Off To "E" Or Yet Another "ED"
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After trading in very sloppy, overlapping corrective wave action over the past several weeks, we saw the market move lower this morning only to jump higher after the FOMC announcement and press conference. The question I now have is whether this sloppy corrective wave action is indeed a larger triangle still needing a push higher to fill out the final wave e of the triangle count, or if we are filling out yet another Ending Diagonal to the downside to finish off the larger wave (c) off of the highs.
At this point, both counts are still viable, and the determining factor will be how high this moves in the days ahead before breaking lower once again. Just note that both of these counts are sloppy and difficult to track with a high degree of accuracy until they actually complete. Once either the Ending Diagonal or triangle does complete, it should provide us with a decent tradable setup. Until then, patience is key.
If we are following the triangle count, which I have labeled in purple, we should see the market continue to push back over the 7525 level while holding above today's LOD at the 7371 level on the ES. From there, I would expect to see this push up toward the 7572-7600 region to fill out the final wave e of the larger wave (b) to complete the triangle. From there, we would need to see a full five-wave move to the downside to give us the initial indication that wave (c) down has begun per the purple count.
If we are unable to break back over the 7525 level, but instead break today's LOD prior to breaking that 7525 level, then we are likely following the Ending Diagonal count to finish off wave (c), with wave (b) having already topped at the 7/15 high. Under this case, I would expect a grind lower toward the 7350-7300 region before reversing sharply after the Ending Diagonal completes.
Again, because all of the wave action is corrective in nature under both of these paths, attempting to analyze or trade inside of these patterns is difficult. The follow-through will continue to be weak and produce a lot of whipsaw-type action while trading inside of these patterns. Once the patterns complete, however, under both counts, the resulting move should be sharp and should give us a tradable opportunity. Until then, however, I will continue to remain patient and wait for the pattern to resolve itself.
