SPX

SPX

ES

The equity markets experienced hard downside price action. Range on the ES was 25 handles, while volume was very heavy and expanding.

Volume has continued to expand during this sell off, suggesting that distribution has been taking place.

This is what structure looks like intraday. This is the same chart posted in eChat, except I have added the fib relationships.

It is unclear what that mess is in the middle with the question mark. I believe it is probably a triangle and looks much better when not scrunched up. This suggests a B or 4th wave.

The question is what degree - if a 4th. It is possible that it is sub-minuette degree, which means that we are finishing up wave v, and thus minuette (iii). I don't really care for the fib relationship, but it is what it is. We should know shortly.

It is very possible that the degree's should be moved up a notch.

The weekly chart shows the nice rejection price had with the upper channel line. In fact, there were several lines of interest in the same vicinity, though not all are shown.

Notice the action in RSI. It has broken its uptrend line from the March lows. There is also negative divergence in place.

MACD has a cross-over that occurred several weeks back. Notice that it has tried to retake the average, but has failed, resulting in a bearish hook. The histogram has been divergent for months.

The channel off the March lows has been violated. Should price close below this channel, this would be confirming evidence that, at minimum, an intermediate degree correction is at hand - and possibly the end of the bear rally.

Cash has broken and closed below the uptrend channel off the March lows. This is a big deal folks.

I believe this is telling us that this intermediate degree ABC (or WXY) has completed. This means that we are in the process of tracing a (1) down, if that also completed a primary degree [2] wave, thus ending the bear rally.

Should primary [2] need additional work, then we would be tracing an (X) wave instead.

In each case, it portends much lower price. I have placed prices of the pivots that may provide support on the chart.

In my update on October 18th, I stated that I felt a man-sized correction was very near and that it wouldn't surprise me if it was 100 handles or better. Any intermediate degree decline should easily achieve that.

The next major KoolsTools cycle low comes from the 9/23 and 10/21 dates. This should arrive in 16 more trading days. There is also a peak scheduled in 4 trading days.

Edit: I failed to mention what bullish alternatives could possibly be in play. The only viable option that I can see, is that the 1099 H finished a 1st wave of an ending diagonal.

I believe that this is low probability. Any trade through the 1012 (1015 pit session) level invalidates this option. In my opinion, the best bullish case is that we are tracing an (X) wave. Sorry bulltards - now assume the position!

Weekend Update - ES

ES
After a nice upside day on Monday, it was all downhill the rest of the week, with Thursday being particularly nasty.

The ES has now given up over 50 handles from its 9/23 high of 1075.75.

It is obvious to me that the equity market(s) topped at the ES 1075.75 H. At minimum we should see an intermediate degree correction. At worst - turn out the lights 'cause this party is over.

My interpretation of structure has the 1075.75 H completing minute [v] of minor C of intermediate (Y). I will assume that primary [2] of [5] of cycle c was finished as well, until proven otherwise.

If correct, this suggests that the March lows should be taken out in this primary wave [3] down. Actually, it is required for 3rd waves to travel beyond 1st waves, as a rule of formation.

There is a possibility that we trace an intermediate degree (X) wave before going even higher, as shown on the monthly chart.

This is a 15 minute pit session chart.

This is my current view of structure of the decline so far. If correct, we are tracing a sub-minuette degree iv wave of minuette (iii). Once complete, we should see v down that will finish (iii).

I have seen some counts out there that show minuette (i) ending at the 1041 L. It is certainly possible, but I don't share that view.

The problem rests with what to do with that clear 5 waves up to the 1065.75 H. My interpretation has structure forming a zigzag with a failure c leg.

The highlighted area represents the 9/7 gap, which should fill in short order and actually has on the 24 hour chart.

This is a Bullish Bat pattern that setup late Friday. It reached its 1st target at market close.

It's possible we see higher price when globex opens if we are still under the influence of this pattern.

I don't like the fact that price ticked through the 88.6%, but 2nd target is up at 1025.50

The daily 3 bar projection sits at 972.25. Notice that the 161.8% was at 1012. Should we break that level, and I'm fairly certain we will, this would suggest that price wants to find its way down to the projection.

SPX
A look at daily cash shows a couple of things of interest.

First, notice the uptrend channel from the March lows. We are very close to that very important lower boundary line. I suspect that should be good for at least some kind of bounce.

Once broken, the play would be to sell a back test failure.

Also notice the RSI. We have broken the uptrend line from the March lows. We also had a very nice and pronounced negative divergence at the highs.

Can't help but notice what a crappy minor C wave, at least wave [v]. A very unsatisfying structure at such an important juncture imo.

We have a full moon Sunday night. Statistically, you are supposed to buy sell-offs into a moon. I don't personally trade moons, but I do pay close attention to them.

Tuesday is a KoolsTools cycle peak day.

Bottom line - there is absolutely nothing suggesting a bullish case here. As stated above, we should see an intermediate degree sized correction at MINIMUM.