Bullish Set Up In Place

While I cannot guarantee how the market is going to move, I can outline potential set ups which present a good risk/reward type of structure.  And, I am seeing one now in SPX.

With the market bottoming around the .500 retracement and the original target we had for this last decline, we have rallied in what counts relatively well as a 5-wave structure off the low.  I would then view that as wave 1 of the (c) wave.  Thereafter, we had a sharp pullback, which is a bit clouded in its structure, but which I am assuming is a wave 2.  We then rallied again in a seemingly 5-wave structure, which I have labeled as wave i of 3, and we are currently pulling back in what can be a wave ii of 3 as I write this update.

As long as the low of wave 2 remains intact, this is a reasonable 1-2, i-ii upside set up for a potential (c) wave rally to new all time highs.

However, I want to note that the standard extension for a 1-2 structure is the 2.00 region, which only provides us with a marginally higher high in SPX in the 6950SPX region.   So, unless we see major extensions in wave 3, that would be our target for this structure for now.

OF course, if the market breaks down below the wave 2 low, then I have to begin assuming that today’s rally was either all of the red b-wave, or just part of an ongoing one that will try to push higher one more time before the c-wave down begins.  

Either way, the parameters for this region are quite clear and outlined above.  If the market does not take immediate advantage of this upside set up, then we will likely be stuck within a deeper (b) wave pullback.   

And, should we exceed the pivot on the 5-minute chart, then it must hold as support for wave iv of 3, or else the red c-wave comes back with a vengeance.