Still in Limits

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

Yesterday we said, it might be possible to count "five up" in the NQ futures, and showed that it was bumping up against it's wave three parallel. Today's chart shows an "outside key reversal down" - this as the Republicans voted to endorse the new tax plan. Here is the updated chart. The overall count has not changed.

NQ Futures - Daily - Outside Key Reversal Down Candle

This is a market to keep an eye on in the short run. Should this and/or other markets start making further lower daily lows, it is not something to ignore.

From the standpoint of the ES E-Mini S&P Futures, and the S&P500 Cash Index, let's start with the situation in the futures, as shown by the four-hour chart, below.

ES E-Mini S&P500 Index Futures - 4 Hour - Potential Diagonal

As you can see from the Fibonacci ruler, wave ((v)) of 5 is still shorter than wave ((iii)) of 5, as it should be. So, we 'may' have started down in earnest today. If price re-enters the diagonal, that would be a significant warning sign. The situation in cash is very, very, similar to this. No critical measurement has been exceeded upward.

But, we caution, by today's internal count, it is 'possible' for prices to go back up and make only marginal new highs again. That is because, as you can see above, there are only three clear waves down from the high. Perhaps this would happen on an announcement of the passage of the tax bill by the Senate. We don't know for certain. We can only say "a completed up count is possible in two markets at this time". If marginal new highs are made, it would likely be the c wave of ((v)) making an ending diagonal in itself.

It is also possible for the market to gap lower tomorrow and extend a third wave lower, then add a fourth and a fifth wave to complete a true impulse lower.  That's the nature of the beast at this time, so monitoring of the overnight futures is again highly recommended.

While I'm sure there are many questions still, let me just add that in no way can wave ((v)) in a diagonal travel below wave ((iv)), so that price movement beneath wave ((iv)) likely means that the diagonal has been completed. Please stay patient and flexible: the longer term implications can be decided once we know if a diagonal has completed properly.

On a technical note, the $VIX made an outside day, up, today, and ES volume shrank to under 980k contracts.

Cheers and have a good start to your evening and holiday travel if you are headed out of town.
TraderJoe