Reality Sets In

U.S. Debt Clock: $22.64 Trillion
ES Daily Candle: Higher High, Lower Low, Lower Close: Outside Candle
Market Posture: Neutral-to-negative and Probing Waves
Daily Swing Line: Lower (Lower High, Lower Low)
Daily Bias: Down (Settle Below 18-day SMA)

After we counted "five waves up", yesterday, we noted today was likely to see inflows from the usual sources (see yesterday's post). The first half hour brought in those inflows which was noted, and that created "one too many waves" for an impulse, i.e. a "c" wave up, as in the first chart below. Then at 10 AM, it was reported that the ISM - Manufacturing dropped significantly - to 47.8, the worst in 10-years per CNBC. The market reversed, and the Dow and the ES futures, in the after hours, made five-waves down, although the S&P cash did not yet. Here is the Dow cash.

DJIA Cash Index - 5 Min - Five Waves Down from High of Day

The move down was very choppy after the news announcement. And the move did not channel well. I do not have concerns about the degree labeling because wave ((1)) could have ended a couple of bars before the exact low. Hard to say.

Today "could be" near the end of the minute ((b)), downward, to the 38% retracement level, and to find support at the horizontal tops across the August highs. One should note that price has contacted the lower daily Bollinger Band (where the "Smart Money" sometimes takes some off the table), and the daily slow stochastic is in over-sold territory (a condition which, never-the-less, can persist).

However, we will again not be counting up waves on the daily chart until or unless today's high - the high of an outside day down is exceeded. At this point, we will try to count a retracement wave upward. Here is the daily chart.

ES Futures - Daily - Last Chance for Minute ((b))

Extreme flexibility and patience is still required. In theory, "B" waves can do almost anything they want. In this case, the minute ((b)) wave may not become longer in time than the X2 wave, as was noted yesterday.

Have a good start to the evening.

TraderJoe