Trying to Resolve - 2

After the cash close Moody's downgraded U.S. debt (story at LINK here) one notch. If news matters, let's see the reaction Monday. The market for its part made a higher daily high into the cash close. It is still above the 18-day SMA and the slow stochastic is still embedded. In the comments we said that the inner of the two channels in the ES 4-hr chart below has been resolved with higher highs (like a fifth wave of some degree).

The last four-hour candle today was a red spinning top (abbreviated S.T. on the chart) and is hanging right on the lower parallel of the inner channel. Red spinning tops are slightly weaker than green spinning tops. And we have often noted such single-candle patterns required confirmation with a significant lower closing candle. That confirmation is not on the board yet and is not on the board until it is on the board. Still, we have noted two significant levels of overlap should they occur. Further if the channel doesn't hold (lower channel line breaks impulsively lower, is back-tested, and the back-test fails) then it would likely be of longer-term importance.

At the moment we also will note that today's higher high occurred on a lower MACD - so a divergence - and that, too, is just a warning sign until it isn't.

As a reminder of the intraday wave-counting screen, the ES 30-min chart is below. One will note that prices were generally rising until about 8 AM, but they simply could not tag the upper band. That is generally a sign of weakness. Then, prices fell off in an expanding diagonal that we showed in real-time and which concluded around 10:30 am. Like all diagonals, it is very difficult to tell if they are ending diagonals (more common) or leading diagonals (less common). So, all we could say was, "watch the high".

Price did reverse, piercing the intraday 18-per SMA, in according with the daily bias still being up, and an apparent fifth wave was made. So, the diagonal was likely the "c" wave of an overnight Flat wave and likely a fourth wave flat. On the Moody's downgrade the downward movement made a longer wave in price than the prior down wave (as shown by the Fibonacci ruler), and this likely suggests that a continuing contracting diagonal is not being formed from these waves. Price then closed below the intraday 18-period, and the intraday slow stochastic closed below the 79 level. And while a warning, it now again fights with the bias of the daily chart until it doesn't. Keep an eye on those down (red) fractals.

Have an excellent start to the evening and the weekend,

TraderJoe