So far ...

Prices have come soooo far since 1932, since 1974, since 1987, since 2001, since 2009, since 2021, and so far, prices still have the right look for both a larger and smaller contracting diagonal. We have shown the larger two-weekly one many times, and it has the right look on a log-scale chart. The daily one is below is shown, and it has the right look currently on either scale.

The initial B - to - ((ii)) trend line was broken in what may be the underthrow for the overlapping fourth wave. And a fifth wave may be in progress. The PPO indicator currently diverges on each subsequent peak, and has touched the zero line twice since June. The upper trend line has multiple touch points. The only item that would be nicer would be if the retraces for the second and fourth waves were closer to 62% or more.

On Friday, the Payroll report gave prices another lift higher, but then they stalled. It seemed like an ideal time to take prices over the prior high, but they just wheezed. We're not making too much of it. We're just remaining calm, patient and flexible pending short-term technical developments. The NQ futures did go over the high again. Still, the four hour chart can give one some markers, as below.

At the moment, the odds slightly favor the uptrend in force. But one needs to watch the recent trend line and Thursday's low for a presumptive invalidation of the uptrend should it occur this week (with better confirmation below 7,575). The prior high is certainly a target for a continued move higher. If slightly higher highs are made, it may wind up only be the minuet (a) wave of minute ⓥ with a (b), and (c) to follow.

But, make no mistake, ES prices are stretched to inanity, and declines should not surprise. I say that because so few stocks and or indexes are participating in the rally. The NYSE Advance/Decline line is clearly not at new highs at this time.

Sentiment is also stretched to an extent not seen before - with my proprietary bullish sentiment indicator indicating more consecutive weeks over 60% bullish than at any time in the past. It's not the highest reading ever, but it is more sustained than in prior runs. People are rotating from "Good news is good news", to "Bad news is good news". In other words, they want to see economic weakness to drop interest rates some to lift stocks more. This has happened in many prior cycles too. It may be a sign of hope developing. And remember, a bear market skids on the slope of hope - should one begin.

One can argue that the Dow and the Russell 2000 have begun significant declines. If so, the Dow especially would just be validating the longer-term two week contracting diagonal. It had quite a few days down, which might indicate  a turn of degree, but one would want to see a greater price extent.

Have an excellent rest of the weekend,

TraderJoe