Welcome to QT! (And I already smell a rat...)

Today is the first of June, the month in which the U.S. Federal Reserve said it would begin its program of selling back to the market various Treasury and mortgage-backed securities. Today was also the first trading day of a new calendar month - which often sees inflows from the common sources we have mentioned already numerous times. Well, the market mucked that second one up, and only popped higher initially before settling in to a down day.

I decided to take a look at the daily Dow today. I decided to look at it like I was analyzing any other wave. And this is what I arrived at.

Dow Futures - Daily - Count

I am highly confident that the Dow had an expanding diagonal from the high, labeled as waves ((i)) -> ((iv)) of an A wave. The measurements on the Dow are spot on. The retraces are deep. There is overlap between wave ((iv)) & ((i)). And, unlike the S&P500, wave ((v)) in the Dow is longer than wave ((iii)). And all of the sequences look like three-waves. Diagonals are often A waves. So that fits, too.

Then, after the A wave down, there is a wave up that seems to have too many sequences to be called a simple zigzag. So perhaps it is a more complex B wave. Yes, you can force it into a zigzag. But the Dow made a higher high at the end of April that the S&P500 did not.

After the B wave up, it is possible to consider the wave structure as a non-overlapping five-waves-down with a flat for wave ((ii)). Note that this wave is largely in a channel. Also note that this wave is slightly longer than wave A. This is a key tell. I've been having a lot of difficulty finding other down counts that don't violate degree logic. This count does not. And - if you consider alternation - then one has a diagonal down, a correction, and an impulse down. So, the alternation is excellent.

Next, note the overall appearance. It simply looks like three waves down in a parallel channel. If this was on the upside, I guarantee you I'd be labeling it A,B,C so far - especially with the waves so close to equality in length. And, further, if you count the daily bars, you will will find there are 94 of them from high-to-low. This seems insufficient compared to the 120 - 160 bar guideline for The Eight Fold Path Method to count an impulse.

Lastly, Neely provides the guideline that if you have a single zigzag, it will almost never have the C wave land exactly on the parallel. And see the chart note, where I specifically call out that that this wave did not terminate exactly on the parallel - just as Neely indicates.

If you add to this all that verbal hokum about whether there was or was not a bear market, I do think we had a temporary low, particularly if this wave up proves out to be in five waves: don't know if it will or it won't, but let's see.

Could this start an even larger diagonal downward? It could - if those five waves up occur, first - followed by another set of five. It needs to be a clean zigzag though.

For the moment, we also need to keep our minds open to any other count that starts with three-down. And that might include triangles, and upward diagonals or a higher high as well.

Like I said yesterday: the wave count is currently a mess. But it's our mess. Could this wave count surprise us? It could, but it is simply not possible now to travel below the low of the C wave without activating some kind of larger downward count. We remain on our toes and flexible. It is the current wave structure that is nasty. So, be calm and patient in the midst of it, and hopefully you'll persevere.

Have a good start to your evening.

TraderJoe