Have to Wait and Observe

By the close of cash trading, nothing had been done to invalidate the possibility of an expanding diagonal first wave lower. In such a diagonal, the fourth sub-wave is now both longer than the second sub-wave, and it takes more time than the second sub-wave. Both of those were as expected.

The reason for the concern comes from the futures market. The futures opened lower and put in an outside reversal candle, up. The futures likely made the lower low because of overseas trading, but it did not carry through to the cash market, and so at the open, the cash diagonal pattern, lower, was still holding. In fact, the futures behaved right until the close, and then moved higher after the settle. Here is the futures chart.

ES Daily Futures Outside Range Candle Up

The futures took out their Jun 9 low today (which may have been related to contract rollover), and have closed over the 18-day SMA. (Crude Oil and the NQ futures closed right on or just below their 18-day SMA's, as an aside). Cash, as of today, hasn't taken out those Jun 9 lows.

This leaves the chart with "no trend", as it has higher highs but lower lows. And the negative bias on the chart yesterday changed to a "positive bias" today, with price back over the 18-day SMA. We cautioned yesterday that "extreme care" should be taken in the down count because there were only three waves down. This is why. There would be more confidence in a downward count if price stopped below the 18-day SMA, but it did not.

For the time, this leaves us cautiously, observing the market. Just like the cash chart righted itself this morning, perhaps it will do it again tomorrow morning. But, there are no guarantees of that. This is light volume summer trading, and messy counts are very possible.

Take it slowly, let's see where the cash market opens tomorrow. After all, it's summer! Enjoy it.
TraderJoe