Early This Week Is Still Important

Nothing has really changed my view from the weekend analysis.  But, the information we received from today’s action has added to our understanding of where the market is potentially headed.

First, I want to note that the rally off the low struck on Friday is now a relatively clear 3-wave structure.  That makes me begin to lean on the more immediate bearish counts a bit more. However, should the market be able to break out over today’s high, then we will likely be in wave [3] in an ending diagonal, as shown on the 5-minute ES chart.

Yet, that red count I highlighted over the weekend still remains strongly on the chart as long as we remain below today’s high.  In fact, there is an even more immediately bearish potential I have added in purple, which is something gleaned from the IWM chart.

On the attached 60-minute IWM chart, which I updated earlier this morning as we were striking the high today, suggests that we have a [i][ii] downside structure within wave i of wave 3.  And, as long as we remain below today’s high, we could see a strong downside move begin sooner rather than later.

Therefore, to mirror this potential move, I have added the purple count on ES, which would suggest that the move into Friday’s low was an a-b-c move for wave i of wave 1.  Should we stay below today’s high and then break down below the red wave [v] support/target box below, that would likely mean we are in wave iii of wave 1 down, with a target in the 1.236 extension region of waves i-ii, which is in the 5111ES region.  Again, this target is only for wave iii within wave i, with all 5 waves of wave 1 likely pointing us down towards the 5000ES region.

The main point to take away from this update is that today’s high is very important for the near-term direction of the market.  Remaining below it keeps pressure down, with the extent of that downside yet to be determined in ES/SPX based upon the manner in which the market handles the red wave [v] support/target box on the 5-minute ES chart. However, should we be able to take out today’s high, it opens the door for an ending diagonal pointing us towards the 5400SPX region.

For now, we still do not have a confirmed top in place . . . YET.