Live: Thursday, May 31, 2018

3:10 p.m. New York time

SPY’s price fell a bit during the day and the Fisher Transform flipped back to downtrending, negating the need to make any trading decision today. I placed no trades.

10:15 a.m. New York time

The Fisher Transform on the daily chart (left) crossed over to uptrending this morning, although the indicator remains downtrending on the monthly chart (right).

spy20180531a

My method is to let the Fisher signal when it’s time for a decision, although the decision itself is based on Elliott wave analysis. My options positions on SPY  (here and here) expire June 15, so the more sensitive daily chart signal must be taken very seriously indeed.

Having said that, the Elliott wave analysis shows impulse wave 3 at the Subminuette level remains in progress. An alternate count would interpret the chart as an ongoing 2nd wave correction at that level — perhaps a C wave. In either case, Elliott shows the direction is down.

I have labelled the count after the May 22 peak as {-4}, which is one degree below the Submicro level. Since the recent high, of $273.11, is below the wave 2 {-4} high of $273.13, both the impulse wave and corrective wave counts remain valid possibilities. Time will resolve the ambiguity.

My shares in the inverse S&P 500 fund SPXU have no expiration, and I am playing them at the Minuette level, which remains in the 3rd wave down.

The chart covers 20 days with 30-minute bars.

spy20180531b

At this point I plan to hold on to the options positions in the expectation that the downtrend will continue. That resolve will change with a significant reversal to the upside, and most certainly if the monthly-chart Fisher Transform should move to uptrending.

By Tim Bovee, Portland, Oregon, May 31, 2018

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Live: Wednesday, May 30, 2018

3:20 p.m. New York time

I placed no trades today.

10:05 a.m. New York time

In Elliott wave terms, SPY continues its 3rd wave down at the Subminuette level. Within that movement I see Tuesday’s low as being the 3rd wave a lesser degree, perhaps Micro, perhaps a degree below that. Today’s bump back to the upside at the opening would be an A wave within a 4th wave correction within that lower degree.

As one of my favorite sci-fi writers puts it,

“Wait a bit, Tyek,” Farad’n said. “There are wheels within wheels here.”

 —Children of Dune, by Frank Herbert.

The continuation of the Subminuette 3rd wave counsels holding on to my positions: SPY options (here and here) and shares in the inverse S&P 500 fund SPXU,

The continuation of the Fisher Transform in downtrending mode on both the daily and monthly charts buttresses that counsel.

By Tim Bovee, Portland, Oregon, May 30, 2018

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Live: Tuesday, May 29, 2018

3:30 p.m. New York time

SPY has declined below the May 15 low, breaking past the sideways patten set the day before.

I placed no trades today.

9:55 a.m. New York time

SPY has been tracing low-degree sideways corrective pattern since May 14, and this morning’s opening decline remains within the range of that pattern.

The low as of this writing is $269.90, from which it has retreated to $270.34. The prior low in the pattern, on May 15, was $270.03. Basically, our three-day weekend has changed nothing.

I see no trades today. Here are links to the opening analyses for my positions: SPY options (here and here) and shares in the inverse S&P 500 fund SPXU,

Here’s a fresh the Elliott wave chart. The only change is that I have returned the composite labeling to that proposed by R.N. Elliott — a-b-c-x-a-b-c — all of the same degree, rather than using the a-b-c-W-a-b-c nomenclature of Robert Prechter, which puts the W one degree higher.

The chart spans 20 days with 30-minute bars.

spy20180529

By Tim Bovee, Portland, Oregon, May 29, 2018

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The Week Ahead: Jobs, GDP, income, outlays, global trade, Volcker Rule

U.S. markets will be closed on Monday for the Memorial Day holiday, which traditionally marks the start of the summer vacation season. Monday is a banking holiday in the U.K., but other major forex markets, Tokyo and Sydney, will be open for business as usual.

After the long weekend comes a short week with an economic reporting landscape dotted with peak events.

The employment situation report will be released Friday at 8:30 a.m. New York time. As always, the ADP employment report, on Wednesday at 8:15 a.m., will provide a sneak preview.

Also on Wednesday, we’ll get a revision providing a second look at the 1st quarter gross domestic product, out at 8:30 a.m.

A third peak in the landscape is personal income and outlays, a look at the extent to which we’re able to live within our means, to be published on Thursday at 8:30 a.m.

And fourthly, international trade in goods on Wednesday at 8:30 a.m.

In Fedworld, the Federal Reserve Board meets Wednesday at 3 p.m. to consider easing Volcker Rule restrictions on banks’ proprietary trading. A recent Reuters article by Pete Schroeder explains the meeting.

The Federal Reserve Beige Book, a narrative description of conditions in each of the Fed’s 12 regions will be published Wednesday at 2 p.m.

Fed Gov. Lael Brainard will speak about the outlook for economic and monetary policy at the Forecasters Club of New York, on Thursday at 1 p.m.

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Live: Friday, May 25, 2018

3:20 p.m. New York time

The chart is barely changed from this morning. I placed no trades today.

Look for The Week Ahead on Saturday. The U.S. markets will be closed on Monday, which is also a bank holiday in London. Financial institutions will be open as usual in Tokyo and Sydney.

10:20 a.m. New York time

No trades are likely today. SPY’s Elliott wave count remains consistent with the analysis posted on Wednesday. The Fisher Transform on both the daily and monthly charts continues to be downtrending.

I am carrying three positions, SPY options (here and here) and shares in the inverse S&P 500 fund SPXU, which  did a 4x reverse split on Thursday, May 24. I shall update.the SPXU analysis with a recalculated base shortly.

By Tim Bovee, Portland, Oregon, May 25, 2018

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Live: Thursday, May 24, 2018

3 p.m. New York time

I placed no trades today.

10:10 a.m. New York time

I anticipate no trades today. The Elliott wave count for SPY remains unchanged, as a 1st wav to the downside continues. The Fisher Transform on both the daily and monthly charts remains downtrending.

My SPY options (here and here) and shares in the inverse S&P 500 fund SPXU require no action at this point.

By Tim Bovee, Portland, Oregon, May 24, 2018

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Live: Wednesday, May 23, 2018

3:00 p.m. New York time

No trades today. The Elliott wave count from this morning remains valid, and the Fisher Transform signals downtrending on both the daily and the monthly charts.

10:30 a.m. New York time

The S&P 500 index and its exchange-traded fund SPY continued the decline started yesterday, bringing the Fisher Transform on the daily chart back to a downtrend signal. The monthly downtrend signal continues, as it has since February.

I shall continue to hold my SPY options (here and here) and shares in the inverse S&P 500 fund SPXU.

I have reworked my Elliott wave analysis to account for the higher high of May 22, which broke Elliott wave doctrine by exceeding the starting point of the 2nd wave down of the same degree.

The new labelling extends the 2nd wave of the Subminuette degree into a five-wave combination pattern.

To simplify matters, I have reverted to my earlier nomenclature that shows degrees relative to each other, with a base set showing the wave number only, and degrees above and below that base being indicated with a plus-number {+1} or a minus number {-2} in curly brackets. I’ve added a table suggesting what named degrees the relative levels indicate, but it’s a guess and may change.

The chart below shows SPY price from the beginning of the year, with daily bars.

spy20180523

 

By Tim Bovee, Portland, Oregon, May 23, 2018

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Live: Tuesday, May 22, 2018

3:15 p.m. New York time

No trades today.

SPY moved down during the day. The need for a recount of the Elliott wave analysis still stands, however, and I’m still figuring out how best to read the chart.

Big picture: The S&P 500 and other broad stock indexes made a high-level peak on Jan. 26. It is a downward wave, in my opinion a 1st wave of the primary degree.

Therefore, my major presumption remains bearish within that wave.

All of the Sturm und Drang since has been a working out of the details — the waves of lesser degree — within that bearish move.

Of course, for shorter-term traders like me, the devil is in the details, and those waves of lesser degree can burn up my profits very quickly. So I shall be obsessing over the new count until I’ve figured out an answer.

10:40 a.m. New York time

At this morning’s open SPY exceeded it’s May 14 peak, which I have labelled, using Elliott wave analysis, as the start of Minute wave 1 to the downside. Today’s opening breaks an iron-clad rule of Elliott wave doctrine, which is that a 2nd wave can never move beyond the beginning of the preceding 1st wave of the same degree.

Long story short, it’s back to the drawing board.

Events like this illustrate my contention that Elliott wave analysis is as much an art as a science. The patterns and the rules hold true, but their significance unfolds over time. Any count is the best intuitive based on the information available at the moment, but that intuition can be invalidated by ensuing events. That’s what happened this morning.

The Fisher Transform continues to show uptrending on the daily chart and downtrending on the monthly chart. Absent an agreement between the two, I am biding my time.

I plan no action at this point on my SPY options (here and here) and shares in the inverse S&P 500 fund SPXU.

By Tim Bovee, Portland, Oregon, May 22, 2018

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Live: Monday, May 21, 2018

3:15 p.m. New York time

No trades today. My analysis of the markets from this morning remains unchanged.

10:55 a.m. New York time

The revised Elliott wave count, showing that the 2nd wave of the Minuette degree is still underway.

The chart covers 10 days with 10-minute bars.

spy20180521

10:15 a.m. New York time

SPY’s gap upward this morning pushed the price above what I had labelled as the end of the 2nd wave peak of the Subminuette degree of the Elliott wave count. That means the 2nd wave is still in force, invalidating my previous count. I shall reanalyze the chart and post it later today.

The Fisher Transform on the SPY daily chart moved back to uptrending on the daily chart but remains downtrending on the monthly chart. At this point I intend no exits from my present positions, composed of SPY options (here and here) and shares in the inverse S&P 500 fund SPXU.

By Tim Bovee, Portland, Oregon, May 21, 2018

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The Week Ahead: Housing and durables

Real estate takes the spotlight in the week’s economic reporting, with the larger part of the sector, existing home sales, out Thursday and the remainder, new home sales, out Wednesday, each at 10 a.m. New York time.

Also, look for durable goods orders on Friday at 8:30 a.m.

In Fedworld, minutes of the May 2 Federal Open Market Committee meeting will be published on Wednesday at 2 p.m. At that meeting members voted unanimously to keep the federal funds target unchanged at 1.5% to 1.75%.

Fed Gov. Lael Brainard speaks on revitalization of the Community Reinvestment Act at a conference of the Association for Neighborhood and Housing Development in New York City, on Friday at 9:15 a.m. The event will be streamed live to viewers who register, here.

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