Whippy

In the prior post, we showed some of the weaknesses of the potential daily wedge count. Today, on the news of the PCE Inflation report, the weaknesses became more significant. Here is a side-by-side comparison of the ES daily and weekly time frames.

ES Futures - Daily vs Weekly

On the daily time frame the price bias is down as price is below the 18-day SMA. The first target of the lower daily Bollinger Band has been made. The next target of the 100-day SMA is in play. The daily bands are being bent downward a bit. The daily slow stochastic is one day away from embedding. It hasn't yet. It doesn't have to. An outside day up candle, made yesterday, was negated today, setting a trap for the bulls.

On the weekly time frame the bias is neutral because price closed on the 18-week SMA. Price has been turned lower by the resistance of the combination of the upper weekly band and the 100-week SMA. The Bollinger Bands are constricting. The weekly slow stochastic just lost the 79 level, and therefore, the first target of the 18-week SMA was reached. The next target could be the lower weekly band.

On the intraday timeframe, today, after the overnight gap down we were able to count a diagonal, lower, which was likely a small degree fifth wave and ended a downward wave as it was exceeded higher in 'less time' than the diagonal took to decline. Here is a 10-minute intraday chart of the SPY cash index.

SPY Cash - 10 minute - Two Upward Zigzags So Far

The downward diagonal appears on the lower left; draw in the contracting diagonal trend lines as an exercise. Then the new higher high in less time appears at about the 11:50 hour. There was then a 78% wave downward in three waves. This alerted me to a B wave, an X wave or a second wave of a contracting diagonal upward.

Next on the SPY 1-minute chart I counted up - in real time - the five non-overlapping waves that are shown with the green arrow in the center of the chart. (See the comments in the prior post for details). This turned out to be the Ⓐ wave of another zigzag upwards. That zigzag stopped just short of price equality with the first zigzag upward. As the day ended in cash another zigzag upward was not completed, but it did get a good start. Interestingly the downward retrace levels for the two down legs are nice & deep at 78% and 75%. The second downward leg is just short of the length of the first.

So, either a contracting diagonal, upward, is under construction or a failed triple zigzag will have been made. Either way, the rules and guidelines are clear for how to handle the situation.

The daily Dow futures (YM) made a lower low today and undercut the December low. This adds another wrinkle to its wave count and makes it more difficult to count upwards as well. 

As I have said, no market movement to the downside will surprise me. The upward wave counts are the difficult ones. Again, to resume an upward count, it is the bulls that have the onus of crossing the ES level of 4200 and closing there.

Have an excellent start to your evening and weekend.

TraderJoe