Market Indexes: Major U.S. Equity Indexes closed lower; DJTrans, DJUtil, up
SPX Candle: Higher High, Higher Low, Lower Close - Outside Reversal Candle Lower
FED Posture: Quantitative Tightening (QT)
The daily 78.6% Fibonacci retracement level from the low, shown on yesterday's daily chart proved to be stiff resistance at least for the day. And while I was expecting a lower low day, it did not come before a marginal new higher high after the CPI report. The market, as measured by the S&P500 Index, had closed yesterday at the 2,783 level. After the open, the market gapped up to 2,802 in the first half hour, and then turned lower. It filled the opening gap at mid-morning, and traded down to 2,769 by noon. There was a brief rally at that point, which was shorter in time than the down wave, as it traded up to the 38% retracement level of the down wave.
Refer to the Intraday chart of the S&P500 cash index below.
|S&P500 Cash Index from the High of the Day - 5 Minute Chart|
After noon, price headed lower again, tracing down to 2,758 in what appear to be three slightly diverging waves. I have tentatively labeled these three waves as i, ii, and iii since, in the cash market, a fourth wave has not overlapped upwards yet. But it could.
If there is no upward overlap, then since wave iii is 78.6% the length of wave i, at this point, then we could have another one of those wedge-shaped impulses downward being constructed. If a wave iv upward should make an overlap on wave i, but not become longer than wave ii, then it is 'possible' a diagonal is being made. That would suggest a fifth shorter wave downward. Unfortunately, we won't know until we know.
Of course, the three-waves down could end here, as a-b-c. I'll address the larger daily count when I first know if we are dealing with five-down or three-down. It is possible to see these downward waves as part of a fourth wave, if you use the futures and not the cash for counting. That is because the futures have a 62% retrace at the March lows. And cash does not. Further the downward retrace has not overlapped any important waves.
Have a very good start to your evening.