GIGO Day

There's an old expression: garbage in, garbage out.

You pretty much knew from the outset of a -60 point overnight movement in the ES E-Mini S&P500 futures, that they would not allow a futures gap of that magnitude to stand. Well - as has been a typical case - after the first bar of the cash session in the morning, they spent the rest of the day trying to buy back that gap.

Today that strategy did not work on the Dow (YM), the S&P (ES) or NDX (NQ) futures. Gaps remained going into the settlement. The Russell (TF or RTY) futures did swing around to make another new high, including an outside day up. Yet, the Russell is up against it's upper daily Bollinger Band, and it's daily slow stochastic is just in over-bought territory.

The result of the day is that the major index charts are just plain ugly. But, there are some things we can discern by measurement. Here is an intraday chart of the Dow Jones Industrial Average.

DJIA - Intraday - Downward Count

First, we know we had five-waves down from the high as an impulse wave that was called for you here in real time. That is likely an (a) wave. Next, we had three ugly waves up to a (b) wave, followed by the sharp overnight drop. That (c) wave down made a lower low, confirming the five wave structure of the prior impulse.

Then, today, we had yet another three-waves up - which we simply can not assume are completed. But these three waves were longer in length than the waves to (b), although they were shorter in time. Therefore, this length violation eliminates a 1,2,i,ii count because it would be a degree violation.

Should the market sport another higher set of waves, that goes beyond the current (b) location, then it would be possible to consider the count at the bottom which is 1-2 where 2 is a Flat wave. There is nothing wrong with that scenario from a degree standpoint because the (b) wave is shorter in length than the wave marked 1 or (a).

Should the last three waves end the rise, then we may have to look for some kind of diagonal lower. But, let's take it a step at a time, and see how it goes. Going into the last fifteen minutes of the futures trading day (16:45-17:00 ET), the index futures uniformly decided to get ugly again. Keep an eye on it!

Bottom line: we only had three waves down, and now three waves up. The market is playing its cards very close to its vest.

Have a good start to your evening and your week.

TraderJoe