Is The Market Ready For A Bigger Bounce?
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Today we saw the market open slightly higher only to see a sharp drop in the early trading session. That move lower was relatively short lived however as we saw a fairly sharp move back up off of the low of the day. At the time of this writing, we are still trading under micro resistance so we are still not out of the woods in regards to the market seeing a bigger bounce just yet. We do however have some fairly clear parameters that we can watch to help give us additional clues as to where we still have a more immediate drop in the next few sessions, or if we will see a larger bounce before heading lower once again.
I do not have too much to add to what Avi laid out in yesterday's update in regards to the bigger picture and as he noted with the break of 5090 the primary count is that we have indeed struck a larger degree top. The bigger question as far as the SPX chart is concerned is how exactly we will move lower. Because the action is so far corrective in nature the path lower is far from clean but we do have some fib and price levels that we can work with on the smaller degree timeframes.
While the count is not super clear on the smaller timeframes I am able to lay out some fibs that should help guide us in the near term. I have micro overhead resistance at the 5062-5087 zone as key resistance for the potential wave iv of larger wave (c) of a. If we are able to push through that zone then it would give us an initial signal that we have already bottomed in all of the wave a per the yellow count and have already begun the larger wave b up. This resistance zone also has good confluence with the larger 5090 support pivot which we had been watching on the 60min chart over the past several weeks.
So while the count is far from clear on a micro perspective the 5087/90 region overhead is going to be key and I think that should we be able to move over that zone we can reasonably count a local bottom in place. Until we get through that zone however we are still not out of the woods and can certainly see further downside action before any sort of bottom is indeed found.
