No Assumptions

Market Outlook: Now Getting 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)

If you watched the market on television near the close, you know the Dow Jones Industrial Average closed down more than -1175 points. In Friday's post, we indicated we were likely in a third wave lower. That view was borne out in today's trade. Prices gapped down and largely traded lower all day.

Today, we offer this weekly chart of the S&P500 Cash Index, and we make no assumptions. None. That's why there is a big 'ole question mark by the potential wave 4, shown.

 

S&P500 Cash Index - Weekly - Making No Assumptions

Although today's move is more than a 23.6% retrace of wave 3, it is not yet a 38.2% retrace of Wave 3. Could price drop further? Sure. Is there anything magic about a 38.2% retrace? No. Could the 4th wave be over here? Possible, but it seems the momentum is still strong to the down side. Could there be a 50% retrace on Wave 3. Yes. Could wave 4 not be over by long shot, and could it form a whippy triangle? Yes.

Could waves 1, 2 and 3, be only waves A, B, C of Intermediate (1) of a large contracting ending diagonal? Yes, they certainly could be - in which case the retrace could be 50% or 62% or more.

Could the bull market be over in it's entirety? Yes, that is possible with the correction to the Elliott Wave International count that I provided to that organization - to try to help correct the situation with wave degree. As a reminder, here is that chart, updated with the chart correction.

Dow Jones Industrial Average - Extended Fifth Wave - As Corrected for Wave Degree

Clearly there is a quite a large down wave underway, and  the difficulty from a wave degree perspective is now this: How in the world would this wave pair with wave 2, unless it forms a very large triangle? Is a triangle possible? Sure. But there is virtually no evidence of one yet. Yes, Neely says the first wave of a triangle can be the most dramatic one. But, even then, we don't know that downward wave progress is over, yet, to assess if there are only three waves down or not.

So, we make no assumptions. We observe. We count. We are well aware of the phenomenon I have coined as The Fourth Wave Conundrum, and we respect it.

For those wondering how the up wave in the DOW might have ended, I pushed this chart in the live chat room days ago on January 30th. And you may view it below. I titled it The Completion Count.

DJIA - Hourly - Completion Count

You will note that is does contain both a final triangle, and an ending contracting diagonal at the hourly level. That diagonal has well been superseded lower in less time than it took to form validating it as a diagonal. We have shown you portions of this count on this blog. Notice, again, that the very purpose of  the triangle for wave ((4)) was to equalize the net distance traveled with wave ((2)), and to insure that wave ((5)) did not wind up being longer than wave ((3)) since wave ((3)) was shorter than wave ((1)).

Can this happen again at the daily and/or weekly chart level? Sure, it could. But I'm not holding my breadth. Due to The Fourth Wave Conundrum, it's at times like this I turn my wave-counting attention to other markets rather than be inaccurate in what might turn into very whippy highly volatile waves.

Have a very good start to your evening.
TraderJoe