E-mini S&P Elliott Wave Discussion

[EWT]

Hi everyone.

I am new to the forum but wish to open a discussion about trading the e-mini S&P using the Elliott Wave Principle. I would also like the discussion to be of high quality. I have attached a chart that shows my operative count. I believe the decline from 1216.5 formed a leading Diagonal rather than a 5 wave decline. We are currently working minor wave 2 up in a zig-zag.

I look forward to your comments.

Mike Sinibaldi

 

[EWT]

Tomorrow may bring a break above 1127.5 that increases the odds of alternate counts playing out. Rather than to recreate a lenghtly blog post, you can read more about it in my July 25, 2010 blog post at: http://elliottwavelive.blogspot.com/2010/07/elliott-wave-live-week-in-review-for.html

If you don't have time, then one word of caution. The current rally is getting tired as measured by many indicators. It is ripe for failure. Could the market extend further? Yes but 1127.5 is a previous 4th wave, so one needs to be looking for possible failures tomorrow. If the market penetrates 1127.5 cleanly and with upward thrust, then the next target is in the vicinity of 1136.

Best of Trading

 

[JahDave]

Tomorrow may bring a break above 1127.5 that increases the odds of alternate counts playing out. Rather than to recreate a lenghtly blog post, you can read more about it in my July 25, 2010 blog post at: http://elliottwavelive.blogspot.com/2010/07/elliott-wave-live-week-in-review-for.html

If you don't have time, then one word of caution. The current rally is getting tired as measured by many indicators. It is ripe for failure. Could the market extend further? Yes but 1127.5 is a previous 4th wave, so one needs to be looking for possible failures tomorrow. If the market penetrates 1127.5 cleanly and with upward thrust, then the next target is in the vicinity of 1136.

Best of Trading

Hello EWT,

I agree the correction is getting tired and I think the 1131 range will supply plenty of resistance, at least in the shorter term. I just haven't decided yet if this level will be the entire correction or the end of the A wave. I'll just have to see some more candles before I can decide that.

Good Trading,
Dave

 

[EWT]

Hello EWT,

I agree the correction is getting tired and I think the 1131 range will supply plenty of resistance, at least in the shorter term. I just haven't decided yet if this level will be the entire correction or the end of the A wave. I'll just have to see some more candles before I can decide that.

Good Trading,
Dave

Good point on the possibility of an A wave. Either way, we have a tradable top that should produce a significant decline.

 

[EWT]

The ON session tested 1127.75 and failed. The June high was 1129.5 on the continuous contract. Jobless claims jumped by 2,000 and the market sold off. I'm looking for confirmation that a top is in place... meaning 5 waves down, followed by a 3 wave counter trend rally. Traders may want to consider short positions should this occur.



Best of Trading

 

[EWT]

The ON session tested 1127.75 and failed. The June high was 1129.5 on the continuous contract. Jobless claims jumped by 2,000 and the market sold off. I'm looking for confirmation that a top is in place... meaning 5 waves down, followed by a 3 wave counter trend rally. Traders may want to consider short positions should this occur.

Best of Trading

The market finished the week on another low volume affair. When we last spoke, I was looking for conformation that a tradable top was in place. The trade never materialized. Corrective waves are always tricky because the pattern(s) and count can be complex in nature. Often, the pattern and count isn't identifiable until the wave structure has completed. Identifying the wave structure from the low of 1006 has been challenging. So stepping back, let's look at the big picture and work or way down to the daily level.

A Head & Shoulder Top?


The first chart is the weekly continuous combined contract for the S&P. I have identified a possible H& S pattern. The right shoulder (RS) appears to be building in a 3 wave structure. Notice that 1146 is resistance where Wave A = Wave C. This resistance is also chart resistance from the high of the Left Shoulder.

Turning our attention to the daily chart level, I am currently working two scenarios ( a double 3: W-X-Y) and ( an expanding flat with a wave C diagonal) for the current advance. Here's the charts for both for everyone to review.

What's important to know is that it doesn't matter which way you label the chart at this point. Both interpretations have the same implications when completed and offer similar targets for the termination of wave 2 (blue).


Targets For Wave 2 Termination


The key EW resistance levels to watch for next week are: 1136, 1143-1149.25. 1152.85 - 1156.25. I will post the wave C diagonal fibonacci clusters before the market opens on Monday. Together, they should give us areas of confluence that coincide with the larger time frame analysis.


Where Are We Wrong?


On the daily chart level, a break below the lower trend line and a break of key support of 1084.5 would mean that the current wave labeling was incorrect. A break of 1053 would most likely mean that wave 2 (blue) had ended.




Best of Trading

 

[xyz456]

Very nice charts , I agree with you ....

thank you for your comment

 

[EWT]

The key EW resistance levels to watch for next week are: 1136, 1143-1149.25. 1152.85 - 1156.25. I will post the wave C diagonal fibonacci clusters before the market opens on Monday. Together, they should give us areas of confluence that coincide with the larger time frame analysis.

Here are the additional EW Fib levels and color codes created from the intraday 60 minute chart.

Red- wave c =.618 wave a @ 1129.5

Green- waves (i) - (iii) = .618 @ 1133.5 (Golden Section) of the entire wave 2.

Blue- wave c = wave a @ 1145.25

Purple - wave (v) = .618 wave [(i)-(iii)]@ 1153.5

 

[EWT]

Price came within 2.5 points of the inital target of 1129.75. It remains to be seen if a new recovery high can be struck or if wave 2(blue) has ended. The current interpretation of the wave count from 1103.75 is open but the ending diagonal and its structure is still intact. All Fibonacci targets remain in place.

I'm moving key support to 1108.25. If prices breach this mark, then something is wrong with my count and or the diagonal interpretation. I'll set critical support to 1103.75.


Best of Trading

 

[EWT]

Price came within 2.5 points of the inital target of 1129.75. It remains to be seen if a new recovery high can be struck or if wave 2(blue) has ended. The current interpretation of the wave count from 1103.75 is open but the ending diagonal and its structure is still intact. All Fibonacci targets remain in place.

I'm moving key support to 1108.25. If prices breach this mark, then something is wrong with my count and or the diagonal interpretation. I'll set critical support to 1103.75.


Best of Trading

The market is at a key juncture from an Elliotticion's point of view. The ON is trading heavy and price has reached critical support that I established at 1103.75. The significants of this level and the implications of a break have already been mentioned.

A few other points of consideration to supplement the previous analysis:

1. The Dow was the only indice to take out the June high. The S&P and Nasdaq failed to confirm this move.

2. The S&P and Nasdaq exhibit ending diagonal patterns (terminal patterns)that have not significantly resolved to the upside trend line... accompanied by a volume spike and higher breath.

3. Analysis in both Time Cycles, Fibonacci Time Ratios and Fibonacci Time Extensions provided the following dates for termination at the daily and intraday chart level (+/-) 1 trading day : 8/10, 8/11, 8/16, 8/17, 8/18. On an intraday basis, wave 1 (down) lasted 29 days and wave 2 (up) has lasted 76 days for a time ratio of .382.

As always, draw your own conclusions.

Best of Trading

 

[EWT]

I had been calling for a possible move beyond the June peak. It didn't happen. Two days of selling pressure , the subsequent break of critical support (1103.75) and bearish technicals combined with a bearish ending diagonal ( wedge) have set the stage for a wave 3 decline that should take price to new lows for the year.


Ending diagonals make quick retracements to the origin of the pattern which is 1105.5. The reason for this quick decline is because with each peak (waves 1,3,5) leading up to the termination point, buyers stepped up. Most bought at or near the last high in anticipation of the breakout. Their stops are below each swing low. Each break of a previous swing low traps more bulls as their stops are hit. This should add to selling pressure. I'll be looking for continued selling and confirmation of five waves down at the most common initial retracement for wave 1 of 3 down at 1051.75.

Best of Trading

The market is at a key juncture from an Elliotticion's point of view. The ON is trading heavy and price has reached critical support that I established at 1103.75. The significants of this level and the implications of a break have already been mentioned.

A few other points of consideration to supplement the previous analysis:

1. The Dow was the only indice to take out the June high. The S&P and Nasdaq failed to confirm this move.

2. The S&P and Nasdaq exhibit ending diagonal patterns (terminal patterns)that have not significantly resolved to the upside trend line... accompanied by a volume spike and higher breath.

3. Analysis in both Time Cycles, Fibonacci Time Ratios and Fibonacci Time Extensions provided the following dates for termination at the daily and intraday chart level (+/-) 1 trading day : 8/10, 8/11, 8/16, 8/17, 8/18. On an intraday basis, wave 1 (down) lasted 29 days and wave 2 (up) has lasted 76 days for a time ratio of .382.

As always, draw your own conclusions.

Best of Trading

 

[EWT]

First up - I made a typo last night. Regarding " Ending diagonals make quick retracements to the origin of the pattern which is 1105.5" The level should have been 1005.5. Sorry.

The pre market session indicated further weakness as the third wave down looks to be incomplete. Odds are that we have a gap down opening and complete the third wave, then look for 4th wave with choppy price action before a final thrust down to complete wave 1 of 3.



Best of Trading

 

[EWT]

Here's what I'm looking for wave (iv). I expect that price will retrace to .382 in an impulsive manner, counting 5 waves, followed by a decline to complete wave (v) of 1 (red) of wave 3 down. If the count isn't complete by 1091.25, the possibility can't be ruled out that wave c= 1.618 wave a @ 1099.5.

The Fibonacci targets for the final push lower are provided but are only applicable if the wave (iv) terminated at 1091.25.

Looking at the 15 minute chart, I've shown a zig-zag set up where wave a = wave c at 1091. 25. The pattern should be as symmetrical in slope as noted by the cloned blue lines. Should the market print below key support, all bets are off.

Let's see what develops overnight. It is also possible that wave (iv) could develop into a more complex correction negating this outlook.

Best of Trading

The pre market session indicated further weakness as the third wave down looks to be incomplete. Odds are that we have a gap down opening and complete the third wave, then look for 4th wave with choppy price action before a final thrust down to complete wave 1 of 3.



Best of Trading

 

[EWT]

Last night I gave the game plan for today's trade. Price almost reached the target of 1091.25 in the ON (overnight session) then headed south. I've noticed that this has happened twice this week,... where fills are scarce around my #s. I shade my orders by .50 but larger market players seem to be stepping up in front and dictating the direction. I've seen this game before.

Since the ON stole our trade and price have traded back down to key support, the pattern we spoke about is void and we will have to re-evaluate.

Best of Trading

 

[EWT]

The Market spent most of the week falling in an impulsive manner but it doesn't appear that we have a completed wave 1 down from 2 (blue). At the daily chart level, price has yet to break the trendline. Doing so would add the the bearish case. Final confirmation that wave 2 blue has indeed ended occurs on a break of critical support (1053).

For the early part of next week, I'll be looking for the completion of wave 1 of 3 (blue), then a retracement for wave 2 of 3. There represents a low risk entry for a significant decline of wave 3 of 3.

I'll calculate some preliminary targets early next week. Until then...

Best of Trading

 

[EWT]

The overnight session hasn't shown its card but we will be relying on the wave count to provide our directional bias which remains down. On Friday we had an "inside day" on a daily chart of ES1. Inside days often lead to trending price action. So be alert to this possibility. What a trader needs to be aware of is that trend days can reverse during the same day and lead to a powerful move in the opposite direction.

Examining the current move down, the wave count is mature... meaning that we are in wave (v). Most of the decline is done; therefore, there is limited downside potential and greater risk of a countertrend move.


Best of Trading

The Market spent most of the week falling in an impulsive manner but it doesn't appear that we have a completed wave 1 down from 2 (blue). At the daily chart level, price has yet to break the trendline. Doing so would add the the bearish case. Final confirmation that wave 2 blue has indeed ended occurs on a break of critical support (1053).

For the early part of next week, I'll be looking for the completion of wave 1 of 3 (blue), then a retracement for wave 2 of 3. There represents a low risk entry for a significant decline of wave 3 of 3.

I'll calculate some preliminary targets early next week. Until then...

Best of Trading

 

[EWT]

I warned about the possibility of trending price action and a reverse during the same day. Examining the move down off the open, it appears that wave (v) has been struck but the powerful reversal never materialized. I have relabeled the wave sub structures to better reflect the size of the decline. Nothing changes the larger degree trend. A failure to hold 1066.25 (critical support) would indicate that wave (i) was still extending.

Minuette wave (ii) is currently unfolding. Since the most common retracement for a 2nd wave is .618, the target is 1103.75 (+/_ ). Attaining this level isn't an absolute requirement. My minimal expectation is for the gap between 1090 - 1096 ( +/_ ) to be filled.

Best of Trading

The overnight session hasn't shown its card but we will be relying on the wave count to provide our directional bias which remains down. On Friday we had an "inside day" on a daily chart of ES1. Inside days often lead to trending price action. So be alert to this possibility. What a trader needs to be aware of is that trend days can reverse during the same day and lead to a powerful move in the opposite direction.

Examining the current move down, the wave count is mature... meaning that we are in wave (v). Most of the decline is done; therefore, there is limited downside potential and greater risk of a countertrend move.


Best of Trading

 

[EWT]

Early action in the overnight session is progressing as anticipated in an upward fashion. If the current rally is to unfold in a simple zig-zag, then the target(s) for the completion of wave c of wave (ii) is:


wave c = wave a @ 1087.25

wave c = .618 wave a @ 1081.75 (already reached)

wave c = .,618 wave a past wave a @ 1089.71

wave c = 1.618 wave a @ 1096.25

As a reminder... from last night's Market Wrap, I mentioned possible targets of at the gap between 1090-1096 and the .618 retracement at 1103. Together these represent our "Zone" for the termination of wave (ii).

Let's see what unfolds.

Best of Trading

 

[EWT]

Just a short note here tonight. Today may have marked the end of wave (ii) purple right in the area of our Fibonacci cluster points. Getting below 1083.25 would bolster the case that wave (ii) had indeed ended.

Best of Trading

If the current rally is to unfold in a simple zig-zag, then the target(s) for the completion of wave c of wave (ii) is:


wave c = wave a @ 1087.25

wave c = .618 wave a @ 1081.75 (already reached)

wave c = .,618 wave a past wave a @ 1089.71

wave c = 1.618 wave a @ 1096.25

As a reminder... from last night's Market Wrap, I mentioned possible targets of at the gap between 1090-1096 and the .618 retracement at 1103. Together these represent our "Zone" for the termination of wave (ii).

Let's see what unfolds.

Best of Trading

 

[EWT]

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