Fed Day Reversal

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

Yesterday we had suggested two things, depending on how whippy the FED day actually was. First, we suggested that the b wave, up, might not be over. It wasn't. It made a marginal higher high. Second, we suggested that there would likely be a c wave down to possibly hit the diagonal trend line. There was. It did. I had suggested that 2900 - 2905 would be a target range. After the FED news conference started prices got down to 2903, before closing the day at 2,906.

S&P500 Cash Index - 2 Hour Chart - Potential Diagonal

Prices could have lower to move, but it is not required. In no case, however, can wave (4) become longer than wave (2) and still maintain the potential diagonal pattern. Should that occur, we'll deal with the consequences then. With today being an outside day down the diagonal has it's work cut out for it until today's b wave high is exceeded higher.

In any event, the utmost caution in wave counting is called for. Once again, my stance is neutral, cautious and only trying to count the waves to a potential top. Including today's movement, "most" of the upward waves are in the market as it tries to hobble into the month of October. The risk of incorrect counting of waves grows. If we are nearing a market top, a truncation can occur, or a new story can come out of the blue that will change things in a hurry.

Have a very good start to your evening.
TraderJoe