On Wednesday, in our blog post entitled, One Possible Interpretation, we had noted the possibility of a triangle downward in the SP500 Index. And, because of the sharpness of the triangle, we specifically said, "And it is entirely possible, the triangle could even expand a bit if it wants."
Then, on Thursday we gave a specific level for a "wave counting stop" at 2424 on the S&P500 Index, as far as the downward count goes. It appeared in the SP500 15-minute cash chart. And that level was indeed hit on Friday, which put the larger down count temporarily on hold.
Because since there was some support found at the 50-day moving average, and a new price low was not made in the process, the hypothesis of an triangle which is pushing out it's boundaries a bit now seems entirely plausible. Here is the chart of the ES E-Mini S&P500 Index Futures - on a four hour time frame. I highly recommend that - until further notice - this time frame be used for counting waves.
|ES E-Mini S&P500 Futures - 4 HR|
The waves of the triangle are the five waves, (a), (b), (c), (d), (e) if they form properly. Please have a look at the time signature within the possible larger triangle. Each of the waves is currently becoming longer in time. Wave (a) is 16 candles, wave (b) is 18 candles, and wave (c), so far, is more than 34 candles.
Furthermore, there is relatively little economic news in the beginning part of the week which could result in range-bound whippy trading until Chair Yellen begins her testimony before Congress on Wednesday. It does not end until Thursday.
Waves (d) and (e) do not have to take more candles than (c). The only requirement here is that if a triangle forms properly, that waves (c) and (e) cross up and over the downward a wave from 21 Jun. If you look at where the 18-day SMA is on the daily chart, you will probably note the same thing that Ira Epstein might. "The battle is being fought at the 18-day SMA - the line in the sand".
For this chart, both of the blue b waves are hard wave invalidation points
Have a good beginning to your week as it might be good to hear what Chair Yellen has to say.