The Day Ahead: PM Edition 2024-08-01
NFP on Friday morning
Bonds
Bonds are on plan as they extend higher. At this point, I think it best to let ZB attempt to stretch for 123^17. Yes, the dominant cycle is topping but probably too aggressive to fade prior to testing the next overhead target or a drop under 122^10.
Crude Oil
CL moved down which was expected. Looks like the first step in a [B] wave and thus might get a little bounce prior to dropping a bit lower to say 75.92 to complete [B].
Dollar Index
DX moved lower initially on Thursday but recovered the drop. I continue to be bullish DX but need over 104.63 for confirmation.
Euro
I was a day early in looking for a bounce in Euro as it fell on Thursday but in the early hours of Friday as I type this, it has recovered most of the drop. I’m penciling this in as the first leg up in a wave [II] bounce in development. A good target for ‘(A) of [II]’ is at 1.0866.
Gold
Gold is being stubborn as it pushes back up to near the previous high. The wave [II] idea is still alive though it is running out of runway. Last ditch targets for a lower high at 2518.40 and 2529.15. Probably too aggressive to short prior to a drop at least under 2502.90.
S&P 500 Futures
Well, I was expecting a retrace for 5603.75 or 5638.50 but nothing like this as the market dropped relentlessly all day on Thursday and as you can see, has continued lower overnight. I can see three possible paths which I have color coded on the intraday chart.
The last chance for bulls is to count this out as a 3-3-5 where we are now in 5 with an extension target of 5402.25 or retrace targets on the daily chart at 5384.50 and 5368.25. Yes, technically [IV] could be deeper but I’m not comfortable with anything under 5368.25. This is the green count.
Next, count this out as a leading diagonal which has the high on Thursday as [IV] and now in [V] down. First target is 5402.25 but could easily extend lower to 5349.00 or even 5279.50. This count assumes the high is in and that the next major bounce will set a lower high in wave ii. This count is in blue.
Last, the very bearish count in red. Here we have a 1-2-1-2 type count that has the current swing as the middle third in development. It shares targets with the count in blue, the difference being we should expect the lower targets to be hit and that the resulting bounce will be choppy and modest for a wave (IV).
Bulls are on the back foot but not down and out 
Three possible paths
