Squawk Morning Briefing: Selling Crescendo?

This morning sees a continued sell-off in U. S. equity futures, helping to confirm a likely end to a corrective move at Monday’s high. We have been tracking the idea that that the move down from early August needs one more leg down to complete a five wave move and with the Dow futures off roughly 90 points as we write this, it is possible that most or all of such a move could come today.

There are several reasons to think that we could see a swift down move to end five waves. First, bottoming action is often quite different from topping. Bottoms are commonly made with sharp down moves which exhaust themselves. Second, it isn’t uncommon to see a 90% down day (90% of all stocks down and 90% of the volume to the downside) somewhere within a five-wave move down of the size we’re seeing. We haven’t seen one yet, so we could get it here.

We have discussed the possibility that the recent correction is a second wave and not a fourth. The possibility of a selling crescendo here for a fifth wave is a warning that just because we might make a new low on very sharp action doesn’t necessarily mean that we’re in a third wave down as opposed to a fourth. In fact, it would be completely normal to see a sharp fifth wave down and then a reversal. Nevertheless, it is still possible that we are beginning a third wave down, so rely on our discussion in today’s videos to tell the difference.

Lastly, remember it is the last week in August where many on Wall Street are on vacation and volumes are typically quite thin. Usually there’s not much movement this week, but when there is it can get wild.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:

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