Trick or Treat, or Both?

Market Outlook: Probable Long Term Top Identified
Market Indexes: Major U.S. Equity Indexes closed higher
SPX Candle: Lower High, Higher Low, Higher Close - Inside Candle 
FED Posture: Quantitative Tightening (QT)

Tomorrow is the last day of the calendar month. As I have written about before, this is often a "window dressing" day, with sloppy price action, as portfolio managers trim their holdings of the losers and try to show they were only holding the winners. This will be followed by Nov 1st on Thursday, the first trading day of the new calendar month. This is often a day of inflows as mutual funds, 401k's, pension funds, company bonuses and dividend reinvestment plans often add funds to equities on a planned or timed basis.

From a technical standpoint, today made a higher high than yesterday's late day rally high, but not a higher daily candle overall. Today was an inside day, and from the perspective of the hourly chart, below, price closed right on the hourly down trend line, about which so much has been written.

S&P500 Cash Index - Hourly - Close on Upper Descending Trend Line

So, there are now three competing counts. The market wants us to have to assume a lot of risk - or none - in order to find out which is which. (I chose the latter! Lol!).

The three competing counts are currently a diagonal upward, a flat for wave (ii), or a lower low. Let me explain. First, the upward diagonal version.

S&P500 Cash Index - 15 Minute - Upward Diagonal Version

So, if wave (ii) can hold as a low tomorrow, and then proceed to make a marginal new high (which would likely break the hourly down trend line), then there may be justification for "five-waves-up". Note that wave (iii) stopped almost precisely at the 0.618 extension on wave (i) - which is quite common in diagonals.

But, if a diagonal is made upward, say early in the day, then much of the day could be spent retracing it downward in the "window dressing", prior to say a first of the month rally day.

The other possibility is a large gap up in cash that destroys the pattern of a Leading Diagonal wave, and brings about perhaps a larger flat wave for wave (ii) - in other words today's high might only be all or part of a common (b) wave upward, with a (c) wave down to follow. Wave (ii) would not fully have occurred yet.

Finally, since we have tagged the upper diagonal trend line, and since (i), (ii), (iii) of a diagonal counts exactly as (w)-(x)-(y), is it possible that all of minute ((ii)) is in the market, and prices head lower to break the low? This last option would seem remarkably short in time to correct all of the bars of the diagonal, so far. So, for me, it is lowest down on the list, but I will watch for it. I only mention it because, it is possible, and would not break any rules I know of. But, again, when time is considered as a guideline, then, it should be considered last.

As far as I can tell, because of the grinding up nature of today's movement, I have shown the most likely count on the fifteen minute chart. But, money managers who want to adjust their portfolios may have more to say about it than I do.

Have a good start to your evening.
TraderJoe