A Tale of Two Triangles

Market Outlook: Expecting Higher Volatility
Market Indexes: Major U.S. Equity Indexes were higher; $RUT lower
SPX Candle: Higher High, Higher Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)

Nothing has changed to invalidate either the contracting ending diagonal, or the potential contracting triangle. The market as measured by the S&P500 Cash Index had closed yesterday at 2,680. The futures were slightly higher overnight, and so the cash market opened up slightly to 2,682, and traded higher to 2,686 before trading lower to 2,679, and then reversing mildly to close at 2,682, up about two (+2) points.

The lackluster trading volume (with ES below 650k contracts), and flat Elliott Wave Oscillator can be indicative of a triangle which is waiting for year end. This can be best seen on the ES 4-Hour Futures chart, below.

ES E-Mini S&P500 Index - March 2018 Futures - Potential Second Triangle

Today the futures made a lower low than yesterday (although cash did not). This suggests the (c) wave of the current triangle is the complex one in the futures. It is possible the triangle is trying to extend the rally, waiting on the new money which is often provided by the first trading day of a new month, and, in this case, a new year from things like company year-end bonuses, dividend reinvestment plans, 401k's, pension accounts, etc.

There are no guarantees with potential triangles, and like all potential triangles, this one must prove itself, too. This triangle would invalidate below the low 2,679, the prior (a) wave.  And a downward fourth wave would invalidate itself with an overlap of wave ((i)). If the triangle invalidates, it could suggest that the diagonal was already completed at the location of wave ((iii)) - as previously described - or a larger b wave is forming within the potential diagonal. Again, the preference for the triangles right now, rather than the diagonal, is they have more of the right look at this point in time.

But, if the triangle holds as is shown above and is exceeded higher, we would likely have two contracting triangles at two different degrees of trend which would likely spell the termination of the rally - at least for the time being. So, even though it's the holiday, it is still time to be checking in at least loosely with the market and the overnight futures to see how the wave count is progress.

So have a good start to your evening and we'll see how things go tomorrow.
TraderJoe