Resistance at the 100-Day

Back on January 26th, I publish a chart showing a potential expanding diagonal in the ES / SPY. I did that because of strained wave counts on the way down. Today, both cash and futures got upward overlap on wave Minor 1. Here is an updated daily chart.

ES Futures - 1 Day - Potential Diagonal

Today I posted what I thought of those counts as the bottom waves were made. I had said that there were some irregularities in the impulse count. You can find that chart at this LINK. Read yesterday's comment at 09:46 am to see what the anomalies were.

After the cash close FB missed earnings and it started a downward wave of some degree.  Now the question is whether price heads below the 18-day SMA again or not, after finding some resistance at the 100-day SMA.

This is one of the reasons why diagonals are low probability patterns that must prove themselves. Price is over the 18-day SMA for wave 4, and that means this wave is fighting the daily bias. Thus, the potential pattern fights the odds.

Still, the daily slow stochastic is no longer in over-sold territory, so some of the Smart Money that got caught unawares in the decline may wish to minimize their losses, and see if there is more to the down side. As this is written, the upper daily Bollinger Band is beginning to curl down under the prior high.

For a diagonal to complete properly, wave 5 should be longer than wave 3 in both price and time, and it should be made up of a zigzag at this point. The invalidation point of the potential diagonal is above wave 2. A cause for concern would be any price higher than today, as we could count a completed ((c)) wave up today, with these last five waves. See the chart at this LINK2. (In this last chart the degree symbols are only illustrative).

Have a good start to your evening.

TraderJoe