The reason I am sending this update out a little earlier than normal is because there could be a slight change in the smaller degree expectations for this current potential bottoming structure in SPX.
In the weekend update, I was considering a break of the 4274SPX level the door to open that would point us down to the lower low in SPX in a 5th wave. However, due to the structure that we have in the ES, we may be taking the scenic route to that 5th wave lower low.
First, I want to re-post something I noted in the trading room today:
“I am often asked why I track both the ES/futures and the SPX. Well, there are times where the SPX seems to be missing information in wave structure that we can see in the ES from the overnight action. This could be one of those times.
In the SPX, this looks like a CLEAR break down is about to happen. Yet, the structure in the ES tells us that we need to see a break down below 4295ES to take away the potential for a b-wave structure within a more protracted 4th wave.
So, this is just one example as to why I feel it is necessary to track both.”
Therefore, early this morning, I highlighted the 4295ES level as the level that must be broken to make the alt-b wave potential much less likely. Should the market hold that support, it can still project us higher in a c-wave rally over the coming days to provide us with a larger wave 4 structure.
The a=c target should we hold this support is in the 4355SPX region. But, as I noted over the weekend, we could still extend to the 4370/75SPX region. And, it would still take a break out through 4401SPX to suggest that a bottom has been struck. For now, I am still expecting that 5th wave lower low.
So, as it stands right now, today’s low is quite important to the near-term direction of the SPX/ES. If we hold it, then we can still swing higher in the alternative c-wave of a larger wave 4. And, this is what makes 4th waves so treacherous, as they can often take many different paths to complete, as they are the most variable wave within the 5-wave Elliott Wave structure.
It is for this reason that I like to see a CLEAR 5-wave decline off a wave 4 high to make it likely that wave 5 has begun. I cannot say that we saw the clearest 5-wave decline off Friday’s high, as it left room for several interpretations, as we can see.
So, until we break down below today’s low, I have to leave the door open for the potential in the alternative c-wave rally. Taking out the high struck overnight in ES would make this a highly likely scenario.
Lastly, I would like to add that the fact that the MACD’s are turning up on the smaller time frame does provide some support for the alternative c-wave.