Downside Quite Sticky - Market Analysis for Oct 5th, 2016

As Garrett noted yesterday, the most likely way to count a c-wave down seems to be as an ending diagonal.  And, it means much more whipsaw can still be seen, as we make our way lower.

However, for the diagonal count to be maintained, we really should not exceed the 2166SPX level, and a move through the 2175SPX level would completely invalidate that count.  In the event of such invalidation, we would only be left with the alternative yellow b-wave, which would then become the primary count, with the alternative being the wave (ii) in blue as having already completed.

Again, I have a hard time accepting the leading diagonal potential in the alternative count in blue, but will consider it if this immediate downside set up invalidates. 

But, as long as we maintain below resistance, we “should” see downside follow through by tomorrow.  Yet, I cannot say that this would be the type of pattern I would be advising one trade aggressively, since diagonals are quite difficult to trade due to the whipsaw.

So, I think tomorrow should give us our answer.  If we do not see downside follow through, it would place the ending diagonal down, along with an immediate downside set up, in jeopardy.

Avi Gilburt is founder of