Down Day on Heavier Volume

While we had to observe the overnight action last night (see yesterday's blog post), somehow, almost as if it were ordained, futures prices held the high, punched through the 18-day SMA lower mid-day, and then made lower lows. In the process the possibility for an expanding leading diagonal lower was not invalidated in the overnight in the cash market.

First here is a look at the ES daily futures chart.

ES Daily Futures - Outside Reversal Candle Lower

The futures today had made an outside day down which actually took out the low of yesterday's outside day up. In the process, the daily futures today bent the lower Bollinger Band downward, and overlapped the high of the candle on May 16. They found some support there, and then retraced back to the lower Bollinger Band, closing just a whisker below it. In doing so, price closed below the 18-day SMA, and, therefore, has a negative bias again. It's possible the 100-day SMA (dotted green line) could be the next target.

In terms of the SP500 2-Hr Chart, the topping process was as confusing at it could get. There are two ways to count a top. There first way is with the triangle B wave count we showed you in the Thrust from Triangle Count we showed you at the post in this LINK. In this case, the B wave of the triangle has been exceeded lower, and  the A wave now clearly overlapped.

The second way is with the diagonal with the truncation, as below.

SP500 2-HR Chart - Diagonal with Failed wave ((v)) - Truncation

In this count, price was clearly turned back today by the lower up trend line shown, and this scenario may make more sense. Here the A wave has been overlapped, so far, but the B wave has not yet been exceeded lower which would help prove a diagonal. (The futures 'daily nearest' contract did take out the B wave low.)

In any event, we said some of the gaps lower could be filled, and today, in one day, yesterday's opening gap, now shown in black, was closed, as was the June 1, opening gap up, also now shown with a black circle.

There has, in all honestly been a lot of discussion in the live chat room as to whether to count the downward wave as an impulse or an expanding diagonal. That's fine. We are sure the situation will clear up quickly in a manner we can understand. While the diagonal may have held on the cash chart, it didn't in the futures. And, today's down move was so swift as to make one question the slower jerky moves inside a diagonal. This latter fact would more support an impulse lower.

Volume today on the futures was a bit heavier. So, not everyone left for vacation yet.  Since today was an outside reversal candle lower, then the high should not be exceeded within 48 hrs. or it would be considered a trap for the bears - just as, since yesterday's low of an outside day up was exceeded within 48 hrs., it constituted a trap for the bulls.

As for me, it's time to start thinking about family fun on the Fourth, anyway.

Hope you do, too!
TraderJoe