The THUD heard round the world!

Counting the upward wave from the February lows as if it were Primary V had served us well - right up until the day of the Brexit vote. In fact, this chart of the ES E-mini S&P futures we posted the morning after the vote, shows that higher highs were made right up until the time of the vote.

E-Mini S&P 500 Futures - Higher Highs Until the Day of the Brexit Vote

First, we want to note, we did not count the futures this way until 'after' the vote. Second, we want to note that the cash indexes (Dow, S&P) do not look anything like this chart - as they never made the higher high at (5) on the S&P, or at (3) and (5) on the Dow.

We do note that the invalidation point of 2026 we showed on the cash chart in the weekend video has been taken out lower. During the week in two chat locations, we raised that invalidation level to 2074 because of potential overlap of another first sub-wave higher. That invalidation point was obviously also hit as the futures began their descent in the early hours.

Prior to the vote, on both chat sites, we noted specifically, that "brokers were increasing margins, particularly for currencies, and that news sites stated there might even be currency halts". We also noted that Thursday's up move occurred on very low volume". Both of those factors caused us to "sit one out", and not risk capital needlessly in either direction.

So where do we go from here? Well, it's certainly 'possible' that we have gotten a first wave up, and are still working on the second wave lower. Such a count would wind up synch-ing up both the ES futures and the major cash indexes. See chart below.

One 'possible' way a Primary Vth Wave Could Continue

After all, the S&P has not even made a 38% retracement of 'this' up-wave yet. So we do not wish to get too excited about a move that occurs on such wide-spread news, involving trading halts.

However, it is just as possible that the market has topped with the diagonal shape on the futures. Here is the similar diagonal on the cash S&P500.

Potential Diagonal Failure in the S&P500

The problem is this : Leading Diagonals can not fail. Well, the diagonal in the futures (which would be counted as 5:3:5:3:5) did not fail. It made the higher fifth wave. But, a similar (yet 3:3:3:3:3) diagonal in the S&P500 would have failed, and ending diagonals are allowed to fail! And, of course, since it is not possible to count the Dow Jones in the above manner, then this may provide a higher degree of probability that Primary V is still in progress but just needs a deeper second wave, as a FLAT wave. If that's the case, that would be fine with us.

We can see both sides of the coin, and therefore remain "patient and flexible" until the situation clears. Again, with the momentum lower, it will not be possible to talk about higher waves until or unless there are higher daily highs that exceed Thursday's S&P high.

This is a difficult wave-counting environment : one of the most difficult I have seen in recent times. And several counts remain possible.  For example, it is STILL possible to see the DOW (and DOW only) in a Primary IVth triangle. And - just as we saw the S&P500 in a W-X-Y Primary 4th wave, there is nothing to suggest it couldn't continue on in Primary IV, as W-X-Y-X-Z, before making a Primary Vth wave.

So, when we say something like, "Primary V may continue higher", we DO NOT mean to suggest that heavily speculative upside positions should be taken.  Nor, when we say, "momentum is currently lower" do we mean heavily leveraged short positions should be taken.

No, our approach is one of caution and care, and, in fact, we offer no trading or investment advice of any type. We are merely counting waves - as best we can.