Trust, but Verify

Market Outlook: Diagonal Top Complete today or Last Wave Up Dead Ahead 
Market Indexes: Most major U.S. Equity Indexes were higher today, except, RUT, $Tran and $Util 
SPX Candle: Higher High, Higher Low, Higher Close : Spinning Top 
FED Posture: Quantitative Tightening (QT)

The title of yesterday's post was, "Larger Triangle, Diagonal or Completed Top". And today, it is possible to count a diagonal top at the high. Still there is insufficient downside movement to draw a firm conclusion today, but it does look promising to get a completed count.

S&P500 Cash Index - Half-Hourly - Possible Diagonal Completion

President Ronald Reagan used to use an expression when dealing with foreign powers, "trust, but verify". And we must take that approach here, too. Everything now depends on the amount of price movement higher or lower next week, and any overlaps that develop.  With the structures we currently have and the current lengths of the downward waves, there is nothing that positively says that a higher wave can't develop. The only thing the pattern says at this point is that further upside progress is less likely. And, there is a big difference between acting on reality, or a proven count, and acting on the probabilities.

So far, the measurements are correct: that wave ((v)) is smaller than wave ((iii)), and wave ((iii)) is smaller than ((i)). Wave ((iv)) is smaller than wave ((ii)), and wave ((iv)) overlaps wave ((i)) downward. And that is as it should be. There may even be a very small truncation of (c) of ((v)) which could be a last wave failure. Chat room participants advised that the SPY did make a new intraday high at (c), which would fit, as well, if that is the case.

All of that said, we know know that wave 3 has been overlapped downward. But to prove out a diagonal, we should look at the time relationships involved. The diagonal took three-and-half days (roughly) to build. That means, if a diagonal is to be proven out, then prices should trade below the low of wave 4, by Thursday of next week, and hopefully - to get clarity - much sooner. 

The NQ futures have come quite close to the maximum measurement for their potential daily diagonal, as below.

NQ Futures - Daily - Potential Diagonal Still Valid

Again, if the NQ exceeds the 6110, then we must assume the structure was a triangle and look for a "five wave" thrust out of it, and not a "three wave" thrust. So far, we can only count three waves up.

Bear in mind, the ES daily futures are still up over their 18-day SMA, and the bias is therefore up, as is the daily swing line, with a fully embedded slow stochastic. Those of you who have read my paraphrase of Ira Epstein's guidelines for interpreting market action know what means. If you haven't read it yet, you can read it at this LINK.

So, that should give you something to chew on to start this weekend. And please remember, nothing in this blog is to be interpreted or taken as trading or investment advice.

Have a very good start to your evening.

TraderJoe