The Emini closed down 5.25 points at 1,428.50 on Friday 29 December. The cyclical short trade from Thursday worked out well today. However, the selling climax at the end of today’s trading may see this trade only break-even. Normal trading resumes on Wednesday and December’s low volume trendless action will finally come to an end. Check out the longer term chart below to see the likely market direction.
The Emini opened down 1.00 points at 1,432.75 then rallied, hitting a high of 1,437.50. The market then dropped all day, accelerating in the last hour and hitting a low of 1,425.50. Then in the last 30 minutes there was a strong bounce on very high volume to finish the day’s trading at 1,428.50. Range for the day at 12 points was above average but volume was again below average at only 0.5 million contracts traded.
Interestingly, the low for today and high volume bounce happened almost exactly at the rising trend line that connects the lows of 28 November and 22 December.
Looking for end of Elliott wave 4
The chart above again shows John Ehlers Hilbert Sine Wave indicator on a daily chart of the Emini. This indicator makes sine wave type crossovers when the market is in cyclical mode. However, when the market enters a trending phase, the "fast" and "slow" lines don’t crossover until the end of the trend mode. The last crossover we had in this time frame was on 17 August, after which the Emini bounced around at the highs then started it’s long uptrend move. The long dotted white line starts on the crossover day and is often a useful support / resistance line.
As you can see, the indicator is just about to make another crossover, probably during this week. Crossovers at the end of a trend move are usually equivalent to Elliott wave 4 corrections that mark the beginning of a final Elliott wave 5. The indicator isn’t perfect – none are. Sometimes the crossover fails straight away and a new trend in the opposite direction is signaled; sometimes there are 2 or more final crossovers before the end of the last wave 5.
Wednesday’s open is likely to be a gap up, judging by the overnight action and selling climax on Friday. However, I still expect the Emini to resume it’s downward move and a more substantial wave 4 bottom to form over the next few days. Trend indicators are still down but approaching over-sold and the bond market is also in a downtrend.