Value of Perfect Information

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It is time for the market to speak clearly. I can make a case for many scenarios because not all the markets are in agreement. Let’s review the markets and see if we can’t make some sense out of the trading environment.

First, let’s look at an update of Thursday night’s posting for the action on Friday. Below is an updated 360 minute chart of ES with the arrow I drew for Friday’s action. Yup, I projected a turn at the 88.6% retracement level after taking out Thursday’s high. I can’t get much closer than this. It’s worth noting, however, that even though ES had a lower close, the Daily bar was Bullish with a higher high and higher low. The candle was a Doji though – indicating indecision and often is seen at a turning point. The question is whether the turn on Friday will stick and lead to more correction over the weeks ahead. The charts following this one will explore that question, but don’t expect a clear answer. Maybe we will just get more questions. Until the market tells me otherwise, this chart is still my primary scenario.

We could begin in a lot of places to analyze the market, but let’s start with the leading Dow Transportation Average. At the Weekly interval on the next chart, I see a double top and I couldn’t resist the artwork. Some might argue that this is a market knocking on a trendline for the 4th time and is ready to break through after challenging it several times while consolidating and coiling for an assault on a new high. So while this isn’t conclusive, it does confirm that this leading indicator is at a significant resistance. A healthy close above this level should confirm that the market has more upside in it before making a top.

Let’s look at the Transportation Average Daily chart and see if that gives us any clues about the near-term action we might expect based on Elliott Waves. I’ve highlighted in yellow what GET is calling W5 of this final impulsive push up to the old high. GET isn’t making much sense out of the count on the Daily chart, and I think I can see a better count.

When you are using oscillators to determine when a wave is complete, the interval you use is important. The Daily chart above is crying for a more compressed chart and the Weekly is the next compression we can use. We saw the Weekly chart above and the count for this last leg up was not very helpful because the software was focusing on the whole rally from Mar2009. In order to analyze this final impulsive move from July of last year, I localized the Elliott Count on the Weekly chart and the chart below is the result. This gives us an interesting count that I like, and it helps us with the possible short-term direction for the market. Since most of us here are day-traders, the short-term is the most important timeframe to have correct. Bottom line for this chart is that I think the Bears will take control for the short-term before making a new high.

That’s about all I can squeeze out of the Transportation Average so lets’s take a look at the Dow Industrials. This adds another twist to our analysis. Somehow, the market eventually works out the kinks in ways that we could never have imagined. This is the Daily Chart of the rally from July 2010. I added an Elliott Channel to this chart and the expectation is that W5 will terminate at the upper trendline. However, when you look at the current structure of W5, you will see that it looks like a nice little impulsive wave that is underway. But it doesn’t look like an impulsive wave that typically will carry to the 13502′ish level that the bigger count seems to calling for. I have to be on the lookout for a failed or truncated W5 with the Dow.

Based on these studies, I will be looking early next week for market weakness. I won’t fight the Bulls if they come to the party in strength though. When I have more data to swing my opinion in one direction or the other, I’ll let y’all know. Until then, good luck in your trading! Remember my motto ~ ALWAYS ORIGINAL, SOMETIMES RIGHT!

If you like what you see here, wait to see how MortiES’s analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and

I am offering a 30 day free trial period to be followed by a new monthly price of $60. If you have subscribed in the past, please note that you can choose the “New Subscriber” button and our monthly price has been reduced from $100 to $60 a month to welcome you back!

That is the question. Is this a Wave 2 or Wave B or a deeper or much deeper correction, or is this the beginning of a Wave 5 that will take us to new heights. My bottom line position is that this is the beginning of Wave 5 that will take us to a new high. I base this in part on looking at other indices, but will show you both sides of the argument. The first chart I want to show y’all is the Dow Transportation Average. This index is traditionally considered a leading indicator. The chart is a bit of a dilemma in that it could be read two ways. First you will notice that it is making a long-term double top and second, it has barely reached new highs as it peeks above the old high of 2008. It could still be considered in the resistance zone of the old high, IMO, and another substantial move above its present level will be telling.

So, what does the ES Weekly chart look like? And what scenarios can we anticipate? On this chart, I did something a little different with the GET software. I localized the Elliott count to the beginning of Wave 5. You will notice that at this time frame it is calling for our more Bullish count (Black numbers) where we make one more high. I have as a primary scenario, W4 of W5 completed and a new high our next objective. Note how close ES came to my typical minimum retracement of W3 (38.2% – the red Fib level). As a secondary scenario, I have depicted with the dashed arrows, W4 of W5 not yet completed, but in Wave B of W4. I see the second scenario as a possibility if the double top on the Dow Transportation Average provides resistance and a short-term pullback.

Here is a shorter term view of this scenario and the beginning of W5. This demonstrates the completed W4 (Black). In support of this count is the fact that W3 (purple) has gone beyond the 162% projection of W1. That is the typical maximum projection for a Wave C in a corrective pattern. Therefore, it is safest to regard this as a change in trend with the initiation of an impulsive move which typically are in the direction of the major trend.

Now we will look at the more Bearish scenario. Even with the long-term settings for the Elliott count turned on for the GET software, it counts W5 (the whole wave) of the rally from 6March2009 as complete. You will notice that it is counting the rally ending Friday as Wave B of the countertrend move after a completed impulsive wave. But this isn’t just the end of this W5 impulsive wave, it is the end of the entire impulsive rally from 6Mar2009. That means that typically this correction should minimally correct to the beginning of this whole impulsive wave (1002.75) or from 50%-62% of the entire rally from 6Mar2009. Why does the GET software count the Daily data as a completed wave and the Weekly data as just beginning W5? It has to do with the way that the counts are calculated by the software. The software uses an Elliott Oscillator to arrive at its count. Fewer bars will change the histogram of the oscillator. When I want to tweak the counts on the data to agree with my count, I will alter the time interval that is being calculated. That’s why you need to know more than the software. The software is great for speeding up analysis, but it isn’t the Holy Grail!

What does this scenario look like on a Weekly chart? This is our Sky-is-Falling scenario. The red-dashed arrow is for the end-of-the-world scenario where we go into a double dip recession and make new lows. That scenario is low on my list.

I hope this hasn’t been confusing, but I couldn’t think of any more simplified way of presenting it. This is a study that is worth going over until you understand it, because it should be useful in days to come. Have a Happy 4th and good luck next week.

The overall stock market won’t have to, because Bank Stocks look ready to rally. Financial look okay, and should join, possibly even lead, the next rally, which should start fairly soon. That would be wave e-up on the chart below.

The BKX Daily Full Stochastics are on a new buy signal, coming from an oversold level, which is bullish. The price pattern is similar to the major averages, an Ascending Broadening Wedge pattern, but is occurring over a longer period of time, from August 2010, whereas the same pattern in the Industrials and S&P 500 started in March 2011. Wave d-down gave the impression that Financials were diverging against the major averages, which led many commentators to ask, “How can the major averages rally without the Financials?” That impression was because the wave d-down in major averages started in May 2011, whereas wave d-down started in February 2011 in the BKX. However, waves d-down in the BKX and in the major averages now look complete.

The next chart of the BKX shows it has completed a five wave Descending Bullish Wedge pattern for d-down, and its end is punctuated with a Hammer Candlestick pattern formed by last week’s price behavior. Hammer Candlestick patterns are typically bottom signals.

It also looks as if the Weekly MACD is just starting to curl up from its widest divergence point, as last week’s histogram was a smaller negative reading than the week before. This is typical of bottoming action.

Also, the Weekly Full Stochastics are deeply oversold, in a position to support a lengthy rally.

So we are expecting Financials to start a rally soon, one that could be fairly strong.

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“Jesus said to them, “I am the bread of life; he who comes to Me
shall not hunger, and he who believes in Me shall never thirst.
For I have come down from heaven,
For this is the will of My Father, that everyone who beholds
the Son and believes in Him, may have eternal life;
and I Myself will raise him up on the last day.”

John 6: 35, 38, 40

If you like what you see here, wait to see how MortiES’s analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and Click on “Subscribe to MortiES Premium” and give it a try! I am offering a 30 day free trial period.

Today’s action was not entirely unexpected as the second chart of this weekend post shows. I think I got too focused on the trendline as a turning point for ES. I would still pay a lot of attention to such a trendline in the future, but it wasn’t the Holy Grail this time. Our overall analysis of the recent action is still the same. I believe we are in a W5 ending diagonal. It’s just that the trendline was not meant to be the support that would turn Wave D of that structure. So now it’s back to regular Fibonacci retracement levels for finding that support level. I have a series of three charts that are meant to get everyone on the same page regarding where we are in the market. After all, that is the main goal of Elliott Wave analysis IMO. It let’s me know where the market is, so that I can make a high probability projection on where the market most likely will go. If you don’t know where you are, it’s difficult to guess where you might be going.

The first chart is the Weekly chart. Nothing new with this chart, but I post it to make sure everyone has the Big Picture – at least as I see it. The yellow highlighted area is the subject of the Daily chart below.

The Daily Chart shows the count using the Long-Term Elliott count of the Advanced GET software. I had to tinker with the setting to get the software to agree with my count. If you can’t count on your own, the software can lead you astray very quickly. I see that a lot with those new to GET. My comments on the chart don’t need to be repeated here. The labeling of the ending diagonal waves are mine and not the software. I believe we are looking for the end of Wave D and I suspect we will see that in the next session, so be ready. The yellow highlighted area is the subject of the chart following this one.

This final chart below is a 7000 Tick chart that analyzes the area highlighted in yellow on the chart above. Very often after a H&S is formed and breaks through the neckline, the market retests the neckline. ES has done that, but it is testing even more deeply now. As I note on the chart, the W4 we were looking at last night turned out to be the W4 of W3. In retrospect, I should have seen that, but I was too anxious for ES to reverse at the trendline that I let my preference interfere with my analysis. I rightly pointed out that we could expect some more downside, but not that the rally would only be temporary as it was a W4. This chart has some good W5 targets and therefore end of Wave D targets. As I’m preparing this analysis, I notice that ES has gone lower and probably has more to go tonight. I also put my trade that worked even though I was wrong on where I was in the count. Good old Fibonacci and MOB!

 Could double Black Swan event mark major Wave IV attempt?  Only time will tell.

Hubris? At the top?

I have heard several money managers and traders turned analyst celebrating the resiliency of the marketplace with what is quickly becoming not only a catchphrase but a rallying cry:  WE HAVE SURVIVED TWO BLACK  SWAN EVENTS!

To seasoned traders such a crystallization of bullish sentiment by the extreme lack of bearishness among Investment Advisors gives one pause.  The phrase “to late to but too early to sell”, springs to mind.  However, it is the perfect time to trade.  The key of course to the current rally -post Ides of March has been the collapse in the Dollar Index.  Stocks and commodities, held hostage to this massive trade are likely to move violently in one direction or another depending on whether the dollar trade accelerates of reverses course.  Possibly as soon as the Big Man’s press conference.

Technically I have opined that wave 5′s are turning into wave3′s with regularity.  It is happening again as markets surge to new yearly highs (see NASDAQ chart).  Part of don’t fight the tape is respecting the trend simply because it exists.  If traders are pushing individual issues/sectors; well’ when in Rome…

Then again maybe it is Sunspots after all.

                                                ***************************

Speaking of bull markets our focus -the grain trade has once again caught trader’s attention.  Monday’s report that:  Corn plantings are only 9% completed vs.  23% 5 year average has sent corn prices surging back toward all-time highs.  Wheat jumped on the realization that (La Nina) drought will not ease significantly in Midwest before harvest. 

As a pure play we like the JJG as preferred ETF on this leg of the rally.

Sometimes there are so many possibilities to wade through as we try to project a path for the market, that it becomes dangerous to even try. The good thing is that as ES unfolds, it will begin to reveal its intent. If we have done a good job analyzing where we might be in the market structure, the unfolding of new data will begin to crystalize which of our projections are most likely and we can discard useless scenarios. I apologize for all the stuff on this first chart, but I will give my preferred scenario.
This is the Daily chart. Look at the wave counts that are translucent as non-confirmed counts – i.e. possibilities. W5 (black) is definitely extending, and the question is whether it is complete or are we in W4 (red) of W5 (black), or has W5 (black) ended. I don’t think W5 (black) has ended. BOTTOM LINE: I am looking for a continuation of Friday’s rally – to new highs.

Ben (BostonWealth) asked me to do another track record post. It has been a while since I did one – due to laziness/busyness, not to lack of examples! I thought, why not simply post the last three days of trading? I want  to show the continuity of my analyses. The projections below are based on a lot more than what is evident on the posted charts. Key to my analyses is the Big Picture from the Daily/Weekly chart. Without the Big Picture, it’s difficult to understand where we are in the market. I usually review the Big Picture on weekends, but this week I did it mid-week because it was important for my subscribers to understand exactly where we were (IMO) to understand clearly where we are going. Translating that Big Picture into high-probability daytrading projections is my goal on this site. Here are my posts for the last three trading days (Wed-Fri).

The first chart is Tuesday’s post for Wednesday’s trading. I am using the data for the regular trading hours in this analysis, but the Globex after-hours data followed my broken arrows perfectly also!

The chart below shows the next day of trading. Pretty good call!

This next chart is an early morning intraday update that I posted when I saw the market nearing a bottom, and the end of Wave A (according to my count). Calling for market reversals is not a high probability venture. You need to know when the odds are in your favor to project the end of a wave. Even then you often end up with egg on your face.

The projected turn did happen in the middle of the green ellipse and a nice long trade was the reward.

My posting for the next night was an overview of the count on a Daily chart. I wanted all subscribers to be properly oriented to the Big Picture. The comments below were posted the next day as I was looking for an ABC correction for a Wave B. I rarely announce my trades since I don’t have time to properly manage them with my full-time day job, but in this case I felt strongly about a short at the level we gapped to in the early morning.

The following chart shows where I took the short I mentioned above in the comment section. Not a spectacular trade but at least it was in the right direction, and we called another Wave reversal pretty well. The white broken arrow indicates where I think the market is going now. Join us with a free month’s subscription and see where I project the end of this wave to be. More importantly, see the Big Picture that could be useful in your own analyses for weeks/months to come.

** Counting waves on multiple time-intervals is a dynamic undertaking. As the market unfolds, lower probability counts may become the highest probability count. Because this is a dynamic process, you need to constantly update your short-internediate term projections. That doesn’t mean Elliott isn’t working, but rather that we are dealing with probabilities and not certainties, and need to remain flexible. I only analyze the e-mini S&P500 market. Specialization is useful since markets have personalities and IMO it’s more beneficial to get to know one market’s personality really well than many superficially. It’s said that “Generalists” know nothing about everything and “Specialists” know everything about nothing. I’m not sure if that’s the case here, but as a “Generalist” analyst, my ignorance is unbounded! As a “Specialist”, I hope I know a little about something.

If you like what you see here, wait to see how MortiES’s analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and Click on “Subscribe to MortiES Premium” and give it a try! I am offering a 30 day free trial period

There is a lot of Bull in the market. My first chart – the Weekly – gives the Big Picture so we can see what our overarching market opinion needs to be. Look at all the Bullishness on this chart: 1. ES above the 15EMA, 50MA and 200MA, 2. all but the 200MA have positive slopes and the 200MA is flattening, 3.ES is in W3 of W5, 4. ES consolidated below the 61.8% retracement level and began peeking above it on Friday (still in area of resistance though!), and 5. typical targets above the current high are indicated on chart – including MOB. I’ve included a range for the Weekly resistance levels ( wide translucent red line) based on the long-term correction to indicate that these resistance levels are operative over a range of more than a few ticks. My ultimate target has to be the 1350′ish level – with the 78.6% retracement level (1389.65) being the extreme target. I’ve also included a wide translucent green line next to the green arrow to remind us that ES needs room to move during its ascent. This scenario can stand a Weekly red candle and still be on its way to the target.

The next chart zooms in to the 30 minute time-frame and examines more closely where we are in this last rally – on the Weekly chart, the rally beginning at W2 of W5. This chart shows us that we are in a W3 of an impulsive move – or possibly a W5 of that move. Either way, we can expect ES to correct at some point during this climb, but for now my trading strategy has to be buy-the-dip until the market tells us otherwise. I’ve included the 61.8% retracement level from the Weekly chart above on this chart as a wide red translucent line to remind us that ES is at resistance in the bigger picture. The little red arrows remind us of levels where we might expect a correction. Be on your trading toes! And good luck next week!

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We don’t provide a day trading system. I am a probability trader that has modified a system that gives you an opportunity to learn to fish. The value we provide is in understanding setups and managing risks. However, there are times when I will give you a fish and other traders here will do the same. Also, please remember that this is about probabilities, not certainties.
My goal would be an “Elliott Wave for Dummies” curriculum. I love all the “for Dummies” books because they strive to simplify and clarify. They are profoundly simple. The mark of a good teacher IMO is someone who can get the hay down from the loft so the horses can eat it. Many teachers like to complicate their subject matter so they can appear “smart”. I have no use for insecurity in teachers. The old saying that “it’s better to teach someone to fish than give them a fish” is never more true than in teaching.
To that end, the best way to see what we do on a daily basis and on an intraday basis is to try our Premium Content. If this site doesn’t add back more than the price of admission, then you have no obligation to subscribe after one month, and you will have still learned some Elliott.

If you like what you see here, wait to see how MortiES’s analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and Click on “Subscribe to MortiES Premium” and give it a try! I am offering a 30 day free trial period.

We don’t provide a day trading system. I am a probability trader that has modified a system that gives you an opportunity to learn to fish. The value we provide is in understanding setups and managing risks. However, there are times when I will give you a fish and other traders here will do the same. Also, please remember that this is about probabilities, not certainties.
My goal would be an “Elliott Wave for Dummies” curriculum. I love all the “for Dummies” books because they strive to simplify and clarify. They are profoundly simple. The mark of a good teacher IMO is someone who can get the hay down from the loft so the horses can eat it. Many teachers like to complicate their subject matter so they can appear “smart”. I have no use for insecurity in teachers. The old saying that “it’s better to teach someone to fish than give them a fish” is never more true than in teaching.
To that end, the best way to see what we do on a daily basis and on an intraday basis is to try our Premium Content. If this site doesn’t add back more than the price of admission, then you have no obligation to subscribe after one month, and you will have still learned some Elliott.

If you like what you see here, wait to see how MortiES’s analysis can assist you in your everyday investing or trading strategy! Go ahead, check out my track record and Click on “Subscribe to MortiES Premium” and give it a try! I am offering a 30 day free trial period.

Look how beautifully ES is respecting the regression channel we drew days ago. The chart below should speak for itself. We’ve said it before and it is worth repeating ~ the market will usually go to an expected destination in a most unexpected way. The rationale for the arrows on this chart is given on the second chart.

Let’s look at a 1 minute chart to see what should be in store for us in the very short term. I love the 1 minute chart and won’t place a trade without consulting it. A 1 minute chart gives us insight into the rally this afternoon. My count says we are in W4 of W5 of an impulsive move from today’s low. The arrows approximate typical action we can expect from this move as it completes and corrects.

Let’s talk about NEWS again. I repeat my views on this because I hear so many subscribers talking about what news will move or has moved the market. I won’t argue that news does not effect the market. But the effect is temporary volatility that the market movers/manipulators use to move the market to an expected destination. The news today was no surprise to the market, but the market used it to juice up volatility. Smart money loves volatility, because it is less affected by fear and greed – the major demons of retail traders. How should we handle news? IMO, we should either be flat for the announcement, or if we are reasonably confident in our analysis, we should widen our stops so as to not be taken out by a few wild swings. Widening stops increases the risk in a trade and the prudent will be flat for the news. The more adventurous may want to fade and scalp the extremes, but that is for the cowboys and cowgirls only, and not recommended!