No Impulse Yet

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

Today and tomorrow are the end of the month. The futures were lower overnight, likely on end-of-the-month window dressing (re-balancing of stock/bond portfolios). The market, as measured by the S&P500 Index, closed yesterday at 2,853, and opened down -20 points at 2,833. After a brief five-point lift to 2,838 prices again went lower and traded as low as 2,818 (or down -35 points). Beginning about 10:15 ET, prices began see-sawing sideways-to-lower, before closing at 2,822 or down -31 points.

Volume as measured by the E-Mini S&P Futures rose to 2.04 MM contracts (remember futures volume had been trading at 700k to 1.2 MM contracts), and the NYSE advance-decline line dropped to 586-to-2,420 by the close or more than a ratio of 1 : 4. This is in the beginning of the impulsive range. And, even though volume and breadth supported an impulsive move, an additional wave downward is needed to claim 'five waves down'. That can be seen on the S&P500 15-minute cash chart, below.

S&P500 Cash Index - 15 Minutes - Three Waves Down So Far

There was a 2.618 extension to the morning lows, as you can see in the peach color, and then less than a 38.2% retracement upward of the middle wave (not shown), and then a 90% retracement to the lows (shown in green).

There is a strong suspicion of a triangle at the lows, but again, the pattern is not proven yet. If the triangle forms properly, and then new lows are made, then the down wave can be a c wave of a fourth wave, with high as the b wave possibility we noted in our post entitled Solo High.

But there are other possibilities (rather than a potential triangle in this wave) for a fourth wave, since the 90% level was reached on the downward move, such as a flat.

Such a c wave might coincide with the beginning of the new month in February, and potential inflows from pension funds, 401k plans, etc. and the employment report due out on Friday. However, if the down wave travels too far, and overlaps other important waves, it may invalidate a c wave and create a first wave lower.

Let's take it a step at a time, and see how it goes.

Have a good start to your evening.
TraderJoe