Near Round Trip

Market Outlook: Possibly Topping this Week
Market Indexes: DJIA, S&P500 cash new all-time highs, ES and NQ futures too!
SPX Candle: Higher High, Lower Low, Lower Close - Outside Candle; Doji and/or Key Reversal
FED Posture: Quantitative Tightening (QT)


So far, so good. The market as measured by the S&P500 cash Index, closed Monday at 2,591. Futures were higher overnight, and the cash market opened with a small gap up, and traded up to a new all time high of 2,597. Then, as if on cue for a "turn around Tuesday", stocks headed lower and traded down to 2,584 by noon - in the process breaking yesterday's cash daily low. At that time, they began to trade sideways to up for the rest of the day and closed at 2,591, closing only 0.49 points lower than where they started. But it was enough for the cash market to make an outside range day, lower, and possibly a "key reversal", although the point change was quite small.

So, here are the two charts we showed you yesterday. The first is of the S&P500 cash index channel and how price again found resistance at the upper channel, then reversed to trade lower.

S&P500 Cash Index - Daily - Resistance at Upper Channel Line

Price is still inside that daily wedge at the highs.

And here is the ES E-Mini S&P500 Index Futures - 4 Hr Chart showing two possibilities for the wedge.

ES E-Mini S&P500 Index Futures - 4 Hr Chart - Wedge Counts

If one adjusts the trend line across the highs we showed yesterday, now shown in blue, above, then we can still be in the formative phases of the potential diagonal. However, if one keeps the original trend line (now shown in red, above), then it is possible to see today as the "throw-over" of the trend line, and the potential end of the move. The alternate count for the completed diagonal is shown in red below the pattern. In this second case, October 18 is "a" of (i), and October 19 is "b" of (i) and October 21 is "c" of (i) of the completed diagonal.

The uncertainty in the two counts goes back to how the market bottomed back in late August and/ or in September. Did it bottom as a simple zigzag or as a triangle? This affects the number of waves upward to count. In live chat room today, we were able to show a satisfactory counts on the triangle and completed diagonal combination, but only said it was possible. There is no confirmation yet.

In the above ES chart, trading below 2,558 would invalidate the black diagonal, and begin to confirm the red diagonal. Because of the choppy internal trading today, we must have patience until there are more impulsive clues as to resolution. But, so far, so good.

So have a very good start to your evening.
TraderJoe