Little Change - 2

Market Outlook: Topping, but possible triangle
Market Indexes: SP500, Dow, RUT, Trans, ES, NQ: Higher

The S&P500 closed yesterday at 2472, and rallied eight points on an opening gap to 2480 on the strength of the employment report. This rally, which closed yesterday's down open gap, was sold within the first 15-minutes. Then prices turned and "nearly" closed the opening gap, within the first half hour. But, the gap remained open by 0.01 throughout the remainder of the trading day (somebody sure has got a sharp pencil!).

It has now been seven days trading in what could be a triangle, which can resolve to the upside.  For the triangle count, the internals would resolve something like this.

SP500 Cash - Half Hour - Plausible Triangle Count

Such a triangle can be resolved into all zigzags and and ending triangle in the ((E)) wave. The only item that seems odd is where ((B)) and ((D)) slightly exceed a 78.6% retracement, then ((C)) only slightly exceeds a 61.8% retracement, so it's proportions are slightly off. If this is a valid triangle, then it would likely resolve to the upside, and it would be one of the few daily triangles we would have had that was not a "running triangle" - with a higher B wave. Running triangles in the upward direction are bullish, and this one would only be "neutral": it would have less power to make higher highs than a running triangle would.

But, the price changes are so small, we are not sure about the triangle, even though it appears valid. Triangles must prove themselves, in this case by making a higher high than the ((D)) wave, at least, and this one has not yet. Also, there are still other ways the ((E)) wave could resolve. For example, Monday could open lower and/ or travel lower, and make the ((E)) wave a double zigzag, lower.

If the triangle does resolve to the upside - again at least over the 78.6% Fibonacci ratio - whether or not a new all-time high is made - then we would likely conclude the overall upward wave there, as it would be more in-synchronization with the Dow Jones.

For now, we must remain neutral until there is a more clear resolution. But remember, even if this is a triangle, triangles usually precede the last wave in the sequence.

What if it's not a triangle? As we stated before, it is possible to have a truncation at the first (B) at 2483 on 27 JUL, and five waves down that day to start a larger movement. The exact downward count would depend on waves made next week, but let's not put the proverbial cart before the horse.

Have a good start to your weekend.
TraderJoe