Important Number

Yesterday, we said a higher high was possible, and if it occurred, it would likely start a diagonal sequence. The higher high occurred, and during the day, we showed portions of this chart which was not confirmed complete at the time (see this LINK) but which was showing significant divergence on the hourly MACD oscillator. A potentially completed ending contracting diagonal is shown below on the same ES hourly chart.

ES Futures - 1 Hr - Potential Diagonal

Such a diagonal might end the minute ((c)) wave upward on the ES 4-Hr chart, as discussed in previous posts (see the first chart in the post at THIS link).

Still, while the downward wave at the end of the session tended to act like exiting from a diagonal, a contracting diagonal can not be confirmed as completed until the length of wave (ii) is exceeded. That would occur below 3,646.75, and that is because wave (iv) in a contracting diagonal by the rules can not be longer than wave (ii) of the same diagonal. P.S. If the diagonal does go slightly higher, all it does is raise this number by the same amount it goes higher.

After the down wave occurred a nice 62% retrace occurred, then a slight lower low which might be the b wave of a Flat for wave ii - to take more time than wave i, down. So, we'll watch the overnight and see how it goes. A substantial gap lower in the overnight might be indicative. 

So it is clearly stated, the alternate for this count is that wave (iii) of the diagonal ended at today's high, and wave (iv) ended at the 3,655 late-afternoon low.

Have a good start to your evening,

P.S. Below is the put/call ratio chart, showing a new low both for the raw index and for the 10-day MA

Put/Call Ratio - Daily - New Lows

 Note where the black arrow is at a new low.

TraderJoe

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