Both Potential Triangles Still Intact

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

Summary: Today's potential hammer candle typically requires confirmation by a higher closing candle. If confirmed, and particularly if yesterday's high is exceeded, then that would likely provide considerable evidence that this down leg of the triangle is completed - whether a minuet (b) wave or a minute ((e)) wave.

Here is the current daily chart of the S&P500 cash index, the larger triangle version.

S&P500 Cash Index - Daily - Both Potential Triangles Still Intact

Prices closed yesterday at 2,634, and ticked higher to 2,635 at the open. Then, prices made a slight lower low today at 2,613 - likely the .c wave of the y wave of the (b) wave. In the process, prices filled one of the two open gaps from the low, as show by the red price flag. This .c wave was likely the ending expanding diagonal you see diagrammed on the left side of the intraday chart, below.

We had cautioned yesterday that "Absolutely nothing has said we are done with the volatility yet'". We had also mentioned in previous blog posts, that "any or all of the gaps lower could fill". We have had four of the five daily gaps upward from the (a) wave fill. One remains open at this time.

Today's hammer candle could easily count on the five minute chart, as a contracting leading diagonal, and a then downward wave, as diagrammed following the (b) wave, below. We followed this second potential diagonal as both a potential triangle and a diagonal within the chat room today. In the diagram below, wave ((5)) is shorter than wave ((3)), wave ((3)) is shorter than wave ((1)), wave ((4)) is shorter than wave ((2)) and overlaps wave ((1)), and they are all clear three-wave zigzags. This is an excellent model for you to follow for contracting diagonals, so I hope you will refer to it often.

S&P500 Cash Index - End of (b) And Diagonal

Up until the time of the close, this diagonal had not invalidated. Therefore, this is likely the completed diagonal. The retrace is likely a wave .ii, or part of wave .ii, of the new (a) wave up. The futures have exceeded the high of .i in the after hours.

Because this diagonal took so much time, we don't know exactly how much time the .ii wave will take. With the higher high, it may turn out to be a flat wave again. The market is currently throwing every possible complication at us - likely in order to throw us off the track of a triangle. None-the-less, without lower lows than the 2,554 low, then there is, again, no evidence to conclude otherwise. Certainly, without significant down side follow-through, those with an outright bearish count are not succeeding yet.

So, we will remain flexible, patient and calm, and we will adjust our stance immediately, once we see any likely evidence to the contrary. So far, the evidence is slightly to the up side, not the down side. Further, we now have a very clean invalidation point. Wave .ii may not travel below the low of wave (b). Sometimes in Elliott Wave work, that's all one can ask for.

Have a very good start to your evening.
TraderJoe