Bulls Last Stand - Market Analysis for Oct 31st, 2024

With the market breaking down today, it has made it quite clear that any potential wave [2] had not yet completed.  And, clearly, we have not gotten the additional i-ii thereafter to make it a higher probability we are about to rally to 6153+ next.  

Yet, at the same time, we are still clearly over the 5674SPX level, which means we still have to give the bulls the benefit of the doubt until that level is broken.

Therefore, I am viewing the current decline as completed a bit more complex w-x-y structure, with us now coming to the completion of the [c] wave of the y-wave of wave [2], as you can see from the attached 5-minute SPX chart.

As I have also outlined from a positioning standpoint, those that are more aggressively inclined may want to consider long positions down here with stops either just below 5700SPX, wherein the [c] wave within the y-wave would be equal to 2.382 the size of the [a] wave, and is our next support below.  Or you can simply use 5673SPX as your stop – just below the 5674SPX level we have been keying off.  A break of 5674SPX would invalidate this potential upside structure and would provide us with an initial indication of a major top potentially being in place.

For those that are a bit more aggressive, you have a risk of approximately 50 points (using the 5674SPX level), with upside potential of 430-510 points higher, as the target for wave 3 is in the 6153-6235 region (1.382-1.618 extensions of waves 1-2). That is why I noted earlier that the risk/reward ratio is approximately 1:7.  

For those like me, who want more of the probabilities on my side of the table, I would be waiting until the market completed a 1-2, [1][2], i-ii before I considered buying in.  That means we would need to see another clear 5-wave rally to complete wave i, at which time I would consider deploying some of my cash during a wave ii pullback, while using the low of wave [2] as my stop.

Remember, this market has come a VERY long way and is still quite extended from many perspectives.  Yet, until the market actually breaks down below 5674SPX, we have no clear indications that a major top may have been struck, which means the bulls can still push this market to even greater extremes.

But, to even begin the bullish juices for wave i, we will need to see an impulsive move through the 5765SPX region. Until we move through that region, we may still be tracing out one more 4-5 within this [c] wave.

So, the market is giving us really nice parameters for whatever kind of trader or investor you are. Please make sure you have your plan in place, as the markets will likely begin to move rather quickly once we move past election day.