Squawk Evening Update: We Missed It

We missed a few things today.  The first was confirmation.  We said the market would need to give us some because we had only seen three waves down.  Today did not give us that confirmation.  The other thing we missed was presenting a valid alternate count to consider, although we did email subscribers with the implications during the trading day.  The count we were looking at is shown in magenta along with the other counts we had been considering this morning.

[click image to enlarge]

While this count satisfies all of the wave counting rules, there are several things to dislike about it, it isn’t particularly clean.  We would prefer to see a classic wave where the third wave is the longest.  Perhaps more troubling is how short wave 5 is relative to the rest of the move.  Generally, it just doesn’t look right, but with the right shoehorn we can make it fit.

There will always be rare possibilities that we do not note.  There are additional, unlikely possibilities that we could imagine even now that are not on the chart.  However, we wanted to alert you all to this one because its existence contradicted something we said in this morning’s briefing.  We had said that a move above red 2 would likely lead to new highs.  This would remain true if we couldn’t count five waves down into Tuesday’s low.  So even though the five-wave down count is ugly looking, and making it less reliable, we felt compelled to alert readers to the possibility during the day.

The decline from Monday’s high to Tuesday’s low still counts out equally well (perhaps better) as a three.  Therefore, we were quick to point out that our observation of the possibility of the magenta count did not mean we were calling for a turn down, just that it was possible.

This afternoon prices rose awfully close to Monday’s high.  The magenta count will allow a downturn from these levels.  But once above it would point to the green count that said we only had a correction.

The market is anticipating a significant amount of economic news out of China overnight.  Perhaps we’ll see some movement in overnight futures that colors our outlook.  We’ll also have a full set of charts and analysis.