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Friday, April 21, 2017

Market Update 4/21/2017

Markets continues to chug sideways in a range, but we've done pretty well timing daily moves, right?
Got our pullback on Wed., and a nice snap-back rally on Thursday, but not seeing any follow-through. This pretty much rules out a powerful wave 3, in my mind, because wave 3 waits for no one. For this reason, I've revised the short term EW count to wave 1 (or A) in a leading diagonal triangle, as I tweeted out yesterday afternoon, and seen on the 1 min. chart below. Short term support looks like 2352 - 53. I wouldn't be surprised to see markets remain pinned in a range after yesterdays big move.

OPEX (options expiration) is notoriously unpredictable, and this morning we see most markets pinned; gold up $2.50, Oil flat, Dow up 1 - 12 points (pinned).

There's still a good chance we see a pullback, on higher volatility, so watch the $VIX (our most reliable fear gauge).

$VIX - A breakout back above 14.70 would spook most traders, but resistance is 15.55.  

Oil - how long have I been calling for a pullback in oil, yet we didn't see it until traders returned from the long pass-over holiday. I have to admit I got this one wrong, because I got caught up watching the short term $USO chart, and misidentified a wave "a" (bearish) triangle for a wave 4 (bullish) triangle, even though I identified exactly where support was (right where it broke). This is why I always say trading it is half the work. When support breaks you sell, because that's what every other trader is going to do. If you're not prepared, the boat is going to sail without you.  

Here's where I got it wrong, for those who understand Elliott Wave Theory: $USO looked like it was pulling back into wave "iv" (the triangle pattern seen in purple), and marked "iv" (seen on the chart below), and the reason I labelled it wave "iv", is because wave 3 (what I have marked wave "i" of 3) is not supposed to be the shortest wave (according to EW rules and guidelines). Did wave 5 truncate? I don't know, and this is a good example why I despise short term charts, as well as why I never trust holiday trading, when volume is light, and markets are notoriously unpredictable. Given, it's a 15 min chart, and the $USO may not be the best representation of the $WTI Crude trade, but I don't like missing a 5% move. There, I'm done beating myself up, and making excuses...

Oil - pulls back in what looks like wave 2. The trend (in blue) is still very much up. This Oil fund pretty much tracks $WTI crude just as the $USO does, but keep in mind ETF's are not a perfect representation of the underlying index, a topic for another time.

If Oil goes slightly lower, I'll be re-adjusting my bullish channel, and lowering my green line (as seen on the next chart), so also keep this in mind, Oil Traders.

The Russell 2000 $RUT (and the matching ETF $IYW) - I don't like (the heart of the Risk on/off trade) the Russell , and I have yet to identify the pattern it's trading in.
I'm seeing several possibilities and none of them bullish.

1. On the 5 min chart we see the price action whipsawing in an apparent broadening triangle pattern. Wave D can overshoot, and often doesn't determine the shape of the triangle. I wouldn't chase this, on a dare. Wave E is a panic wave, so there's just too much risk being long here.

2. The 60 min chart shows a contracting sideways triangle - this is actually more bearish (wave B triangle), than the alternative pattern seem in the above chart. I think wave B may continue testing the highs into next week, but if you see the Russell crash into a powerful wave C, key support is 1296 - 1299.

$RUT support at 1296, and the 200 day ma. 

Stay nimble and have a great weekend, Traders

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