Since hitting the high off the lows at the end of August, we have had 4 downside set ups, with one of those invalidating.
Today, we were watching for a market short side set up, which seems to have initially triggered at the end of the day. While the ES chart counts quite nicely as the top of the red b-wave, I honestly have to say that it is a quite small b-wave in the SPX. But, sine that potential b-wave top, the market has dropped in a 5 wave move, and moved back up in a 3 wave move, wherein a=c within that 3 wave move. This is a technical short set up.
As long as the market maintains below the 1971SPX level (1961.25ES), then we have a set up in place which will target the low 1900’s, depending upon the size of the downside extensions.
For those trading overnight, any move back over 1961ES will open the door back up to the 1974ES region, and even back up to the 1985ES region. So, the market must maintain below 1961ES and continue to subdivide down.
The next confirmation of the break down is dropping below today’s low. Until that happens, I have a hard time trusting the market action within this corrective chop. So, please, make sure you are using appropriate risk management in your positioning, as b-waves are notorious for whipsaw.
But, should we extend down to the 1900 region, as you can see, I think that will likely send us back up over 2000 to complete a larger degree b-wave. So, since I don’t have a strong larger degree c-wave set up to take us to the 1700’s just yet, the market may not yet be done chopping up trying to trade the smaller degree set ups, which is why I still urge caution on any overnight trades.