ES Daily Candle: Lower High, Lower Low, Lower Close: Yin-Yang Candle
Market Posture: Neutral-to-negative and Probing Waves
Daily Swing Line: Neutral (Higher High, Lower Low)
Daily Bias: Up (Settle Over 18-day SMA)
Yesterday, the outlook changed to "neutral-to-negative". Today was a lower close day. We had suspected it would take another news item or tariff tweet to provide more clarity to a market count. Today that occurred when Chinese negotiators canceled a trip to the farm belt as the result of a tweet. What the day 'finally' provided was a way to legitimately count a potential triangle. Here is that potential triangle as a b wave on the ES Futures - 4 Hr chart.
|ES Futures - 4 Hr - Triangle|
The count reads as follows: from the second X wave of Intermediate (B), there are five-waves up in an expanding leading diagonal to a minute a wave. This is followed by a potential triangle minute b wave. IF the potential triangle is to play out, the triangle may not go lower than the ((C)) wave of the triangle. So far, it has not. However, what makes the triangle potentially legitimate is that its potential ((E)) wave has crossed back under the high of the a wave to make the triangle corrective to it.
If the triangle busts lower, then it suggests that a FLAT b wave is in the making instead, or that the market has topped. There is nothing wrong with such an alternate count. It just means a b wave wants more time. The DOW futures have, in fact, already broken this level of triangle which is what prompts an alternate (the DOW futures could still go on to make a slightly 'wider' triangle).
You'll note that some people are getting very rude about not calling every wave (as if that is even possible some times). Few have the patience for this work. Instead they say their view of a new high "must be correct" because 3,000 has held and been defended. And now? Prices closed at 2,989 today. Can they be correct (ahem 'within a range')? Sure. Still that does not at all detract from the value of wave counting. And you'll also note, they don't say "when" such a new high will occur. It certainly didn't occur today. And - anyone with just an opinion and no flexibility - might have had a nasty surprise today.
What a day like today gives the wave counter is a clear and unequivocal invalidation point for a specific pattern. That might be useful information if used properly. Still, the market is sitting on a razor's edge. It's likely that many market participants want to see the gap at the all-time-high cleaned up. So far, the market has refused to cooperate. Cool.
So, this triangle with it's marginal new high ((D)) wave would be a "barrier" triangle. Notice that the ((D)) wave did not close above the high of the barrier. Typically, the barrier triangle has less of a 'pop' out of it than do regular triangles because the market would have spent much of its energy banging against the upper barrier. Well, that's the theory anyway. We'll see how well it works - or if we get a chance to test the theory at all.
Have a good start to the evening.