Weekly Commentary

publication date: Aug 24, 2019

NOTE;  All posts are opinions only.  No investment advice is given.  Consult with a financial adviser and do your own due diligence before trading.
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2019-Dec-06  11:21am  -  INTRADAY ALERT!  There is a huge wall of calls traded at $SPY 315.  This should act as a ceiling on today's price action.




2019-Oct-17  10:36am  -  I've found an article on Ending Diagonals, which you might find interesting.  The technical explanation is at  https://fbs.com/analytics/guidebooks/ending-diagonal-pattern-252#targetText=The%20ending%20diagonal%20is%20the,in%20a%20whole%20wave%20count. and I've temporary put & pasted an excerpt from it below for your convenience (with all due credit to FBS, an online Forex broker)


In the previous article, we discovered a leading diagonal, which acts as the beginning of an impulse or a zigzag. Today we're going to examine a pattern, which serves as the top-stone of an impulse (wave 5) or a zigzag (wave C), so let's find out more about an ending diagonal pattern.

The main rules for an ending diagonal

- This pattern subdivides into five waves.

- Wave 2 never ends beyond the starting point of wave 1.

- Wave 3 always breaks the ending point of wave 1.

- Wave 4 usually breaks beyond the ending point of wave 1.

- Wave 5 in the absolute majority of cases breaks the ending point of wave 3.

- Wave 3 can't be the shortest.

- Wave 2 can't be a triangle or a triple three structure.

- Waves 1, 3 and 5 form like zigzags.

 article 5 1.png

As you can see, the main difference from a leading diagonal is that the motive waves of an ending diagonal can be only zigzags. However, sometimes we might face some ugly structures, but generally the ending diagonal consists of zigzags. It's also possible to have sometimes double zigzags in a position of the motive waves of an ending diagonal, but we'll come back to this topic a little bit later when we go through all the correction patterns.

Types of model

There are two variations of the ending diagonal: contracting and expanding. Mostly, the first wave of a contacting ending diagonal is the longest one, but the expanding pattern usually has the shortest first wave (in both cases the third wave can’t be the shortest). Also, in the real-time wave counting, an expanded ending diagonal is considered riskier than a contracting one.


There’s a contracting ending diagonal in a position of the fifth wave on the chart below. As you can see, wave (i) is the longest and all the motive waves are zigzags. A pullback from the bottom diagonal led to a formation of a bullish impulse in wave (i).

article 5 2.png

However, sometimes the third wave of a contracting ending diagonal could be the longest. To be honest, this violates the rules from the book ‘Elliott Wave Principle: A Key to Market Behavior’, but the case happens on the markets quite often, so we should know what we could face with.

The next chart represents a contracting ending diagonal in wave 5, but the third wave of the pattern is longer than the first wave and smaller than the fifth wave. So, there’s a contracting diagonal with the longest third wave.

article 5 3.png

There’s another thing we should know about the ending diagonal. Sometimes the price just can’t reach a line from waves one and three as shown on an example below. The first wave of this pattern is the longest (remember, the third wave can’t be the shortest anyway). Because this pattern was formed in a position of the fifth wave of the bigger third wave, then we had a downward correction (wave ((iv))) and another bullish impulse (wave ((v))).

article 5 4.png

It’s also possible to have a contracting pattern with the longest third wave, but a line from waves one and three remains untouched by the wave five (check the next chart).

article 5 6.png

And here we are, there’s an expanding ending diagonal on the chart below. As you can see, the first wave is the longest. Also, the fifth wave hasn’t reached the pattern’s upper side. It’s a usual story for this type of an ending diagonal.

article 5 6.png

There’s one more example of the expanding diagonal. The fifth wave here also hasn’t reached the bottom line of the pattern, but have a look at wave (iii), which was formed like a double zigzag. There’ll be another article about this correction formation, but for now just remember that sometimes a motive wave of an ending diagonal could be not just a zigzag.

article 5 7.png

The Bottom Line

The ending diagonal is the end of an impulse or zigzag. This pattern consists of zigzags or more complex correction formations. A duration of a correction subsequent to a diagonal depends on a pattern’s position in a whole wave count.





2019-Oct-16 11:23am  -  I found an incredibly well-written article by John Crudele of the New York Post.  He has mentioned several of the points I keep bringing up about the Federal Reserve.  His article is here:   https://nypost.com/2019/10/14/feds-back-printing-money-so-what-gives/ but I've also copied and pasted the text below for your convenience:


Fed’s back printing money – so what gives?


Although there’s been no official announcement, the Federal Reserve has restarted QE — better known as Quack Economics.

You might know it better as Quantitative Easing, in which the central bank buys large amounts of government bonds or other assets to help stimulate the economy. There have been three of these QEs since the financial crisis more than 10 years ago. But the big question now: Is there a new crisis that has the Fed dusting off QE?

The Fed isn’t saying.

QE is simple to understand even though economists gave it a sophisticated name. Here’s how it works: The Fed electronically prints trillions of dollars in extra money, which it uses to purchase bonds and other securities.

This was supposed to keep interest rates low. And the low interest rates were supposed to help the economy grow.

Once the economy got going, the Fed was supposed to stop printing money. The economy would then stand on its own.

I used the phrase “supposed to” a number of times because QE didn’t quite live up to expectations. And there have been many vocal critics — myself included — who have argued that QE was just another version of the age-old money-printing schemes that have created enormous inflation problems in the past.

If you print too much money, then prices are bound to go up.

And once prices start rising the possibility of unchecked inflation becomes very real.

Let’s say, for instance, that you have $200 in your household budget for groceries, and you’ve been making do with that amount. Suddenly the price of food rises 10 percent, 20 percent or 30 percent because there is too much money chasing the same amount of goods.

The cost of things is as important to your family as the amount of money you earn.

Another big problem is that QE didn’t do much to help the economy, which has been stuck at around 2 percent annual growth for years.

Still another problem: What the Fed is really doing is rigging the bond market, where interest rate levels are ultimately determined.

By being a shill bidder at government bond auctions with QE money in its pocket, the Fed is causing the prices of bonds to go up. And that automatically causes the yield on those bonds (the interest rate) to come down.

Like at any other auction, eventually legitimate buyers won’t stand for this bid rigging any more.

QE advocates have argued since the beginning that their scheme is different from past money-printing operations. They argued that this wasn’t real money since it was designed strictly to purchase bonds and keep interest rates low.

This extra QE money wasn’t going to seep out into the real economy. And it wouldn’t affect things like living expenses.

And the Fed under former chairman Ben Bernanke — who initiated the first Quantitative Easing in November 2008 — promised that QE would be reversed when it was no longer needed. That means, the Fed, whose balance sheet exploded in size to nearly $4.5 trillion, would be selling the bonds it bought during the era of low interest rates.

The Fed under current Chairman Jerome Powell even started reducing the balance sheet, but only to the point where it was holding around $3.8 trillion worth of securities.

But it stopped the sell-off — essentially reneging on its promise to reverse QE.

Then last week the Fed double reneged when it announced that it would start purchasing $60 billion a month in securities from the open market.

This is the same as QE only the Fed didn’t call it that. So, if the Fed instituted Quantitative Easing in the first place in 2008 because there was a financial crisis, what’s the problem now?

There are plenty of problems to choose from. Here are some guesses:

Since QE was employed the first time because of a banking/Wall Street crisis, the first guess has to be that there is a hidden problem now that the Fed knows about and we don’t. US financial markets look healthy, although there are bubbles. The best guess is that the Fed is worried about a crisis somewhere else in the world that might affect us.

The political crisis in Washington would be my best guess. Although others in the media won’t admit it, there is currently a constitutional crisis in this country.

Democrats have been trying to expel President Trump from office ever since he was elected. Right now there is an impeachment investigation in the House. The Fed may be trying to get in front of all this through QE rather than rate cuts.

Or, maybe the economy is really doing as well as we are led to believe by government statistics. Maybe the Fed knows something we don’t (although that’s unlikely in this case) and is reviving Quantitative Easing for this reason.

Perhaps the Fed is just caving in to President Trump’s demands for lower interest rates and decided to do this in a more circumspect way. Rather than simply announcing rate cuts, the Fed might be trying to keep borrowing costs low by buying bonds.

The Fed could also be trying to spur more inflation, which has been coming in under its preferred target of around 2 percent a year. Maybe it believes that by putting more money into the economy through QE it will get inflation up to a more desirable level without overdoing it.