Market Indexes: Major U.S. Equity Indexes closed lower; DJUtil higher
SPX Candle: Higher High, Lower Low, Lower Close - Bearish Engulfing Candle
FED Posture: Quantitative Tightening (QT)
In the daily chart of the S&P500 cash we said it was likely the c wave of the minute (d) wave was underway, and we had stated it could have higher to go. It still could.
Yet, in the live chat room today, this hourly count was posted.
|S&P500 Cash Index - Houly - c wave of minute (d)|
So far, we can count this movement as a potential contracting ending diagonal to end the c wave of the minute (d) wave. Interestingly, we called this potential wave structure at today's marginal new high - which makes such a diagonal a potential. Notice how the Elliott Wave Oscillator is declining from wave ((1)) to wave ((3)). We had no assurance that wave ((4)) would begin in earnest, but it did.
As a refresher, here is that larger potential daily triangle.
|S&P500 Cash - Daily - Potential Larger Daily Triangle|
Clearly you can see why we have a Fourth Wave Conundrum. This larger triangle could play out or the smaller triangle - as we outlined in a previous post on The Russell 2000 Index (with it's new high) could have been the triangle of interest - just apply the same declining trend line from (b) to a, above in the smaller version of the triangle. There simply is not a fool-proof way to tell.
The hourly ending diagonal c wave could be spelling out that the prior b wave low will be taken out by the minute (e) wave lower. That is one excellent possibility. In any event, I would like to see the (e) wave travel below the blue EMA-34 shown for best form and balance. Such a wave would probably generate a lot of bearish sentiment.
And, so that you know, this is now the first time that I can call a legitimate downward alternate to this count - bearing in mind there is little downward evidence for it just yet. However, in the interest of 'an abundance of caution', we're going to show it to you here first.
|S&P500 Cash - Daily - Downward ALTERNATE|
The above count would be that of a double combination w-x-y whose purpose would be to form minute wave (ii) after a minute wave (i), down, from an Extended 5th wave higher. This count would be the very same in the DJIA as it would be in the S&P500, and might help explain the Dow's lower low at x, which is unconfirmed by the S&P500.
Why have we NOT counted it as the proverbial 1,2, (i), (ii) down as so many web-sites have? Well, remember Neely's guideline that no part of wave 3 should break a line from 0 - 2? That is what would happen if w was wave 2., and if y was wave (ii). So, we are not going that route.
Further, we think that considering this wave as either of the two triangles, above, or as the double-combination alternate count has served us well in terms of predicting just how this wave would stall as it has in the low volume reflecting the tremendous uncertainty as nations elect whether or not to play the "Trade War" game.
And this should be the best written illustration of why The Fourth Wave Conundrum exists in reality. With exactly the same wave structure, you have the clear possibility for the smaller triangle, and the larger triangle which point upward, and this latter double-combination, which points downward. If that doesn't spell conundrum I don't know what does.
We might suppose that with the recent highs in the advance-decline line, that it would be better to have a Minor 4 triangle help finish the Primary 5th wave to end the SuperCycle. That's our bias, but it is just that, our bias. It could also be that the Primary 5th wave ended with the extended Minor 5th wave as a major Elliott Wave firm sees it. And, the evidence for that might be that we are forming an ending contracting diagonal. Will such a structure lead to a complete breakdown of the entire triangle? It could. But, it hasn't as of yet.
Stay tuned, and have a very good start to your evening.