How High In A b-Wave?

If you have been reading my updates in the trading room, you would know that I am treating this action as wave 4, especially since we broke below support and the rally off yesterday’s low really does count best as a corrective rally.  But, as usual, the question is how high does the b-wave take us?

As I write this update, we have struck the ideal target I would normally expect for a b-wave, which is the .618 retracement of the a-wave at the 4895SPX region.

However, if you may remember me noting this in the past, when an impulsive structure does not reach its ideal target, we often see the b-wave on the ensuing corrective structure come back and strike the target.  We call this an expanded b-wave structure.  

So, if the market does not begin an impulsive decline after striking our resistance, and we meander down in a corrective structure, it leaves the door open for a more expanded b-wave, which can still point us towards the 4955SPX region in the coming days.

But, if we see an impulsive break down below 4853SPX, then it likely will be pointing us down to the 4784-4802SPX region for the c-wave of wave 4.

Take note that I had to adjust our wave 4 target.  Normally, we target the 1.00 extension of waves 1-2 for a wave 4 target, as it often coincides with the .382 retracement of wave 3, which is also the typical target for wave 4.  However, in this case, the wave 3 came up short of the ideal 1.618 extension, which means that the .382 retracement of wave 3 is a bit lower than the 1.00 extension.   Therefore, the target for wave 4 is 4784 (.382 retracement)-4802 (1.00 extension).

And, of course, should the market continue to break down below 4740, or if the rally off the wave 4 support is corrective in nature, then we have to begin stronger considerations of the yellow count again.

Avi Gilburt is founder of