Break Out Update - Market Analysis for Aug 25th, 2022

I have been going through the structure some more, and, as I warned for the last several days, a break out seen before we hit the 4095 target would make this region much more complex.  And, that is where we now stand.

Normally, when a 4th wave ends, we get an initial 5-wave move off the low to confirm that the 4th wave has completed.  But, because we expect this 5th wave to be an a-b-c structure, the a-wave start will not likely be a 5-wave structure.  

Therefore, unless we actually hit the target for a 4th wave pullback in our current larger degree structure, it is nigh impossible to determine if the rally is only setting up a drop to the ideal target of 4095SPX (the wave 4 we were trying to track before the break out), or a b-wave that will set up a c-wave to the target below, or the a-wave in the start of the 5th wave.  

So, this is the issue we have been dealing with.   And now that we broke out before we hit the ideal 4095SPX target, we are left unsure if this rally is a b-wave in wave iv, or an a-wave of wave v.  Again, I warned you that this region was going to be quite complex if we did not hit our downside target, and it has now shown its colors.   

Now, the question will be if this rally will fill in a standard [a][b][c] structure, which we normally see in this type of move, or if the market is going to try to stretch directly to the 4270+ region for the a-wave/b-wave.  Unfortunately, the structure off the low does not lend itself to provide an answer.  But, as noted, the standard way this would normally take shape is the [a]b][c] structure.  

But, we will not likely be able to answer the main question as to whether we have begun wave v or not until we see the structure of the pullback after this rally completes.  If the pullback is clearly impulsive, then we are dealing with a c-wave in wave iv, which will likely take us back down to the 4095 (and maybe even a bit lower, depending on how high this rally takes us).  If the rally is clearly corrective, then we are dealing with a b-wave pullback in wave v, which should set up the c-wave rally to 4400+. 

Lastly, I have been trying to warn you that most investors would not likely want to get involved in the market until it actually proves itself.  It was clear this segment of the market action was going to be difficult, and it has chopped up even some of the best of traders.  As this region fills in over the coming week or so, it will likely give us more clues as to the resolution of this structure.  But, until it clarifies, it will likely continue to chop people up.  Consider that in your own positioning.   

Avi Gilburt is founder of