A Tale of Two Triangles - 3

Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were lower
SPX Candle: Higher High, Lower Low, Lower Close - Bearish Engulfing
FED Posture: Quantitative Tightening (QT)

The market, as measured by the S&P500 cash index closed yesterday at 2,688. The futures were higher overnight, and actually made a new all-time high. So, the cash market opened up a point to 2,689, then traded higher to 2,692 but did not make a new all time high. At that time prices started reversing lower in an initially choppy session. But toward the end of the session, the down draft gained steam, and the market closed lower at 2,675 - down 14 points, and closing one gap in the process.

Now, it's a question of who do you want to believe: the futures or the cash? The futures traveled down far enough to overlap the first wave in the impulse count below, after making the new all-time high. Cash neither made the new all time high, nor overlapped downward.

ES E-Mini S&P500 Index Future - Pop & Drop

So, it is possible to count the up wave as completed, with the new all-time high, and the down wave started with the overlap. Because we can at this time only count three downward waves, we do need to see five clear downward waves form, and a retrace that sticks without making new all-time highs to see a downward count properly unfold.

The Daily ES E-Mini S&P Futures lost the embedded slow stochastic reading, as in the chart below, with today being a clear outside reversal day down.

Daily ES E-Mini S&P Futures - Lost Embedded Slow Stochastic

If the 18-day simple moving average (or SMA) gives way, then the lower daily Bollinger Band could be a target (not trading or investment advice - just a paraphrase of what Ira Epstein teaches). So far, prices stopped right at that "line in the sand". Very interesting!

It is also interesting that the daily cash S&P500 Index chart has no cash gaps above the current price! I may have a few more observations this weekend. 

Until then, have a very good start to your weekend, and to your New Year's as well.
TraderJoe