Depends on the Futures Again

Market Outlook: Now Getting Higher Volatility
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Higher High, Higher Low, Higher Close - Trend Candle
FED Posture: Quantitative Tightening (QT)

Yesterday, we showed you a chart of a potential contracting diagonal wave, and said an awful lot depended on today's gap direction. Prices gapped higher at the open, broke the upper diagonal trend line, back-tested that same trend line and headed higher. I said I was looking to count an impulse downward in the live chat room, if the gap direction was lower, and that did not occur. I continued to try to count an impulse lower to be sure one couldn't be counted, and by mid-afternoon, it couldn't be. 

To be sure, I was looking for a larger downward structure than a 23.6% wave. It may simply not occur that way.

S&P500 Cash Index - Potential Diagonal or Triple Zigzag Lower

I also said in the previous post that the potential diagonal was malformed. Wave (v) was too long in time for wave (iii) or vice-versa, and the Elliott Wave Oscillator made a lower low at (v) than (iii) - which is not the usual signature of the EWO on a true diagonal.

So, since every potential diagonal which is formed by the 3:3:3:3:3 sequence of waves must also be a triple zigzag by very definition (each wave in a diagonal must be a zigzag), then, IF this diagonal invalidates, the downward sequence must only have been w-x-y-x-z the triple zigzag - contracting in shape, and probably a wave (b).

Given the whippy and choppy price action, such a structure could well be inside a Minor 4th wave triangle. But, that's if the poorly formed diagonal does invalidate. As Ira Epstein says, "it ain't over 'till it's over". There is a question mark on the last wave because it is not over the (a) wave yet, and there is not yet a daily reversal candle-stick pattern.

Looking at the daily ES E-Mini S&P500 Index futures, here is how the (a), and (b) waves would fit into a triangle sequence, if the diagonal clearly invalidates.

ES E-Mini S&P500 Index Futures - Daily - Potential Triangle

Notice that the Bollinger Bands are now beginning to crash in on price, and that the Slow Stochastic is above 70, and already in over-bought territory. Granted, the price bias is up by virtue of the close above the 18-day SMA, and I believe the daily swing-line is now up, as well.

So, perhaps we have the makings of a triangle. Looking at the NQ futures (I will leave that exercise to you), price has already retraced more than 78% from the high to low. So, it is possible the NQ might make a barrier triangle, if the ES makes a contracting one.

It's hard to see. It's the worst time to try to predict waves as this is currently The Fourth Wave Conundrum as best as I can tell. I am letting the counting, the rules, and the invalidation levels tell me the story as best they can. My opinion is neutral.

And I am flexible and patient, and I hope you are too. 

Have a very good start to your evening.
TraderJoe