Last night, I explained to you why I preferred a deep retracement for this wave 2 pullback, as it aligned better with our higher targets overhead. While the bottom of the blue box on our 5-minute chart bottomed at 2628SPX, I noted during the trading day that I can allow the market to even extend as deep as 2623SPX before I would have an issue with this being a wave 2, and would begin to consider something more bearish if we broke it.
While we were at the lows, I also noted that I wanted to see a rally up to AT LEAST the 2652SPX region to consider that we are in wave I of 3, as that is where the .382 extension of waves 1 and 2 pointed, and that is usually the minimal target for wave I of 3 in our Fibonacci Pinball method. As I write this, the market bottomed at 2625SPX, and struck 2650SPX.
Now, if the bulls are going to follow through to the 2740-2780SPX region, then we will need to see a wave ii corrective pullback when this rally tops out. Holding over today’s low then becomes VERY important for continuation of this rally. If the next corrective pullback holds over today’s low, and then we break out over the top of where we complete wave I, the market will be pointing towards the 2696-2713SPX region for wave iii of 3 next, and it can be quite quick.
But, as I have noted many times before, since we are likely still within a larger degree 4th wave structure, I don’t always trust micro patterns. So, if we were to break back below today’s low, and follow through below 2613SPX, it would place me solidly in the green count pointing to the 2440-2495SPX region, potentially by the end of May.
For now, as long as the market holds over 2625SPX, I can maintain a short term bullish bias towards the 2740-2780SPX region. But, even if we do reach that target, I would be expecting AT LEAST an e-wave decline to take hold, and possibly something even more bearish which can still take us to the 2440-2495PSX region before this wave (4) completes. We will cross that bridge when we come to it. For this week, I will be watching the support between 2613-2625SPX like a hawk.