How You Can Tell - 11

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

In the category of you can't extract blood from a stone, you also likely can't get much more information from the market than it offers. So, there is not much point - at times like this - in beating one's head against the wall looking for more clarity than we can get. But I do think it is essential to see what information is there, and not throw away any that is there.

With that in mind, here is the chart of the S&P500 Cash Index - 15-minutes that we have been working with all week.

S&P500 Cash - 15 Minute

This chart essentially says, "we have spent two days going downward, and, after breaking the downward channel to the upside, spent two days going sideways."

We counted out for you in near real time, the A wave down, and the B wave "running flat", all based solely on measurement and structure, and not based opinion. The C wave down - also based on measurement - best counts as the ending contracting diagonal shown. It fits all of the rules and leads to the right conclusion: the upper parallel trend line will break - which it does.

Next, beginning on 15 Mar, there is the break of the channel upward, and a divergent back-test of it downward, which actually makes a lower low in the S&P500 (but not the DJIA), and then a very sideways structure, currently, to which one might try to draw some trend lines. We have sketched in some.

Before we go on about the possibilities for this wave, we will note that, at present, as a triangle it is not very well formed yet. Even to the untrained eye, I think one can see it is not entirely symmetrical yet: the top line is flatter than the bottom line. Also, it is possible to count the up portion from 15 Mar to 16 Mar as a five-wave-sequence or as a three-wave sequence. So, that alone generates some caution. But, we don't exactly know what will happen before the FED meeting this week, and so a triangle could get better defined, or the trend lines could be a good effort, but still just an illusion, and the pattern will break unexpectedly in one direction or another.

So, here are some of the possibilities for this structure. From an A-B-C down, if sideways movement continues, and a triangle is better formed, the triangle could be an X wave, with a further A-B-C down yet to come - to allow the daily triangle on the DOW to extend it's lower trend line further lower. The same with the daily S&P 500.

Equally possible, if the potential triangle prematurely busts upward, is an X wave in the form of another flat. And that is because of the lower low following the C wave. In that case, the middle leg of the potential triangle is, in fact, and impulse, and - provided a new cash low is not made - then the down movement at the end of the day on Friday is all or part of a second wave lower. Further, there has not yet been a 62% upward retrace of this down wave.

Next, because, with the DOW's downward overlap, and a very ill-formed upward channel on the S&P500 it seems less likely that this is a fourth wave of the upward progress, as currently structured. Again, a fourth wave of an impulse is impossible in the DOW, but might be possible as a larger triangle in the SPX. But this is now pretty far down on the list. Remember, the DOW and the S&P are fully out of synch wave-wise because they topped on different days. It is even possible, because of that extra wave in the DOW for it to make a non-overlapping impulse down.

There are few technical clues. I mentioned the DOW's weakness relative to the S&P. Another one I see was the NDX was a bit weaker in the last session than other indexes. Again, due to The Fourth Wave Conundrum, it is hard to get or present more information than is available.

So again, be careful, cautious and patient until things clear up just a bit.
And have a good start to your weekend.
TraderJoe