First of Month

Market Outlook: Likely now In Minute ((iv)) of Minor 3
Market Indexes: NQ,  Dow and S&P 500 cash made new all-time highs
SPX Candle: Higher High, Higher Low, Higher Close - Spinning Top Candle
FED Posture: Quantitative Tightening (QT)

Today was the first new trading day of the month. We have often cited that the new money enters the market from dividend reinvestment plans, pension plans, 401k's, profit-sharing programs, company bonuses, and other sources that become available on the first of the month. Today was no exception.

The market as measured by the S&P500 Index had closed yesterday at 2575. As soon as the overnight futures opened last night, they started flying higher in anticipation of the new funds, and creating a gap up to the open, and quickly invalidating the potential "C" wave down scenario. Cash traded up about 13 points to 2,588, and then began to reverse. By about 13:15, the opening gap had closed, and the upward waves  that could have created a "one-two-three-four" were overlapped.

As the gap was being closed, we noted that the NQ futures had backed off of their high. Before I show you the S&P500, first here is the chart of the NQ futures.

NQ Futures - Daily

In the thrust out of the triangle, it is highly possible that wave ((iii)) has been made. While it is not for certain, a five wave sequence up to ((iii)) can be counted, and prices back off. Further, the futures are currently trading lower after the Facebook earnings. So, it is possible this index is now in it's ((iv))th wave. A potential channel for the move is shown.

Now, we'll show you the chart of the S&P500 Cash Index. In the S&P500 cash, we were able to count a triangle with the (e) wave of the triangle, last night's aborted wave in the downward direction.

S&P500 Cash - 2 Hourly Chart - Triangle

There are two ways to view an interim top here. They are as a triangle or as a diagonal. I can only say that when each wave is counted, the usual structure of a diagonal is not very well met: you have to break too many guidelines. But, the triangle fits without breaking any. And this triangle may be seen to have the purpose of "equalizing" the net point travel between waves ((2)) and ((4)). As we clearly delineated on the chart, the 25 October down wave is the longest down wave since the up trend began. We noticed it and were focusing on it intently. By itself, it would be too large to pair with wave ((2)). But, as part of a triangle, it fits perfectly, as the net distance from ((3)) to (E) of ((4)) is now actually smaller than wave ((2)). Terrific.

You'll also note that this count utilizes the "non-limiting triangle" concept we highlighted back in our October 23 post HERE.

As the down wave progressed, it was yet again quite a slow wave from the top. So, as a result, the thought right now is that we are only entering the minute ((iv)) wave in the weekly chart, below.

S&P500 Index - Cash - Weekly

If minute wave ((iv)) proceeds as expected, then traveling back to around the channel mid-line might be expected. For confirmation, we must see new daily lower lows. You can already see from the above chart, that prices are being "stuck" near that 1.618 Fibonacci extension level. You can also see why, if we are only in a minute ((iv))th wave, an ending diagonal count may not be appropriate - as nothing would have specifically ended yet.

The Russell 2000 futures did make an "outside reversal day down" but did not make a "key reversal" as prices did not make a new all time high today.

Crude Oil put in an outside reversal day down after a potential "double-top", and bears watching. The daily slow stochastic is not yet below 80, and so as of tonight has not lost it's embedded status.

Have a good evening and let's see how it goes.
TraderJoe