Pre-Fed

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

With the FED announcement tomorrow and the first of new Fed Chairman Powell's press conferences, it was not a surprise to see the ES E-mini S&P futures volume shirk to less than 1.0MM contracts (~920k), and the NYSE stock market volume around the 3.2 billion level as participants lightened positions some.

The S&P500 cash index closed yesterday at  2,713. With a very narrow trading range, stocks opened with a small two-point gap and traded up in the opening minutes to 2,724. After the first half-hour stocks began to trade lower and reached 2,710 by mid-afternoon. The pull-back was almost, but not quite, 50% from yesterday's low. About 14:00 ET stocks began again to rally almost reaching the high but not quite. And then they followed with a smaller pull-back into the close - at 2,717.

Here is yesterday's chart updated for today's prices.

S&P500 Cash Index - 30-Minute Chart

From a chart perspective, the first thing to note is  that the low of potential wave ii was not exceeded lower. Next, prices trading on both sides of the mid-line of the down channel showing that the market knows that mid line is present. For a move higher to resume, prices must get over the down-sloping upper channel line, and eventually exceed the (a) wave upward. Today's 50% pull-back was just enough to get an extended third wave if tomorrow is a gap-up day.

If prices fail badly at the channel or before, and exceed the low of ii, then the next best downward count is to think of ways that the daily triangles could be extending lower. More on that if it occurs. We note the EWO is green and still rising, yet the market internals were still negative today with more declining issues than advancing issues, more new lows than new highs, and more down volume than up volume. This is exactly the type of technical deterioration we would expect in a market topping process - all while the major averages are reporting they are up.

Not much else to report on for this very slow day. Have a good start to your evening.
TraderJoe