Wave D’s Final Gasp

Update: Friday, June 15, 2pm EST

Above is the hourly chart of WTI crude oil. If you caught the small leg down, there’s more to come! We’re just about to double bottom. I don’t know if that will be Monday or today, but it’s imminent. The target to the upside is the mid to high 70s, which will be the top for oil. This the fourth wave of an ending diagonal, which set the max. level the fifth wave can’t exceed, which at the moment is $79.00.

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Market Report for Friday, June 15, 2018

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Update: June 14, 2pm EST

Well, this waiting is certainly tedious. There seem to be ending diagonals all over the place. Here’s one more. Above is the 4  hour chart of USDJPY showing the partially formed ending diagonal, now likely in the final wave. The projected top would be the previous high at about 111.40.

The final wave will need to be in three waves, so we’ll need a down wave before the final wave up to the high, which will likely correspond to our turn in ES and the other indices and stocks I identified in the Chart Show.

Ending diagonals result in dramatic turns to the downside, which would also support my feeling that the fourth wave in the ending diagonals in the US indices is going to come down hard.

A little more patience. Hopefully tomorrow morning.

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Update:  June 14, 11:30am EST

Updated: Above is the 30 min chart of ES this morning. It looks like we have an extremely rare expanded diagonal, with a final 5th wave tracing out. They generally don’t overshoot the upper trendline and the 1.618 extension off the ‘a’ wave up now shows a target of about 2807.

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Market Report for Thursday, June 14, 2018

This is the Chart Show (approx. 1 hour, 25 mins)

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Market Report for Wednesday, June 13, 2018

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Market Report for Tuesday, June 12, 2018

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Monday Should Be “Good-bye to Wave D!” — FINALLY

For over three weeks, we’ve watched the D wave of the contracting triangle in ES and SPX try to top. Monday looks like it will be the turn down — there are a number of signals that support this. Good riddance to this wave!

I think the drop is likely to be sharp — the Nasdaq in particular needs a large fourth wave down in an ending diagonal. These waves are usually sharp and fast. 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.

I take a look a the possible timing in the free blog this weekend. Perhaps worth a read.

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).

Last weekend, I flagged this double top and something to watch. We’ve now dropped down slightly, but the waves down appear to be in 3 waves, so I’m expecting a retrace to a new high.

As well, wave yellow (5) did not quite reach the previous high, missing by one a few cents, but this is enough to declare that a top is NOT yet in place.

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’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.

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Week at a Glance:

• ES/SPX  – After a double top, look for the start of wave E down
• USD Currency pairs – most turning down, USDCAD in a bullish triangle
• USDJPY will continue down

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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).

Last weekend, I complained about the sideways movement in ES for three solid weeks. This past week gave us a very fast resolution, as immediately after I made that statement, the Nasdaq indices (including NQ) decided to rally to create an ending diagonal, sending everything else up with it (see additional NQ daily chart below).

The sideways move has signalled to me that the market is very weak, something I still believe and we may see the E wave come down quite quickly from its perch at the 2780 level.

The 2780 level reached was higher than unexpected, but looking at the resulting contracting triangle, it looks even more “text-book” than it did originally. The D leg top always defines the slope of the upper trendline in a bullish triangle, which this is, so now we should be clear to head down in the E leg.

I don’t have a fibonacci measurement for the 2780 level, which is highly unusual. The highest level I had was 2760. We’ll have to blame this on the Nasdaq.

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

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 ended Friday at the top of 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.

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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). 

More than three solid weeks of “sideways” resolved itself with a multi-day rally to 2780. At the end of the session on Friday, we were roughly at a double top of a fifth wave of the C wave of a zigzag pattern. I expect a turn down on Monday into the E leg of the triangle. This is a high probability short.

On Thursday night, I’d put out a caution regarding ES, as it hadn’t topped properly that day. It missed the double top by ticks. That’s usually a sign that the index will return to that level at some point. I had also pointed out that the waves down were in three waves. “Waves in three” completely retrace.

The morning rally looked to be filling the gap left by the Friday drop, but by mid session, it became apparent that we were indeed heading back up to a double top.

Summary: I expect an imminent turn down into the E wave of a contracting triangle. The target on the downside should be under 2600.

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Market Report for Monday, June 11, 2018

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Longer Term Charts

Above is the one hour chart of the SP500.

Virtually the same as ES. At the end of Friday’s session, the rally at the top of the D leg had retraced to about fifty cents below the previous high. That means we’ll need to tag that high on Monday morning (it’s less than a point away from Friday’s high). That should end the D leg (good riddance!) and start a drop in the E leg of the contracting triangle.

I’m calling for a target below 2600, which will depend to some degree on the timing, as the lower trendline is rising. E legs of triangles sometimes drop slightly below the lower trendline and sometimes don’t quite make it to the trendline. I would expect in these conditions that we’re likely to exceed the lower trendline if we don’t stop right on it.

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.

Short term, the turn down from the high at about $25.00 looks corrective. It also looks like a fourth wave of the C wave is forming. As a result, I’m looking for a final wave up to the 25.10 area, which would support a turn down in the E leg in 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 almost complete. I’ve now labelled the wave up as a B wave, since it’s risen above the previous 4th wave. I’m on the fence as to what patten we might see to the downside.

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 for the past week or so, positioning themselves 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.

The drop in the E leg in the SP500 should cause this currency pair to seek a slight new low. The bigger opportunity is to the upside after the drop and a confirmed bottom.

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 (Monday?). The bottom of the E leg in the SP500 will likely see the bottom of the c wave for this pair (at about .74).

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 up. We seem to be forming a small triangle in a fourth wave position, which would suggest there’s one more wave up before a change in trend. Best to watch nightly videos this week for more information on the movement of this pair.

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. 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 seem to be in the process of forming 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 $79 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!