Initial Support Broke - Market Analysis for Sep 3rd, 2024

So, yes, this is a day with three updates on the equity market.  Because we are at such an important junction in the market, I feel compelled to make sure you have as much information as possible.   So, let me update a bit more.

While I clearly did not see it as a high probability that the top was already in place, the action today has made that much more likely.  Yet, I have been warning that we were approaching the potential for a major top, and even outlined the raised risk in the market over the weekend.

So, initial support broke today.  Now, in truth, I want to see how the market bounces into tomorrow to see if what I am doing on my chart is prudent.  You see, I have already noted that the b/a top is in place, as you can now see.  But, I may be pre-mature.  Yet, for now, this is what I am going to do.

Now, the important part is what the market does tomorrow.  As long as the bounce – assuming we get one – is corrective, then I am going to keep the labeling as shown, with the top I place. Then we need to see how the decline takes shape in the coming days.

As far as the SPX, I have noted a i-ii in place, but it does not look terribly good in the SPX, whereas it does look a bit better in the ES chart.  In either case, it is clearly not the most ideal of 5-wave structures to the downside off the recent high. And, when you consider that wave ii topped within pennies just below the high struck, well, it really does not give me a solid feeling about the b-wave top being in place.   Yet, I am absolutely compelled to track it from this point forth.  Especially since IWM really has a much cleaner and nicer downside set up.

In fact, I will state it right now that if IWM provides us with a filled in 5-wave downside structure, I will turn bearish.  However, with that being said, I do NOT want anyone turning too bearish just yet. The bears have a lot to prove before I am going to advise you turn bearish.

In the SPX, we have support in the 5300-5385SPX region.  Should the market decline in a clearly corrective manner over the coming week or two into that support, then there is no reason to turn bearish yet, and we will next be focusing upon the 5840SPX region for another rally.

However, if the market takes a more direct drop and breaks the 5300SPX region, then I am going to assume we are completing wave 1 of the c-wave down, also assuming that the IWM provides us with a similar path in the coming weeks.   But, again, until this happens, DO NOT turn bearish too early.  

So, in summary, assuming the market bounces correctively into tomorrow, we will have our work cut out for us, as we will be busy determining if the decline is corrective or impulsive.  If it is corrective, and we hold 5300-5385SPX support, then we will be looking for an initial 5-wave structure off support to signal that a c-wave to 5840SPX is what is taking shape.  If it is impulsive, then I will not only be turning bearish, I will be strongly advising those that follow our work to be raising cash during the wave 2 expected bounce thereafter.

Have a good evening.