Bounce off 18-day SMA

U.S. Equity prices, as measured by the ES E-mini futures contracts, went down to the 18-day average of closes, and bounced, as shown in the ES daily chart below. As so often happens, this was accompanied by the loss of the embedded status of the daily slow stochastic, as shown below. The down (red) fractal on the FOMC report date of 17 September was not yet exceeded lower.

ES Futures - Daily - Bounce from the 18-Day SMA

Intraday, thus far, with 105 candles on the ES 30-minute chart, we can only count three-waves down following the degree definitions. The essential problems for wave counters are that 1) wave Ⓒ, below, is actually longer in price than wave Ⓐ; 2) wave Ⓑ - while shorter in price & time than wave a/i, is not at all in five waves; 3) the absolute length of wave ④ is longer than either Ⓒ or Ⓐ; 4) wave c/iii is longer than wave a/i in price & time; and 5) the waves appear at this time to form an exact parallel.

ES Futures - 30 minute - Three Wave So Far

So, the problems seem to be solved by designating the "running b/ii wave", and by suggesting that wave ④ is a flat wave to bring its net travel in line with the prior correction. However, that clearly leaves the count with only three-waves down into the c/iii divergent low.

The EWO now appears to be heading up, and a true non-overlapping fourth and fifth wave are needed for a downward impulse wave, probably within 120 - 180 half-hour candles. If this does not occur, then any downward wave would have to form by diagonal instead - if one is to form properly or at all.

Price closed the session above the 18-day SMA. So, the daily bias is still up. The only day that price can get the embedded status of the daily slow stochastic back is tomorrow. Closing below the 18-day SMA might change the bias to lower and create a longer down wave than prior down waves, but that has just not happened yet.

The "running b/ii wave" was a significant sign of weakness. We have not seen one of those in a while. For that reason - and others - no amount of downside would be surprising to me. It would be a matter of counting it properly. But, right now, the downward wave count is governed by The Principle of Equivalence and has two commensurate meanings. That means an upward diagonal or a triangle could still form here and make higher highs and these must be considered equally with downward counts until the market rules out one set of circumstances.

For our part, we count & we measure. And that is compared to the rule-based logic.

Have an excellent start to the evening,

TraderJoe