Market Indexes: Major U.S. Equity Indexes were lower
SPX Candle: Higher High, Lower Low, Lower Close - Outside Candle
FED Posture: Quantitative Tightening (QT)
The title of our outlook for some time now has been "expecting higher volatility". Today, we were experiencing just some of that volatility.
In our post yesterday (seen by very few, apparently) we alluded to a situation in the futures which could reflect valuations being out of kilter. If you did not see yesterday's post you are encouraged to review it. Regardless of our opinion, the futures markets were again 'spun higher' in the overnight sessions on the weekend holiday to a level of 2,804. This was up about fourteen (+14) points from Friday's closing level. And, sometimes, one just has to shake one's head, and ask, "Oh, really, what justifies this?" Well, today, the answer was "nothing, apparently".
Shortly after the open, the S&P500 cash index, topped at least temporarily at 2,808, then began to head lower for much of the day. By 2 PM ET, the opening gap had been fully closed, and some selling appeared which drove the market down to 2,769 level (which was down some 39 points from the intraday high). From the intraday low of 2,769 there was a brief rally to 2,782 which faded into the close at 2,777.
In making it's new high today, the S&P500 solidly crossed a level of Intermediate (3) = 2.618 x (1) as we covered in Thursday's post. That level was 2,788, and it has now been bested. We're probably going to have a lot more to say about 2.618 waves in the near future. But for now, we should assume we have three Intermediate degree waves higher in the S&P500. That assumption means there is an alternate count I can clearly see, but there is not enough evidence for it yet.
One chart that does look complete is that of the daily Russell 2000. It is below.
|Russell 2000 Futures - Daily - Outside Key Reversal Day Down|
Because, unlike the S&P500, the Russell did indeed make an outside key reversal day down, it is now hard to count this wave structure as anything else but completed. If the Russell's daily bars start overlapping or trading below wave (iv), this would likely be confirmation of a turn for this index. This might set up the divergences that need to be seen in some of the other indexes.
Although no claims are made for the S&P just yet, we will note that volume picked up in the ES futures on the down turn. Volume had been running at just 800k - 1.0MM contracts, and today came in at double that on the turn-around day. But, we will also note that the daily slow stochastic on the ES futures is still embedded over the 80 level. So, be prepared for anything including a flat or yet another triangle because there are not, as yet, any invalidating downward overlaps yet.
For this reason, patience and flexibility are still needed until there is something more definitive to report. Have a very good start to your evening!