Thursday, March 15, 2018

How You Can Tell - 10

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed lower; DJIA, DJTran, up
SPX Candle: Lower High, Lower Low, Lower Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Overall, on the longer term daily chart, with an inside day on the Dow Jones Industrial Average there is no resolution yet to the Dow's potential daily triangle that we showed yesterday. Nobody was willing to bite.

On the shorter term, I was expecting up movement at the open, and then a lower low from yesterday's post. That is what happened on the S&P500. It is not what happened on the Dow. Further, I was expecting we had made an A-B-C down in a channel. That is what happened, but with a minor tick too high today in the S&P500 cash index, the potential expanding diagonal C wave invalidated. So, here is the best count I can offer considering the current waves and following all of the rules.

S&P500 Cash Index - 15 Minute Chart

The problem wave was wave (ii) which invalidated yesterday's expanding diagonal C wave in the cash, but not in the futures, as it is higher than wave iv, which is not allowed by the rules. Too bad. Dead is dead. Then, with today's lower low, it is possible we had the third wave of a contracting diagonal overall for a larger (A) wave down. One more new low, shorter than wave (iii) is needed to allow such a count. Then, there should be a B wave up. The alternate - which is harder to fit into a daily count - is that today's new low is the smaller (b) wave of an expanded flat wave. But, it could happen that way. Expanded flats are more common than diagonals so we should respect that.

Further, we don't know that wave (iv) is completed. That's why the question mark. If it is to remain as wave (iv), then it must be shorter than wave (ii) and still be countable as a zigzag wave.

If we do make a larger (A) wave down, then it might simply form a better zigzag lower - which can still fit with diagonal and triangle counts.

The bottom line? No one needs a counting mess like this. We are mid-range between the recent highs and lows and there is not a good trend in force. We also need to note that within this down wave, the DJIA and the S&P500 made their previous high on different days. The S&P topped on 13 Mar, the DJIA topped on 12 Mar, which only adds to the mess.

So ...caution, patience and flexibility remain the by-words. Have a very good start to your evening.


  1. For the moment, I'm counting it as a LD:

    1. There is a lower low below 2,746 (between my iii and iv; which is why iv is counted as a flat) that prevents the count you presented from working. Also, it would be hard to find "right look" diagonal trend lines in that count.

    2. I wasn't sure if a flat was allowed in a LD. If everything within a LD needs to be a zig-zag then the entire decline in SPX from 2802 is corrective.

  2. Hi Joe,

    You have a wonderful weekend!

    Enjoy reading your analysis everyday!!!

    If I can expect your new updates during the weekend? Thank you very much in advance.

    1. Hi David. Thanks for comment. There is a new post on Saturday morning. Cheers.