Market Indexes: Major U.S. Equity Indexes closed mixed
SPX Candle: Higher High, Higher Low, Higher Close - Doji Candle
FED Posture: Quantitative Tightening (QT)
U.S. equity market upward momentum continues to be just awful as we wrote about on Friday. As far as I can tell, it is time to consider that the topping process is underway. Today was the first day of the new month. As I have written about several times before, this is often the day that sees inflows from pension funds, 401k's, company bonus plans, stock dividend reinvestment plans, etc. Today was no exception - at the outset - and then it faded. This is in stark contrast to the rollicking days of the bull-market when the the close would be near the high of the day.
Stocks as measured by the cash S&P500 Index had closed Friday at 2,914. With the cash inflows aided by trade agreement news, the futures were higher overnight. The green up fractal (shown as ^ on Friday's chart and below) was exceeded higher, and a new up wave confirmed to have begun.
The cash market opened up (+12) at 2,926, and traded higher to 2,937 (+23) until 10:30 am. At that point, the market began a choppy down trending wave to 2,918 (-19) ran into the gap up area and began overlapping prior waves. The gap was not fully closed in the S&P500; it was in the NASDAQ 100, and the S&P500 wound up closing higher by about +11 points overall. Some would consider that not too bad a day. What makes it so poor is the overlaps, and the other market averages.
While the Nasdaq 100 Futures made a marginal new all-time high (which we said we could easily find a count for), the Russell 2000 futures actually made an outside reversal day down! Neither the DOW nor the S&P made the new all-time high, today as the Nasdaq 100 did.
Here is Friday's chart again.
 |
| S&P500 Cash Index - 15 Minutes - Overlap |
We had shown you the Coiling Price Squeeze. The breakout was to the upside. There is a clear three-wave sequence up from 28 Sep to today's open. Then the overlap. It's possible we are now getting a 'final triangle' before wave v of minute (iii). Remember, we are counting this final wave as a diagonal. So we need .a, .b and .c up to complete it. If the run up to 27 Sep at 2727 is .a, then it is possible we are getting a triangle as a .b wave. And that is just one possibility. The .c wave of v as a diagonal itself is another one that comes to mind.
The key point is that the market is not impulsing; instead it is overlapping, and that is as real a caution flag as I know. I don't think the market truncated today, as the downward price movement overall was quite meager. But, those are just thoughts, and the market has been known to out-think me.
It's possible in a week or two we might be looking back at some price bar and saying, "that was a top" from a wave-counting perspective. (Remember, nothing here is to taken as trading or investment advice).
Have a very good start to your evening and to your week.
TraderJoe
Joe, your objectivity when counting waves is well appreciated as opposed to subjective services that seem to try and fit in there waves to appeal to their subscribers. So kudos to you. I looked back at your Russel count and chart. It doesn’t look impulsive until today. It appears to be more overlapping. Could this be a leading diagonal? Thanks Sam
ReplyDeleteHi Sam. Thanks, and yes it could be.
DeleteThe concept of degree labelling from your previous posts has had a significant effect on how I view my Elliot Wave counts. Thanks. But I have a question in which I hope you can answer because I regard you as the best Elliot Wave Analyst on the internet. Does the AB base pattern exists? This was mentioned by Elliot in his last book.
ReplyDelete