Temporary Simplification

Today was an interesting day. AAPL and the NQ futures made a higher high. The ES futures and cash S&P did not, but by just 0.25 - 0.50 points, an amazingly small margin. Also of interest, neither cash nor futures left a gap at the high. Still, we were able to follow the count downward in yesterday's comments, and you are welcome to review them at your leisure. The chart below of the ES 5-minute futures will simplify the short term picture.

ES Futures - 5 Min - Base Channel from the High

We have drawn a "base channel" around today's downward sloping waves. We caught the timing on a second wave very well; it is now longer in time than a first wave down (note, first and second can refer to a and b). Because this is such a short term chart, and there is insufficient information, we can not say that the downward waves are definitely i and ii, or a and b. For a third wave lower, there needs to be a 1.618 wave lower that breaks the lower boundary of the base channel, before there is a larger wave upward that breaks the channel upper boundary.

You can see that the setup is there. There may be a smaller degree .i first wave down following the wave ii / b high. As long as any upward price movement tonight remains in the channel, a downward count can remain in effect. Certainly so, if the base channel is broken lower. Very often, gaps down for third waves lower start in the overnight. Will that happen tonight? We don't know with certainty.

For that reason, we have placed a "wave counting stop" above 3,327 - which really is not all that far in points from the current price. Any movement above that level would likely indicate an incorrect count, and require counting like a sideways triangle or upward diagonal. But, we are not there yet, and it bears watching.

So have a good start to the evening and keep one eye on the overnight futures.

TraderJoe