Ground Chuck

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

In Saturday's post, we warned to be very wary of more whippy action with a down-side bias, using a phrase we called "a meat grinder". Today lived up to that description. Looking at the updated hourly chart of the S&P500 cash index that we posted on Saturday will show why.

S&P500 Cash Index - Hourly - Smaller Triangle Holds

The S&P500 index had closed Friday at 2,604. Futures prices had been higher overnight, and so the cash market opened up +13 points at 2,617 and proceeded to rise all the way to 2,654. Clearly, that was up +50 points from Friday. 

At that point in the live chat room we stated "market having trouble with the 2,650 level, and 2,654 is the 78% retrace on the prior wave". That level is shown by the red arrow on the chart above.

At that point, the market began rolling over, and cash fell all the way down to 2,610, down fully, 44 points from the high, and it closed up only +9 points on the day. As to whether this potential e wave, and subsequent (b) wave, up, is over, we can only show this chart of the ES E-Mini Futures on the day, which we also showed in the live chat room.

ES E-Mini S&P500 Index Futures - 30 Minutes

As best we can tell, price traveled up in a channel, and then broke down out of the channel, breaking the down fractal, shown in red, at .b, as well. To put it plainly, that was not a good sign for those who are exceptionally bullish. It was a poor close, and price is back below both the cash and futures EMA-34.

On the hourly cash chart, the e wave did make it's target of closing above the hourly EMA-34 for good form and balance. And so a triangle may be completed here. One caution is that e waves of triangles can become more complex if they want to - sometimes they turn into smaller triangles themselves. That might allow an e wave to become longer in time, but not higher in price.

IF the hourly triangle in the first chart is completed, then with some backing-and-filling, it is possible the recent S&P500 April lows will be exceeded lower - as was discussed in the Saturday post.

For now, have a very good start to your evening. We hope we were of some help in judging the current situation.

TraderJoe