Decision Time - Market Analysis for May 17th, 2022

The market has done a wonderful job of taking us back up to the 4070SPX region.  But, as I noted earlier today, we still have one question left, which revolves around whether yesterday’s consolidation was a 4th wave in the 5-wave structure off the recent lows, or if was actually a 2nd wave.

As I noted yesterday, the ES had a potential of counting 5 waves up off the recent lows, which would have made yesterday’s consolidation a 2nd wave.  I am presenting that as our blue count, which is a very aggressive bullish count.  And, for those that remember the rally off the March 2020 lows, pullbacks were very stingy since most of the market retained a strong bearish bias, not unlike our current environment.  But, in order for me to adopt this more aggressive bullish count, I would need to see us break out through the pivot outlined on the chart.

In the meantime, if yesterday’s consolidation was only a 4th wave, then this rally is either a 5th wave in wave [i] in green, or completing the c-wave in wave iv in yellow.

So, I have added some further parameters for us.  First, if this is indeed the green [i][ii], then the market has a floor in the 3940SPX region.  As long as we hold that support, then the bulls can take charge.  A sustained break of that support would rather clearly point us down towards the 3767SPX region as our next likely downside target.

Furthermore, I have added a pivot overhead in the 4110-4140SPX region.  A break out of that region will place me in the wave [iii] camp.   Moreover, a break out over the yellow wave ii level would also invalidate the potential that this is a wave iv rally in yellow, and make it highly likely that the bottom has been struck.   We would then be looking for the next degree larger 5-wave structure to complete with waves [iii], [iv] and [v], thereby placing the bulls strongly back in control of the market.

So, we have reached a decision point in the market, and it is now up to Mr. Market to make it clear to us whether a bottom has indeed been struck from which we can begin our next climb to all-time highs or not.

Avi Gilburt is founder of