Today's updated 2 hr SP500 chart is below, annotated to show where that error was. Even though we were counting "upward" in live chat today for a minuet second wave, the wave quickly got ahead of that count, and even made new highs in the S&P while the Dow did not.
|SP500 2-Hour Chart|
As you might know, yesterday I published a blog article that said the probability of new lows versus new highs was about 70 : 30 in my view because the market had started to make new lows. While, I did see that it was possible we were still in a triangle (...the other 30%), and while I did see that the Jan 6th diagonal to new highs was possibly an "a" wave of a larger diagonal (see previous days blogs and comments), I failed to factor in a key fact and kept driving on.
The key fact I ignored was: that the upward "a" wave diagonal in the S&P was not fully retraced in less than the time it takes to build it. In fact, it was not, and has not, been fully retraced yet. And that likely makes it a Leading Diagonal, and not an ending one. That's the error. It's that simple. I did not focus properly on the timing and extent of the retrace of the diagonal, and I have once again learned from that. By the time that .a wave occurred, an ending diagonal, by contrast, should have been fully retraced. It was not.
So, we went up and made marginal new highs again today. Volume in the futures was awfully light, worse than "summer light", although cash equity volume was good at about 3.7 bil on the NYSE.
And, bottom line, we do not know that the upward wave is part of a larger ending contracting diagonal for Minor 5 of Intermediate (3) still. It has the potential to be, but there are many, many waves to count before concluding that. We don't even know that Minute (i) of such a diagonal would be fully completed .. looking at the upward wave on shorter term charts - it doesn't look quite finished yet.
So, don't fixate on the tentative trend lines we have drawn in. They are just that ... tentative. The invalidation point for an upward diagonal at this point is if wave (ii) should travel below wave Minor 4.
Be careful in the whip-saws. As I have said before, I am not fond of this market. Today is an example of why.
P.S. We now need to see if the SP500 Intermediate Wave (3) is now "too long" for the larger two-daily contracting diagonal. I'll try to report on that tomorrow.
Best to you always,