Confirmation Day

Market Outlook: Probable Long Term Top Identified
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)

Yesterday's possible "hanging man" candle in the cash S&P500 (see yesterday's SPX candle) played out nicely today, with both a lower low day, and a lower close day, confirming the candle. However, after the gap down, in tone the day was quite choppy.

The only things that seemed to work reasonably well were 1) to consider the up move from 11 Oct to 17 Oct as a large three-wave sequence; the chart is shown below, 2) to realize that corrective moves often occur in channels, as a bear flag, & that the break of the lower channel lower could be telling, and 3) to count on a very short term 5-minute basis, the down wave as a five wave sequence.

Here is the S&P500 30-minute chart showing the three wave sequence, and the channel boundaries.

S&P500 Cash Index - 30 Minutes - Channel

In the down wave today you can find a few ways to count "five down", but the alternation gets a little unclear. If the down move continues tomorrow, and makes a new lower low, lower than 2,710 we could have had a minuet fourth wave up, and a minuet fifth wave down to make an impulse.

If the choppiness is endemic of a triangle, we could thrash around for a while before making the lower low. Or finally, if we only make a marginal low then this ((A)), ((B)), ((C)) up wave could be wave ii of a diagonal lower, with the zero point on the chart as a,b,c of i, and the end of the ((C)) wave as ii.

None of these can yet be ruled out, so we remain, patient and flexible.

Counts in the upward direction can not be considered without a daily higher-high candle. And all those larger potential diagonal upward diagonals would require a cross of 2,900 and again would not be considered until or unless that occurs.

Have a good evening,
TraderJoe