With the current structure of the decline almost “hiding” the b-wave bounce within this downside structure, it has made identifying the completion of this downside a bit more difficult. But, I guess we have to expect these types of scenarios any time we deal with b-waves. As I have noted so many times before, trying to analyze every micro twist and turn within a b-wave is like attempting to throw jello for distance.
Rather than provide you the detail as to the difficulties within this downside structure, I will try to make this a bit easier.
Currently, I would much prefer for us to drop a bit lower in wave iii in an impulsive 5-wave structure for the c-wave of green (b). That would mean we “should” see a wave iv consolidation thereafter take some time, and then follow through with another decline in wave v of the c-wave of (b) towards the 2665SPX region. This is shown in my 5-minute SPX chart.
Should this scenario play out, then we have a high probability bottoming structure pointing us to holding support for the (b) wave at the 2665SPX region, wherein we have the .764 retracement of the (a) wave rally, which aligns with the a=c in this decline from the (a) wave high. And, for those choosing to play the long side for a potential (c) wave rally to 2860+, it would provide you with a set up for a potential 200 point rally, while using a stop of approximately 25 points or so.
Again, in this type of environment, we must recognize that the market has entered a very treacherous state. And, when we deal in such environments, we must reduce our position sizes because we have to also increase our stop sizes.
Now, this does not mean you MUST buy a drop to the 2665SPX region. One can also wait for the initial 5-wave rally to complete off that support to better confirm the bottom of the (b) wave and the start of the (c) wave. You can then buy the 2nd wave pullback, with a stop at the lows we strike.
Should the market break down below 2665SPX in strong fashion, it would start moving the probabilities towards the side of the yellow wave structure on the 60-minute chart. That would suggest the a-wave of wave 4 has not yet completed, and we will likely continue to drop to at least the 2550SPX region.
Again, I want to harp on the fact that we have likely moved into a treacherous market, which was initially signaled by the break down below 2880SPX, which I had warned about almost two months ago. Preservation of capital should be your primary focus during this time, as you want to save this capital to be able to buy the market when we complete this wave 4 in the 2100/2200 region. So, if you consider any trades, please keep this in mind at all times.