Good Riddance to Wave D

Market Update for Friday, June 8, 2018

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

_______________________________

Market Update for Thursday, June 7, 2018

This is the CHART SHOW

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

_______________________________

Market Update for Wednesday, June 6, 2018

CHART SHOW signup

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

_______________________________

Market Update for Tuesday, June 5, 2018

CHART SHOW signup

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

_______________________________

Is Monday Good-bye to Wave D?

For three weeks, we’ve watched the D wave of the contracting triangle in ES and SPX try to top. I go into this in more detail in this weekend’s video. We’re very close to turn and Monday might just be the day. Good riddance to this wave!

With almost every up and down move in the past three weeks in ES, alternate measurements keep targeting the 2750 area. This has been the ultimate target right from the start. This action tells me we have an extremely weak market that is struggling to get to the target.

As a result, once we see the turn down into the E wave of the triangle in ES/SPX, the drop is likely to be sharp. However, the E wave has to be in three waves, so we’ll trace out an ABC wave to below 2600.

While the US indices head down from the top of the D wave, I don’t expect a lot of movement in the USD currency pairs. USDJPY is the exception, as the movement of JPY itself means this pair moves differently from the other USD pairs I cover. There’s more information on this is this weekend’s video.

What I see is everything moving around to get into position for the final wave up — the 5th wave in the US indices that will rally from the bottom of the E leg of the triangle up to a new high. It has quite a distance to go.

While that final 5th wave in the US indices rallies, we should see rallies in EUR, GBP, AUD, and CAD (CAD will move in the opposite direction). Oil will likely also rally in what looks like an ending diagonal pattern playing out. Gold and silver should drop to their targets while the 5th wave plays out.

As I’ve been saying for the past couple of years, everything will top at the same time, but to do so, they all have to finish their final waves within Elliott wave rules.

After they all top, they will all move down together in what’s going to be the show of a lifetime. The drop in the eventual third wave (likely this fall) will be labelled “the crash” and it’s likely to be breathtaking in it severity.

Facebook:  Update on June 1

Above is the 4 hour chart of FB (Facebook).

Uh-oh. We have a potential double top forming after an ending diagonal and five waves up to the top of that ending diagonal.

In terms of trading it, I would be looking for a small wave down to the previous small fourth wave at about 182. I want to see a 5 wave pattern down to that level, and then a 3 wave retrace to around the 62% level, which would be roughly at 190 and change.

I would look for a top of this pattern as the SP500 turns down at the top of the D wave. We’ll see whether the E leg in the SP500 gives us a first wave down in FB. If so, this will be the first FANG casualty of the rapidly deteriorating US market.

I’ll continue to watch this stock as a bellwether for the larger market.

Elliott Wave Basics

Elliott Wave Theory has two primary components:

• fibonacci wave relationships that give clues as to wave lengths (and probable measured targets)
• wave counts in impulsive waves and corrective patterns (each corrective pattern has its own rules and guidelines)

Trend waves, or impulsive waves (which we haven’t really had since 2007), consist of a five wave pattern that measures accurately to prescribed wavelengths. We’ll get a set of impulsive waves in the A wave down after the top of the market.

Corrective waves are typically in patterns. You’ll see a list of corrective patterns in the sidebar in the Trader’s Gold area. They’re there so you can become familiar with the rules and guidelines for the pattern we’re in.

___________________________

Week at a Glance:

• ES/SPX  – Looking for one more wave up to finish the D leg
• USDJPY has turned down. Looking for continuation of the drop to 95
• USD Currency pairs – still working their way to an eventual turn.

______________________________

Here’s the latest daily chart of ES (emini futures)

Above is the daily chart of ES (click to enlarge, as with any of my charts).

We’ve now being going sideways at the top of the D leg of the triangle for three solid weeks. This signals to me that the market is exceptionally weak and having a tough time making it to the required target. I’m expecting one more wave up to complete the D leg. We’re either targeting the previous high (2742) or 2750. I think 2750 most likely.

Volume is exceptionally low, which contributes to the volatility and lack of momentum at times.

Once we hit the target, though, we’ll head down in the E leg. I thought the turn had to happen last week, because of the inherent weakness and the length of time going sideways. This market is extraordinary!

After the E wave down is complete, we’ll take off again to the upside in a fifth wave, which will simply finish off the pattern. We’ll get to a new high and probably more, but don’t expect (as I’ve been saying for a very long time) a large fifth wave that travels any great distance. (I think 3000 is possible but at the high end of the probability spectrum)

Summary: We’re not quite finished the D leg of the contracting triangle. Topping out will result in a high probability trade to the downside (the E leg of the triangle) Once E leg (down) is complete, expect a final fifth wave to a new high. That fifth wave up to a new high will be the end of the 500 year bull market.

_______________________

Here’s the latest 60 MIN chart of ES (emini futures):

Above is the 60 minute chart of ES (click to enlarge, as with all my charts). 

Three solid weeks of “sideways” in what I can only characterize as a fourth wave trying to get to a new high, most likely now the 2750 area.

Last week, I also called for a move to the upside and we got that, but it’s taking much longer than I could have imagined to actually get to the target. Each time I measure the resulting waves, they seem to give me the same target number: 2750-4 (a small range).

In the SP500, it’s the same thing; the direction is up to the 2750-4 area. We could top at 2742 (the previous high) but since we stopped at the end of the session on Friday at just six points below that level, it makes more sense to expect the weekend to deliver a new high.

Plus the wave up is not complete. We’re tracing out a complex wave up, putting in a fourth wave, with a second fourth wave up quite probable before we trace out the final fifth wave up to the stated target.

The top of the D leg will be a high probability short to the downside in leg E of the triangle. We should reach the high possibly on Monday.

Summary: I expect to continue the march up to the 2750-4 area of the D wave of a contracting triangle. There are alternatives, but based on what I’m seeing, this appears the most probable outcome of the current pattern. The high probability trade will be at the top (after a final fifth wave up), to take advantage of the E wave down.

_____________________________

Market Report for Monday, June 4, 2018

CHART SHOW signup

Make sure you zoom the video to full size with frame expander (arrows) in the bottom right hand corner and also set the quality to as high as your web connection allows. This is an HD quality video so the best viewing is at that level.

_______________________________

Longer Term Charts

Above is the 30 minute chart of the SP500.

Virtually the same as ES. I’ve placed the upper yellow line at the preferred target of 2754. It’s showing a C wave equal in length to the yellow A wave up. The 1.618 extension of the A wave targets a bit higher … the 2760, which is a lower probability option.

The top of the D leg will be a high probability short to the downside in leg E of the triangle. We should reach the high (finally!) early this week.

Above is the daily chart of UUP (US Dollar ETF). UUP is representative of the structure of DXY (the US index) and will provide an excellent predictor of the impending top in currency pairs and the US indices.

I’m expecting a new low for the dollar longer-term.

The pattern here is an ABC corrective wave to the upside, which appears to be more or less complete. I’ve now labelled the wave up as a B wave, since it’s risen above the previous 4th wave. I think an ending diagonal is less likely, and probably off the table altogether. We may instead see a final wave down in 5 waves.

After a new low, the dollar will turn up to a new high above 104.00 (UUP likewise above 27.00). The dollar will turn with the euro.

Rather than playing a currency pair, you can consider playing a short here knowing that the objective is a new low below 23.00. But I would wait for a small wave down in 5 waves and a lower high to follow that retraces 62% in three waves.

The movement of the dollar strongly influences the movement of just about everything else, so it’s important to pay attention to what it’s doing.

Above is the daily chart of EURUSD. 

We appear to have more or less completed a large C wave to the downside, part of an abc corrective pattern.  Last week, I stated that I didn’t have another possible inflection point until 1.15, and sure enough, that’s where we landed before a large bounce to the upside.

Currencies have moved up in the past couple of days, positioning themselves perhaps for a drop down to their previous lows to coincide with the coming drop in wave E in ES/SPX.

The longer term direction is up; we just have to wait for a confirmed bottom. That will lead to a great opportunity to the upside.

In terms of a rally trade, the less risky course of action would be to wait for a wave up in five waves and then a three wave, 62% retrace in a second wave.

Once this final pattern eventually tops (with a new high above 1.256), expect a drop in a higher degree fifth wave to a new low below 1.034.

More on the shorter term in the video, of course.

Above is the 3 day chart of GBPUSD.  The longer term direction is up.

GBP has a similar pattern to EURUSD. We’re very close to a bottom on this large leg down. The pattern is corrective and requires a rise to a new high.

If contemplating a trade, as with the EURUSD, I’d be waiting here for a first wave up and then a second wave in three waves down to the 62% level before a long entry with a target of a new high.

This currency pair warrants caution (as does EURUSD). There are less risky trades setting up in the other currency pairs. However, all the pairs are turning, so as the EURUSD confirms a bottom, GBPUSD should not be far behind.

More information on the short term prognosis in the video.

Above is the 2 day chart of the AUDUSD. 

On a short-term basis, we’re looking for a bottom here. The waves up from .74124 are “three wavers,” so the direction is still down.

I expect to see a turn down on an hourly chart with the top of the D wave in the US indices (this week?).

The long term target is .84450 and involves a turn to the upside. This is a high probability trade. We wait in the weeds. More in the video.

Above is the 2 day chart of USDCAD. It moves opposite in direction to AUDUSD (due to the orientation of the charts).

We have a high probability trade waiting to set up. It’s straining our patience, for sure.

The short term direction here is debatable. Best to watch nightly videos this week, as we will see direction changes as the SP500 tops in its D wave, turns down, and then bottoms eventually at the bottom of the E wave. The shorter term movement is debatable.

The high probability trade is a short once we have a top of this corrective wave up in place. The first objective in that trade is a new low below 1.18.

Once this pair hits the final downside target, it should turn up and will eventually rally to a new all time high for USDCAD well above above 1.46254.

Above is the 6 day chart of USDJPY. For this pair, the longer-term prognosis is for a big drop to the 94.6 area.

We’ve topped here a predicted and are heading down to our target of about $95. I’ve been projecting a 4th or 2nd wave retrace, which we’re in the middle of. My preference is for a turn back down close to the previous 4th wave, at ~109.83. See the video for more on this.

After we hit the long-term downside target (~94.6), I expect a turn up in an impulsive third wave far, far above 130.00.

Above is the daily chart of gold. We are starting to set up for an entry in the not too distant future.

We’ve completed 5 waves down and now we’re looking for 62% retrace for a short entry in the 1334-6 area, with a target of 1122.

I will be watching daily and you’ll find updates in the nightly video.

After a bottom at around 1122, look for a wave up in gold to the 1600 area.

Above is the 4 day chart of WTI oil. No change here.

We rallied to a slight new high last week, and then dropped as predicted, but have dropped further than expected in what looks like the fourth wave of an ending diagonal. We appear to have a little more downside ahead of us before we see a bottom.

That bottom should lead to a turn up in a fifth and final wave, likely to coincide with the turn up into a fifth wave in the US indices (after the large contracting triangle we’re currently in finishes).

That final wave to the upside could now reach the $80 area before a dramatic reversal (ending diagonals always end in a dramatic reversal).

Longer term (after a top in the 77-80 area), I’m expecting a long wave down in 5 waves to a double bottom at about 26.00. The entire structure going back to 2007 is a corrective wave, with the A wave equal to the C wave in length. This suggests a double bottom at the 26 level rather than a drop below it (but we’ll determine a final target once we see the wave structure of the wave down).

Good trading!