best of Trading

The Market took off to the downside right after the negative Jobless Claims number was released at 8:30 EST. Prices traded heavy all day and in an impulsive manner. I have provided a chart tonight showing two possibilities. I realize that there is allot going on in the chart so let me explain. If anyone has any questions,please e-mail me.

First there is a base channel drawn from the top of wave 2 blue. It provided structural resistance at 1098.5. There is also another channel draw which is a corrective channel. Notice the upper boundary crosses 1100.75 (more on that in a minute).

I have depicted two possibilities here:

1. That we are working wave i blue of wave (iii) purple of 3 (blue). If this is the operative count, then we should see further selling in the overnight session or into the first part of Friday's trade.

2. I also have labeled the chart for a W-X-Y, "Double Three" flat pattern that would complete around 1100.75 whereas wave W=Wave Y. This aligns well with the upper boundary of the corrective pattern. I would look for the channel to provide resistance! Should this scenario play out, I'd expect trade to turn tail quickly from today's close as trade can't go beyond 1066.25 for a regular flat correction.

Here's the tricky part. If price exceeds 1066.25, there is still another alternative labeling (not shown) that would call for an expanded flat correction. Under this scenario, trade would make a new low, then retrace up beyond 1100.75.

In conclusion, we have two scenarios calling for a new low and one that calls trade higher. Tomorrow is Options expiration. Let's see.

Best of Trading

 

[EWT]

The overnight session is trading up confirming my "week in review" analysis. There's additional supporting evidence that critical resistance of 1083.75 is a significant area to watch. First, we have two fibonacci resistance levels at 1086.5 and a 1.382 reverse extension at 1084.25 on the ES1 chart.

Best of Trading

Often when several scenarios present a greater tendency for trade in one direction you have to play it. The odds favored a decline (66%) and a 33% chance that trade would move higher. I'm not going to go over the trade but there were several ways to enter the market to the downside. Let's look at what occurred.

What we got was #1 as price traded below 1066.25. Indeed the higher percentage played out. Scenario #2 was eliminated on the break of 1066.25 but it is still to be determined if the expanded flat alternative is still in play.

The Next Trade

Regardless of the current wave labeling, the count suggests that trade continues up from the lows set on Friday. Current price action looks choppy and contains overlap ... a classical signature of countertrend moves. So the question to be answered it what's the hypothetical trade. We'll, if the current labeling is correct, price can't overlap 1083.75. If it did, the possibly of the expanded flat interpretation may still have some life. Traders should be looking for sell signals against critical resistance (1083.75). The ideal stop rests just above this level (1084). How one accomplishes this is determined by your trade plan with the underlying wave count confirming the completion of 3 wave up from Friday's low of 1061.75.



Best of Trading

 

[EWT]

The market is currently working wave iii circle down and it appears that further selling is on order on a near term basis. At a minimum, wave iii circle = wave i circle at 1038. There are also other potential targets at 1034 and (1030.25 - 1030.5; respectfully, the
.786 retracement and the monthly S1 pivot support). As the wave structure unfolds, I'll revise these targets if need be.

Best of Trading

 

[EWT]

As expected, selling pressure resumed in the overnight session. Watch the target areas that I posted last night.

The market is currently working wave iii circle down and it appears that further selling is on order on a near term basis. At a minimum, wave iii circle = wave i circle at 1038. There are also other potential targets at 1034 and (1030.25 - 1030.5; respectfully, the
.786 retracement and the monthly S1 pivot support). As the wave structure unfolds, I'll revise these targets if need be.

Best of Trading

 

[EWT]

First target of 1038 hit.

 

[EWT]

A break of 1037 in ES_F sets up next targets of 1030 - 1034 area.

 

[EWT]

We hit the first target (1038) and turned tail to the upside. Notice the divergence of the MACD histogram. This is typically found between a 3rd and 5th wave as it confirmed that wave (i) purple was completed. I must admit, the wave structure would have counted better if there was one more decline below 1038 reaching the 1030-1034 targets but I can count a complete 5 wave structure down from wave iv (1080.25). The fact that it didn't results in a slight relabeling of the internal structure of the move down from 1098.5, but it doesn't change the direction or the overall interpretation which was down going into today's session.

For tomorrow, this sets up a corrective rally that either completed at the close of today's trade or will develop in a more complex correction. Look for targets and further analysis tomorrow morning.



Best of Trading

First target of 1038 hit.

 

[JahDave]

We hit the first target (1038) and turned tail to the upside. Notice the divergence of the MACD histogram. This is typically found between a 3rd and 5th wave as it confirmed that wave (i) purple was completed. I must admit, the wave structure would have counted better if there was one more decline below 1038 reaching the 1030-1034 targets but I can count a complete 5 wave structure down from wave iv (1080.25). The fact that it didn't results in a slight relabeling of the internal structure of the move down from 1098.5, but it doesn't change the direction or the overall interpretation which was down going into today's session.

For tomorrow, this sets up a corrective rally that either completed at the close of today's trade or will develop in a more complex correction. Look for targets and further analysis tomorrow morning.



Best of Trading

Hi EWT,

I am enjoying your thread very much as you are doing a great job. Even though I don't trade stocks I still follow the DOW. This isn't definite, but I can see where the DOW is possibly in an expanding triangle for wave 2. Just something to think about.

Regards,
Dave

 

[EWT]

Dave,

Thanks for the comments. I'm glad you find the information useful. Funny you should bring this question up because yesterday, I to had the "what if" moment on a triangle forming during the summer markets. Regarding triangles and or more specifically, expanding traingles, they are only found in wave structure prior to the final wave of a move. More specifically, in wave 4 of an impulse wave; wave b in a corrective structure, or wave x in a combination. Given the current price and wave structure, of the Dow and S&P charts, the only remote possibility and lower percentage wave count is for a wave B running triangle, not an expanding triangle. The current leg up from yesterday's low is forming wave e to complete the pattern... followed by a large wave c down.

It's good that you are thinking outside the box as your mind is better equipped to see what others miss.

Hope this helps

Hi EWT,

I am enjoying your thread very much as you are doing a great job. Even though I don't trade stocks I still follow the DOW. This isn't definite, but I can see where the DOW is possibly in an expanding triangle for wave 2. Just something to think about.

Regards,
Dave

 

[EWT]

Not much to go over as the overnight session is on stand-by awaiting the jobless claims number at 8:30 est. The chart shows the resistance levels for a proposed wave (ii). As I mentioned last night, the wave either compleeted yesterday or will develop in a more complex manner. Therefore, all I can offer at this point is a range of resistance between 1061.75- 1071.50. Possibly, we close the gap at 1065.5, then turn south. Let's seee what develops.

I'm setting critical support at 1044.75. Any trade back down under this level would indicate that wave (ii) had completed and that wave (iii) of iii circle (green) of 3 (blue) had begin.

Best of Trading

 

[JahDave]

Dave,

Thanks for the comments. I'm glad you find the information useful. Funny you should bring this question up because yesterday, I to had the "what if" moment on a triangle forming during the summer markets. Regarding triangles and or more specifically, expanding traingles, they are only found in wave structure prior to the final wave of a move. More specifically, in wave 4 of an impulse wave; wave b in a corrective structure, or wave x in a combination. Given the current price and wave structure, of the Dow and S&P charts, the only remote possibility and lower percentage wave count is for a wave B running triangle, not an expanding triangle. The current leg up from yesterday's low is forming wave e to complete the pattern... followed by a large wave c down.

It's good that you are thinking outside the box as your mind is better equipped to see what others miss.

Hope this helps

Actually I should have said a B wave instead of a wave 2 .

 

[EWT]

Actually I should have said a B wave instead of a wave 2 .

Dave - Just to clarify, the triangle interpretaion is not the preferred count but it is an interesting alternative.

Thanks again for the post.

 

[EWT]

Not much to go over as the overnight session is on stand-by awaiting the jobless claims number at 8:30 est. The chart shows the resistance levels for a proposed wave (ii). As I mentioned last night, the wave either compleeted yesterday or will develop in a more complex manner. Therefore, all I can offer at this point is a range of resistance between 1061.75- 1071.50. Possibly, we close the gap at 1065.5, then turn south. Let's seee what develops.

I'm setting critical support at 1044.75. Any trade back down under this level would indicate that wave (ii) had completed and that wave (iii) of iii circle (green) of 3 (blue) had begin.

For tomorrows trade, I will be looking at two possible outcomes as shown on the attached chart. If trade continues down in an impulsive manner, we need to see 5 waves down to truly confirm that wave (ii) had ended. A push up and a break of the red trendline would leave the door open for the gap to close at 1066 or any of the above mentioned resistance levels stated from last night.

Tomorrow we have the GDP report before the opening bell. I expect some early volatility.


Best of Trading

 

[EWT]

Another week has come and gone and the only thing that the bears can say is that the market lost (6.25) for the week. The last time I made a post, I offered two scenarios for Friday. The upward wave (ii) purple scenario played out after extending the b wave down, re-testing 1037.25 in a flat correction. The pattern is close to terminating. Key resistance levels cited between 1061.75- 1071.50 and the gap at 1065.5 remain. The game plan remains the same, i.e. looking for sell signals at these levels. A break of 1037.25 would have at a minimum a bearish downside potential to 1002.75.

Interestingly, yearly cycle work dating back to the 1987 low confirms the general direction of the market and wave count. Several yearly cycles anticipate a low by 10/29/2010. The 9-month shorter term 1/2 cycle of the 18-month cycle crested at the top of wave 2 circle purple (1216.75) and is now working down. A bottom of the cycle is anticipated by 1/31/2011. Only the 18-month cycle argues that the market may hold up a bit longer before resuming the decline to much lower levels. A crest of this cycle is anticipated as of 1/31/2011 and pushes out the cycle lows to 10/31/2011.

Best of Trading

For tomorrows trade, I will be looking at two possible outcomes as shown on the attached chart. If trade continues down in an impulsive manner, we need to see 5 waves down to truly confirm that wave (ii) had ended. A push up and a break of the red trendline would leave the door open for the gap to close at 1066 or any of the above mentioned resistance levels stated from last night.

Tomorrow we have the GDP report before the opening bell. I expect some early volatility.


Best of Trading

 

[EWT]

From my week in review, I stated several resistance areas. In the pre market, the overnight session reached 1072.75, and closed the open gap. Although price never tested the area again during the day session, my interpretation of whether wave (ii) purple has terminated is still open for the time being. Currently I can only count three waves down . Counting 5 waves down confirms that wave (ii) had ended. A break below 1037.25 would bolster the bearish view.

For tomorrow, I'm looking for a minor bounce for wave iv, followed by an impulsive decline . In the meantime, I am dead wrong on my count and expectations if price trades above 1054 thereby creating overlap.


Best of Trading

Another week has come and gone and the only thing that the bears can say is that the market lost (6.25) for the week. The last time I made a post, I offered two scenarios for Friday. The upward wave (ii) purple scenario played out after extending the b wave down, re-testing 1037.25 in a flat correction. The pattern is close to terminating. Key resistance levels cited between 1061.75- 1071.50 and the gap at 1065.5 remain. The game plan remains the same, i.e. looking for sell signals at these levels. A break of 1037.25 would have at a minimum a bearish downside potential to 1002.75.

Interestingly, yearly cycle work dating back to the 1987 low confirms the general direction of the market and wave count. Several yearly cycles anticipate a low by 10/29/2010. The 9-month shorter term 1/2 cycle of the 18-month cycle crested at the top of wave 2 circle purple (1216.75) and is now working down. A bottom of the cycle is anticipated by 1/31/2011. Only the 18-month cycle argues that the market may hold up a bit longer before resuming the decline to much lower levels. A crest of this cycle is anticipated as of 1/31/2011 and pushes out the cycle lows to 10/31/2011.

Best of Trading

 

[EWT]

My interpretation of whether wave (ii) purple has terminated is still open after another day of trading. market found support and trade has turned back up, keeping the the possibility of a larger upside correction on the table. Yet, prices still have not moved beyond the 1054 mark which would signal that some form of alternate count or sideways pattern was unfolding. While I think the price structure is definitely corrective in nature, as indicated in the light blue box range, until there is an upside break of 1054, I'll favor near term downside pressure. What may be occurring here is a combination pattern for a developing wave (ii) purple and the market is just marking time before terminating. I'll need to see more of the internal structure before I can confirm such an assumption. Whether the market continues down hard or meanders sideways , the operative direction remains down with much further downside potential.




Best of Trading

From my week in review, I stated several resistance areas. In the pre market, the overnight session reached 1072.75, and closed the open gap. Although price never tested the area again during the day session, my interpretation of whether wave (ii) purple has terminated is still open for the time being. Currently I can only count three waves down . Counting 5 waves down confirms that wave (ii) had ended. A break below 1037.25 would bolster the bearish view.

For tomorrow, I'm looking for a minor bounce for wave iv, followed by an impulsive decline . In the meantime, I am dead wrong on my count and expectations if price trades above 1054 thereby creating overlap.


Best of Trading

 

[EWT]

The market certainly didn't cooperate in holding below 1054.25. The previous interpretation was incorrect. Structurally, the price action is still to be viewed corrective but it appears that my comments on August 31, 2010, i.e. " keeping the possibility of a larger upside correction on the table" are unfolding. Today the market traded impulsively. The attached chart includes the new internal structure. While we have satisfied the minimal requirement to count 5 waves up by the fact that wave iii (blue) was exceeded, the market may further subdivide into a larger fifth wave. Should we fail to see any significant follow through, odds favor a wave (ii) purple completion.

Best of Trading

My interpretation of whether wave (ii) purple has terminated is still open after another day of trading. market found support and trade has turned back up, keeping the the possibility of a larger upside correction on the table. Yet, prices still have not moved beyond the 1054 mark which would signal that some form of alternate count or sideways pattern was unfolding. While I think the price structure is definitely corrective in nature, as indicated in the light blue box range, until there is an upside break of 1054, I'll favor near term downside pressure. What may be occurring here is a combination pattern for a developing wave (ii) purple and the market is just marking time before terminating. I'll need to see more of the internal structure before I can confirm such an assumption. Whether the market continues down hard or meanders sideways , the operative direction remains down with much further downside potential.




Best of Trading