Diagonal Failure

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

As we had written about in our previous post, there was no requirement for the potential hourly ending contracting diagonal to make a new high. When a contracting diagonal is a C wave, it's fifth wave may fail. This one did, and it failed badly. So, we hope we prepared you for that eventuality.

S&P500 Cash Index - Ending Contracting Diagonal C Wave Failure

So, we now conclude the (d) wave of the larger triangle is now over, and it ended with the three-wave, .a, .b, and .c to the wave ((5)) of the c wave of minute (d). There are people who may recoil at the truncation. Given the news environment, particularly as it relates to Italy, Korea and China, it seems like the right count from a psychological perspective, as well. The news could have been better this weekend. It wasn't.

So, now we look at the larger potential daily triangle on this index.

S&P500 Cash Index - Daily - Potential Larger Triangle

From this chart, we can see a completed minute (d) wave, and the beginning of the minute (e) wave - or worse - lower. Today's decline was not small potatoes. Yet, the (e) wave has already done everything we suggested it 'must' do - which is to trade on the opposite side of the daily EMA-34 for better form and balance. It can still trade lower. The only thing this down wave can not do, and remain within this particular triangle count, is trade below the (c) wave.

We'll see how it goes, taking it step by step. Remember, the best alternate now is that a minute (ii) wave ended where the minute (d) did - all as shown previously. I hope you are gaining a better understanding now of The Fourth Wave Conundrum, and why this makes wave calling so treacherous at times.

For now, be patient, calm and flexible. And have a good start to your evening.
TraderJoe