Likely in the Triangle Count

Today's Candle: Lower Low, Higher High, Higher Close
Market Outlook: Still in Minor 4, Lower
Market Indexes: Major U.S Equity Indexes Finished Higher

The market as measured by the S&P500 Index closed yesterday at 2444. Overnight the stock index futures traded down to 2421 on the news that North Korea had fired a missile over Japan. The cash market opened gap-down this morning at 2428, and closed the gap from 21 Aug in the process. That gap is shown by the black circle on the chart below.

Prices then turned upwards, and we were able to count a complete or near-complete five-wave sequence upward. (It can be counted complete as is, or with one smaller new high tomorrow). The lack of down side follow-through after the open, the whippy action, and having 'five-waves-up' at this location most likely means we are in a triangle which served as our Primary count in previous days, even if some down side acceleration did occur today. It was quickly negated.

Here is the hourly chart of the S&P500 Index Cash.

S&P500 Cash Index - Hourly

Remember, this count contemplates minute ((a)), circle-a, triangle minute ((b)), circle-b, and then minute ((c)) downward to finish wave Minor 4. Wave ((c)) can go a lot lower than shown where it is just for directional sake.

This running triangle if it does play out does have eventual bearish implications. But, it is likely that participants are just being whipped around in the light volume now until the Payroll Employment Report on Friday and more participants return after the Labor Day holiday in the U.S.

If you believed the bit about this morning's down move being caused by North Korea, earlier, then you can also believe that the up move was caused by the duly appointed Plunge Protection Team buying the dip to send a message to North Korea that they are not going to play havoc with U.S. financial markets by sending off rockets. As for me, I'll just stick to counting waves.

This leg of the triangle is likely a complex wave, composed of the double zigzag w-x-y. The x wave shown on the chart stopped at the 78.6% Fibonacci retracement level. Thus, the triangle would suspect that the (c) wave would also stop at the 78.6% retracement level, before beginning wave (d) downward.

The good news is that - if this is the complex wave of the triangle - then waves (d) and (e) - when they occur - should be simple zigzags. For now, the impulse down count is kaput, and the best alternate to this could would be a double or triple zigzag, still downward.

Here's an update on The Eight Fold Path Method for the Three-Day S&P500 Cash Index.

S&P500 Cash - Three Day Chart - The Eight Fold Path Method

As you can see, the Elliott Wave Oscillator is still declining since the last update, and price is inching ever so slightly toward the center line of the channel. At some point - likely after the hourly triangle, above - the ((c)) wave of Minor 4 should come down to attack the lower channel boundary. At that point the EWO should go to within +10% to -40% of the zero line versus the high reading.

As I have said many times, fourth waves can be silly and unpredictable, so don't get discouraged. Stay loose and flexible, and keep your eyes on things even if on vacation or planning to go. For those of you familiar with triangles, this is a great opportunity to get some experience. The current triangle would now invalidate only below the low of (b), or above the high of (a). However, a ((B)) wave, up, of the y wave of (c) would now invalidate below the low of the x wave. The very flat nature of the EMA-34 at this location is also supportive of the triangle count.

For now, have a great start to your night.
TraderJoe