Still in Limits

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

Nothing of substance changed today. In very light holiday trade, the market as measured by the S&P500 Index had closed yesterday at 2,679. The futures were higher overnight, and cash opened with with a four point gain to 2,683. Unlike the last couple of days, the market did not close it's opening gap in the first hour and went on to trade higher during the afternoon to 2,692, up about +13 points. A new high was not made, and the upward wave did not retrace 90% of the downward movement overall. The potential inverted hammer candle would require a follow-through candle, with a lower close for confirmation.

At about 13:00 ET, the market just seemed to say, "well, enough eggnog", and turned lower by fully 10 points to 2983, closing at 2985.

With prior upward waves, today's upward wave can be part of complex second wave upward, or it can still be a part of making marginal new highs - although this latter case is becoming increasingly difficult. That is because at the end of the day, there were some deep downward overlaps. This suggests that market is currently having difficulty impulsing higher, and if today's gap up open is filled, a downward turn may be more easily countable.

So, that I don't confuse you, but provide you with the maximum information possible, I have removed all wave labels from this chart, except some of the waves made today and yesterday on the S&P500 Cash - 15 Minute chart.

S&P500 Index Cash - 15 Minutes

Here you can see we started counting the uptrend in a channel, as either A,B,C in blue, or 1,2,3 in black. Towards the end of the session, the market fell rather deeply out of the channel and overlapped part of wave 2, or wave B. This violates a guideline for counting an upward impulse, but does not break a rule. Wave 1 or A upward simply was not overlapped in the downward direction (yet).

Still the formation looks quite weak and may be part of a complex flat second wave upward. The afternoon's downward wave did create some some "running gaps", circled in red after wave 3, or C, and this may signify a the beginning of a third wave lower. But, the jury is still out. More credence to that case will occur if 1 / A is overlapped in the downward direction, and certainly if wave 2, B is exceeded lower.

There are still ways to manage to make marginal new highs (even with this messy count), but to avoid confusion discussion of those will be put on hold temporarily. There is even one way to count today as a truncation top, and it involves a messy prior triangle B wave of the ending contracting diagonal. So, bottom line, we must continue to have patience and be flexible until we see what this wave has in store for us. We are clearly showing you the wave that can be interpreted in two ways at this point, and that is the resolution we must wait for.

Have a very good start to your evening, and a good beginning to your holiday travels if you are headed out that way tonight.
TraderJoe