Inside Day - Consolidation

Officially the ES futures had an inside day, representing some consolidation. Overnight the futures were volatile and trend less and pretty much remained that way today, whipping around quite a bit with some higher highs, then the lower lows, and then staying in a range. This makes several possibilities from a wave counting perspective. The idea below is just one of them we discussed in the comments today. The reason it is being shown in the futures is that the cash market has a decided 'three-wave' look to the last wave down.

We counted five-waves-down in the futures very well, and it is shown in red. The count is legal and it works. But because some waves were not made in the cash market, we are on alert for the possibility of either a running triangle or a diagonal fifth wave. Part of the rationale here is that the NQ futures and the Russell 2000 (RTY) futures have already exceeded their FEB/MAR lows. The ES futures have not and may be playing catch-up to the down side.

If they do, a running triangle is one way to accomplish that. A second way is with a diagonal fifth wave. So, IFF the wave to green (b) / alt:v is really a three wave sequence (and not a five) in cash, then the wave would fit with the idea of a triangle or possibly with a diagonal. Of course, lower lows are still needed for a diagonal to play out. Thus, with all of the volatility surrounding tech earnings, we are on watch for the running triangle, too.

So, if an up wave occurs tomorrow and stalls out around 4,270-80 basis the ES, it might give the triangle idea a little more credibility. Meanwhile, as you can see the RSI is sort-of stuck in the middle.

Have a good start to your evening.

TraderJoe