Next Wave Lower Confirmed

In yesterday's post, we showed a plausible way that the next wave lower could complete as a five-wave sequence. Today, that expectation was met, as shown by the first chart of the S&P500 Cash Index.

SP500 Cash Index - 15 Minute - Next Wave Down

After the third wave, iii, at the 1.618 location then the long draw-out sideways triangle chewed up a lot of time until the vth wave broke lower out of the barrier triangle. The purpose of that triangle was to better equalize the net distance traveled in waves ii and wave iv. In doing so, the upwards diagonal (c) wave that completed on 16 Sep was confirmed as an ending diagonal. The start of the diagonal in the cash and futures was undercut today in less time than it took to build the diagonal.

So, on the daily ES futures chart, here is the picture as of the settlement.

ES Futures - Daily - Swing Line Down

The swing line has turned down, and the daily bias is down as price settled under the 18-day SMA. And, while the lower daily Bollinger Band is just starting to bend lower, the daily slow stochastic is in over-sold territory. It has not even started to embed. As of this time on the S&P500, there is no overlap on the June high as there is on the Dow.

The nature of these waves remains unlabeled at this time, as technically there are only three waves lower. It could be a-b-c, complete. But, it could just as easily become more than that, as an Intermediate (X) wave lower is expected as least to exceed the Minor B wave lower in price. So, we could have three waves down as part of a FLAT Intermediate (X) wave, down. We could have Minor A, down, Minor B up, and minute ((i)) of C down. Or, we could have minute ((i)) down, minute ((ii)), up, and minuet (i) down, today. Time will tell.

The issue is that an (X) wave sequence could be almost any one of the corrective forms. And we note today, that declines exceeded advances by only a 1:2 margin. This is not a very impulsive reading, and it certainly doesn't seem like a "kick-off" wave. Therefore, we are very, very patient with this structure. Look how long we had to be patient with the upwards diagonal to 16 Sep, and look how long we had to be patient with today's fourth wave triangle.

That's what it takes some time. Get some good rest over the weekend.

Have a good start to the evening.

TraderJoe