Slightly Lower Close

Today's slightly lower cash close was not much, but was sufficient to confirm yesterday's outside key reversal day down. As most technicians know, the outside key reversal day - whether up or down - is one of the strongest technical signals there is. That is because it indicates that a group of participants were caught at the highs, and they are looking to get out (in the case of an outside key reversal day down.) Or, on the flip side, in the case of an outside key reversal day, up, there is a group of market participants that got caught at the lows, and they are looking to get out, too.

Today, we have have several things: 1) we not only have yesterday's key reversal day down, but, 2) we have a confirmation of that day with a lower closing low; 3) further we had at the end of the day a near exact 62% retrace of the down wave - from the truncation - on the cash S&P500 index, 4) as the daily chart below shows, we also had a back test of that lower wedge line - and so far - that back test has held. Finally, 5) fifth and Fibonacci last - there was a countable ending contracting diagonal at the end of the day that met all of the degree requirements. Elliott analysts know the significance of that pattern, so I do not note it lightly!

You can see the contracting ending diagonal and the intraday chart at this LINK. The pattern has an excellent 'time signature' as each of the waves is contracting in time, just as expected!

SP500 Cash Index - Daily - Fisher Transform Dropping

Because of the lower closing lows, the Fisher Transform is dropping and further confirming the divergence with price.

Next, as of the futures settlement all of the Dow (YM), S&P (ES) and Russell (TF) futures had lost their daily embedded slow stochastic readings. Only the NDX (NQ) futures had not. So, this likely means many stock indexes will begin to interact with their "lines-in-the-sand", their 18-day SMA's, and there might be some battle there between the bulls and the bears.

Some have said, "today was clearly a consolidation day for a move upward." To the contrary, the evidence above suggests today was a consolidation day for a further move downward.

Have a good start to your evening.
TraderJoe