As the market moved up to the 2104SPX level – which is where we have topped thus far, I noted that I would be moving support up to the 2095SPX level for the bullish count. This was taken out as support early today, and invalidated the immediate bullish pattern we were tracking.
But, simply invalidating the immediate bullish pattern and developing a bearish pattern confirmation are two different things.
I want to start by noting that the high at 2104SPX was struck on a 3 wave structure, which does make me a bit gun shy to short even a 5 wave decline, since it could be a c-wave decline in an expanded corrective move. The support for that scenario is the 2061-2065SPX region. But, once we have a full 5 waves down, which could certainly complete above that region, the manner in which we rally from that point should provide us a bit more information as to whether this is a 1-2 structure to the downside, which has us targeting at least the 2020SPX region, or if a move over 2104SPX is still in the cards before we top.
So, as you know, I am going to be on watch for my standard turning signal – 5 waves, followed by 3 corrective waves, followed by a move through the end of the initial 5 waves. In this case, it would mean we would complete 5 waves down, which would be followed by a corrective 3 waves up, followed by a break down below the low of the initial 5 waves down. That is what would open the door to a much larger drop in the market. Until I see that, I have to remain a bit cautious about any downside follow through specifically because the high made at 2104 was really only a 3 wave high.