One of Nine

Yesterday we showed a chart of fully nine hourly up gaps in the cash S&P500 Index. Like a cat with nine lives, today was no exception, and the day started with a gap up. This one turned out to be the exhaustion gap however. A reversal occurred - an outside key reversal - in fact, and the gap labeled as #9 on yesterday's chart was filled by the lower low. Like all outside key reversal days, the primary thing that matters is whether its high is taken out or a retracement wave upwards holds off from breaking the high.

In terms of the Elliott Wave count, the chart we showed second in yesterday's post is still valid with the top at today's high. The chart below is an alternate only to allow one more up wave.

ES Futures - 4 Hr - Alternate Only

Please note this alternate count is hanging on by a mere thread. While it has already overlapped the Minor A wave, up, it has not yet overlapped the minute ((i)) wave of C in the downward direction. Doing so would spell trouble for this alternate view and invalidate it. We note that last night's higher high was still on a divergence with 4-Hr MACD, and it, the MACD, has turned lower - at least temporarily.

Ira Epstein typically says, "the high of an outside day down should not be taken out within two trading days, or it constitutes a trap for the bears." This is not trading or investment advice, just a paraphrase of Ira's observation.

We saw that today did made five countable waves down in the cash market. In the futures on a daily basis, we will note that - even though a higher high was made - the futures did miss their upper Bollinger Band target which is often, not always, a sign of weakness. The chart follows.

ES Futures - Daily - Outside Range Day Down

However, one can see the daily slow stochastic is still embedded, and is over the 80 level. IF the embedded status is lost, then one might expect price and the 18-day average to try to come together. Until then, the daily bias on the chart is up. Since we were able to count five-waves down right now the trend and the bias are fighting each other - which is why the alternate allows another higher high (perhaps on a stimulus bill or news from the ECB, etc.)

Have an excellent start to the evening.

TraderJoe