S&P, Dow and DJT

S&P may 10 2018Dow may 10 2018DJT may 10 2018

Here we have the S&P, the Dow and, for a change, also the DT Transports.

The S&P has the clearest triangle. It is symmetric and looks pretty good. To be complete the thrust has to rise above the black line, the top of wave d. The Dow is roughly in the same position but needs to rise a little more. The transports do not have a triangle at all, at best it is a range and it is far from breaking out to the upside.

So far the move up does have some of the characteristics of a thrust. It has been up quite relentlessly for two days now.  If it does prove to be a triangle we should shoot up by about the measure of the “mouth” of the triangle. Then it is straight back down. We will see. This is a case where you do not want to count your chickens even one minute too early.

S&P update

s&p may 7 2018

Here is that triangle again. Last Friday it hit the low of wave e (or d) and predictable zoomed up a hundred points or so. The question now is was this really a triangle and is it a 4th wave triangle or a B-wave triangle and is it actually complete. For the moment anything is possible. Triangles serve to kill time when the market is more or less in balance. Sometimes even more time is needed and the triangle expands sideways adding an f and g leg and sometimes even more than that.  Both a 4th wave and B-wave triangle are still possible so it is advisable to wait for a clear breakout (when e exceeds the extreme of d). Under the circumstance, where the first leg is not clearly a 3-wave structure but could be a 5-wave impulse wave, this structure can still resolve itself in either direction.

Another interesting potential triangle is developing with Disney, DIS. Perhaps the distinction between reality and fiction is getting so tortured that it stimulates the movies. This one is a lot longer!

dis may 7 2018

S&P 500, SOX semi-conductor index and Alphabet GOOG

We showed the S&P triangle give or take ten days ago. First it went a little higher than expected but then it did start going down again and now even looks better than ever before;

s&p april 24 2018

Not only does it look good, but waves b, c and d are clearly 3-wave structures as they should all be. Wave a is a little less clear and d has yet to be completed. In any event it could definitely be a triangle. To my knowledge triangles are 4th wave structures that are continuation patterns and ALWAYS continue in the same direction as the triangle was entered! The only exception would be when the triangle was misdiagnosed in the first place (as in 1-2, 1-2 etc.) which proves the rule anyway.

The SOX or semi-conductor index is great for playing with options. It moves relatively fast and for no discernable sensible reason. The large fluctuations are evident in the following chart;

sox april 24 2018

This is essentially an unstable situation. The swings get bigger over time and here it is very easy to conflate different parts of different structures to come up with the desired result. Some even go so far as to refer to this pattern, incorrectly, as the jaws of death. Whatever the case, this one looks to be near perfect and just like the contracting triangle this expanding triangle should be resolved by a spurt up ( and very fast) to more or less meet the upper extended line (about 1550, almost 30%). Wave e, by the way, need not travel all the way to the lower line.

That brings us to some of the tech stocks. Alphabet – what an idiotic name – or Google (GOOG) is a perfect example of the previously discussed “flat” only this one is absolutely perfect and beyond reproach;

goog april 24 2018goog april 24 2018 b

A flat is called a flat because, in its perfect iteration, it is exactly that, flat. The c tends to be equal to the a and the intervening a-b-c is often well proportioned. It too is a correction so once it is complete the stock should go to a new high. It has a 5-3-5 structure. We have added a longer chart going back beyond the lows of 2009. I have used a semi-log setting as that results in a straight line if the rate of growth is constant. I do not recall ever seeing a nine year long trend continuing so precisely. If we do indeed have a flat, and all indications are that we do, then we should make at least one more high. My guess would be around 1270 where the upper line resides. I am not sure what the little triangle in wave 1 up is doing.

One of the other “problems” with the bear case is that gold and silver are not reacting as they should and show no signs of moving up.

Dow and S&P again

dow april 11 2018

The action over the last few days has met at least one expectation and that is that , so far at least, the index has not been able to cross the downward sloping line.

After some 20 plus years of involvement with EW, there are still a number of things that are above my pay grade – which, by the way, is zero given that this blog is free. As far as I am concerned there is a fairly distinct diagonal starting at about the beginning of march and lasting for about a month. Normally – that is 90% of the time -  that would constitute a C wave in a simple A-B-C corrective structure. It is complete! There are exceptions however as shown below;

Image result for leading diagonal vs ending diagonal

This one is going up rather than down but that is immaterial. Use your imagination. We are, in this scenario, at the 2 and about to embark on wave 3 of C. Notice that these diagonals as so called “impulse or motive” waves subdivide as 5-3-5-3-5 structures as opposed to 3-3-3-3-3. I simple cannot get that degree of detail, after the fact, to verify that that is indeed the case. Like I said, this is above my pay grade. Moreover this blog exists solely for entertainment purposes and should never be construed as giving advice.

Time will tell and keep your eye on the red line. Below is the somewhat less ambiguous situation with the S&P;

S&P april 11 2018