Bigger Picture Remains Intact

For those of you that have been focused upon the bigger picture, not much has really changed based upon today’s rally.  I still think we are setting up a test of the 3200SPX region in the coming week or so and the only question is one of “micro-path.”

As I outlined today, we have a possible 1-2, i-ii downside structure for a [c] wave decline.  And, normally, I would be quite eager to short this type of a set up.  However, since both waves 1 and i within that set up would have be counted as leading diagonals, it makes the standard set up much less reliable.  In fact, I do not recall seeing a 1-2, i-ii downside structure start with back to back leading diagonals.  So, while the potential for bigger downside follow through to begin tomorrow certainly exist, I apologize for being a bit skeptical.

Of course, if the market were to follow through below 3350ES, then it would certainly make it a bit more likely that we will see more immediate downside follow through.  But, even so, I would still consider whether that [c] wave decline would morph into an ending diagonal structure.

So, in the near term, micro support for the ES is in the 3350/60ES region, and as long as we hold over that support, the alternate path for a larger [b] wave remains a higher probability than I would normally view it when we have a potential 1-2, i-ii downside structure.  The ideal target for such a [b] wave would be in the 3430ES region, wherein the .500 retrace of the entire decline from the all-time market high resides, and coincides with the a=c for the [b] wave.

Should we breakdown below 3350ES sooner rather than later, and follow through below the pivot on the ES chart, I would expect that we can drop down to at least the 3150 region based upon the current downside set up. 

And, to repeat, I still maintain an expectation that we will test the 3200SPX region in the coming week or so, but the micro path still remains a bit of a question to me.