Smaller Triangle

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

Stocks as measured by the S&P500 Index had closed yesterday at 2,832. They gapped up three points at the open to 2,835, and continued higher to 2,840 making a new all time high. At that point they reversed to close the opening gap, trading down to 2,831 before heading higher to make a second new all-time high at 2,842. Then prices began a slow sideways drift very reminiscent of a triangle. In fact, in the five-minute DOW we were able to precisely count a triangle in real time. By the end of the day, the S&P500 tried to pop up out of the triangle but did not (yet) make another new high, and closed at 2,840.

Here is what the hourly S&P500 Index chart looks like below.

S&P500 Cash Index - Hourly - Two Triangles

The higher highs are currently occurring on a divergence with Elliott Wave Oscillator, and with the RSI (14). The presence of two distinct triangles, and the divergences are suggestive that a wave set is coming to an end. We can also still count a potential ending contracting diagonal on the hourly DOW - which - if it comes to pass - we will show when completed. Today, it got up to it's upper diagonal trend line, but did not make the often expected throw-over of the trend line. We'll see if that happens tomorrow and maintains the required length relationships needed within a valid contracting diagonal.

The U.S. Dollar Index also has a distinct hourly triangle at this location as well. That triangle has already validated by making lower lows this afternoon.

However, we need to caution the S&P's intraday triangle, above, has not yet validated with the needed higher highs. For this reason, as we stated in the live chat room, with regard to wave counting, be patient, cautious and flexible. Suppose a higher high is not made. Would it be a truncation or a (b) wave overall?? Again, Elliott wave analysts think in terms of probabilities, not in terms of absolutes - until there just are no other options. 

So, if there is a downward gap tomorrow that breaks the potential triangle lower, rather than a gap up - as the potential triangle would predict - don't let that throw you. Accept what the market offers and remain somewhat fluid.

Until then, have a very nice start to your evening.
TraderJoe