Everyone Hates Diagonals - Market Analysis for Jul 7th, 2026
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Today the market opened flat but held under the key resistance zone that I had been watching over the past several days, keeping the wave 2 of the larger wave (c) down topping count in play. We began to move lower in the late morning session, but the move stalled out and developed a three-wave move down off of the highs. So while holding resistance is keeping the wave 2 count in play, the fact that we have a three-wave start is certainly less than ideal for the most immediately bearish path. If the market does continue to push lower and begin to break through support, the three-wave start is suggestive that we may be forming another Ending Diagonal to the downside to fill out the larger wave (c).
Alternatively, if we are able to hold over the 7500 level and make another push higher, then it is more likely that we are still going to see another higher high to fill out the yellow wave c of larger (b) before any significant top is found.
As noted above, I am viewing the 7500 level on the ES as the key downside pivot/support zone to keep the yellow count probable. If that level holds and we break back over the 7614 level, then we likely are heading back to new highs to fill out the larger yellow wave c of (b).
If we break under that level and continue lower under the 7400 level on the ES, then it becomes more likely that we have begun wave 3 of (c) down. As I noted above, because we began with a three-wave start, this wave (c) down likely would be taking the form of an Ending Diagonal, which, while still pointing lower, would make the path lower less reliable and much more prone to whipsaw. We would still be very early in this potential path, so I would need to see confirmation of this with a break of support to confirm that we are indeed following this path, and it does not make for the best shorting setup.
So with that, I will continue to monitor the pattern and price levels as we move into the second half of the week and allow the market to dictate whether this is ready to make a more imminent top or see if there is still some unfinished business to the upside before it is ready to move lower.
