Likely into a (b) wave lower

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

After likely completing the (a) wave up, of minute ((d)) of the larger daily triangle pattern yesterday, since the futures were slightly higher overnight, cash prices initially popped higher, and then quickly reversed course taking out the low of the e wave triangle we noted yesterday. That meant we were likely somehow in a (b) wave lower. 

After the opening gap was closed, cash prices then headed to a new higher high in a three-wave sequence that we measured at 1.382, exactly, from the (a) wave high, yesterday. So, things don't get too confusing, here is the SP500 5-minute chart. Overall, the cash index closed up only 2.25 points.

S&P500 Cash Index - 5 minutes - Possible (b) Wave in Progress

On the left hand side of the chart you can see the e wave of yesterday's triangle, and the lower low at the point marked (A). You can see that 1.382 measurement over on the right hand side of the chart, and it shows where the (B) wave of (b) likely stopped. So, with the higher high, (b) would likely be an expanded flat correction.

For the rest of the day, prices made an expanding leading diagonal 1st wave lower, which was followed by a complicated second wave, 2, higher, that neared the high again in a "deep retrace". The leading diagonal has wave ((v)) longer than wave ((iii)) which is longer than wave ((i)). And wave ((iv)) is longer than wave ((ii)), and overlaps wave ((i)) without exceeding the high of wave ((ii)), and  they are all three-wave zigzag sequences. Wave 2 counted as a sideways double combination. After wave 2, prices started downward and made the first 1.618 wave lower of the whole afternoon.

By the close, cash had not taken out the ((x)) wave lower, but in the after hours, the futures did exceed that level lower.

Why was price so tight to the high? Because the futures were grinding against the daily upper Bollinger Band, and the 100-day SMA for most of the day. So, at some point tomorrow, the expectation is to see a gap lower, and work on finishing a (C) wave lower of a (b) wave. Then the (c) wave up of a triangle ((d)) should resume.

As a reminder, here is the still Potential Triangle Count, with several of the sub-waves now filled in more clearly.

S&P500 Cash Index - Daily - Potential Triangle

Of note, the Elliott Wave Oscillator (EWOsc) has gone dead flat, and is neutral as is typically the case in a triangle. It is worth noting that the weekly EWO has gotten to 11 as of today, below that 20 level we wrote about in the weekend post! That would be a key step in identifying the pattern as a fourth wave.

This is just a reminder, the (b) waves can be quite tricky, if that's what is, in fact, occurring. Any of the chart gaps lower can fill. None has too. The only invalidation point for the (b) wave is that it may not go below the start of the (a) wave.

Have a good start to your evening!
TraderJoe