They Can't Help Themselves

Today was the first day of a new trading month. As we have written about many times before, the last day of the month is often sloppy trading as portfolio managers undertake window-dressing, and prune the losers while they amp-up on the winners. Yesterday was no exception with a red candle for both the SPX and the NQ indexes. 

Then, the first of the month usually sees the inflows from the typical automatic investment sources such as pension funds, 401k's, company bonus plans, dividend reinvestment schemes at the like. Today was no exception with the NQ futures printing an outside candle up. It's almost as if it is expected that markets will always give a positive return, so in goes the cash. It's one of the most reliable market seasonal patterns I can find, but you don't hear much about it.

Below is the update of the NQ daily futures continuing the prior labeling previously shown.

NQ Futures - Daily - Awaiting (iv)

The nearby count suggests that any higher high tomorrow would likely qualify as the fifth wave, v of (iii). Again, this count continues to suggest than an ending wave whether C or five of 3 should end in a five-wave sequence. So far, a completed five-wave-sequence is not to be counted. But, a correction within the local channel could happen at any time for a wave (iv) - like if the Senate stalls on the debt limit bill, etc.

Out of interest in the shorter term count, the ES futures are shown below in the hourly time frame. The chart is as of the cash close. There has been more trading since.

This hourly count suggests only three waves down since May 30 - more clearly showing the window dressing. Of note, there was an expanding diagonal c wave, shown, after an impulse a wave and an expanded flat b wave. And now three waves up, possibly three waves up of five. Short term, the count suggests that overlap at 4,200 be avoided unless a contracting diagonal upward is to be built - but there are not enough waves or enough problems to suggest the diagonal at this time.

Let's see how some of the news affects the market including whether the Senate completes work on the debt limit agenda, and how the Payroll Employment report turns out tomorrow morning.

Have a good rest of the evening.

TraderJoe