U.S. equity prices, as measured by the daily ES futures contract, headed lower overnight and continued lower into the open until about 11 AM. At that point, as the chart below shows, the 100-day moving average was tagged, slightly below the 6,600 level, meeting our Target #2 price. And then there was a bounce.
As of the cash close, the bounce occurred in three-waves, missing a five-wave-move by fractions, and then price headed lower breaking the lower trend line of an upward parallel, and then price again closed below the lower daily Bollinger Band.
Price has not closed the daily futures gap yet (as Target #3), but it could. The market is still quite bouncy in the sense that there is a lot buying on the way down. We suggested whippy action, and we appear to be getting it.
With two closes below the lower daily Bollinger Band, the odds drop to about 4 - 6% that the next close will be below the band (not impossible, but lower odds). The greatest number of consecutive closes below the band as reported by broker Ira Epstein, is typically seven - and a grinding lower scenario like that cannot be dismissed out of hand.
The hourly SPY can still be drawn in a downward parallel, and readers of this blog are encouraged to perform that exercise. As long as it is in a parallel, it suggests downward continuation.
Tomorrow is NVidia earnings after the close.
Can the bulls rescue the current downtrend? Well, at the moment, the wave down today from 13:30 to the close is longer in price and time than the wave down from 11:40 to 12:35. And the up wave from 12:35 to 13:30 is longer than the prior one this morning. This suggests the primary up path would be by a low probability expanding diagonal. However, keep an eye out if price gets below 6,614 either in the overnight or tomorrow as such a diagonal would invalidate below there. If it busts it would not surprise me in the least. Again, no amount of downside selling would truly be unexpected at this point.
The daily slow stochastic is in over-sold territory, and that bears watching. If price has "latched on" to the lower band, it may force the stochastic to embed. But we are a way from there at this time. So, a word of caution is worth its weight at this time.
Have an excellent rest of the evening,
TraderJoe
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