Is Wave (iv) Now Done?
The market clearly did not go as I primarily expected today, but when we broke the 2873ES level, if forced us to adjust on the fly. With the break of 2873ES, the market opened that door to the c-wave down, and it really walked through that door today. And, when it was clear that support broke, we set our minimum target for this c-wave down at 2822SPX, and we have even exceeded that. In fact, we are now at the bottom of our target zone for this c-wave.
For those that read my weekend analysis, wave (iv) will most often overlap into wave (i) territory in ending diagonals. And, with wave (i) at 2791SPX, we have come within a stone’s through of that level. Can the market still push us down there this week? I am not sure. But, I think we may have generated enough bearishness with this drop to build that wall of worry to take us over 3000SPX.
But, as I was warning many times as we were approaching the recent highs, we are certainly getting closer and closer to a major top in the market. And one has to strongly consider how much you want to play any further upside, if at all.
In the bigger picture, while I can accept a spike and reversal of the 2791SPX level to complete a wave (iv) in this region, a follow through below 2770SPX would make it quite clear that we have struck a major top in the market, and we can continue down strongly to the 2600SPX region.
Currently, lower resistance resides at 2825/30SPX, with upper resistance at 2850SPX. Once we climb over 2850, it should place us strongly into the a-wave of wave (v), on our way to 3000+.
For now, we are in the lower end of our support region for this wave (iv). As long as we only see a spike and reversal of 2791SPX, the uptrend remains intact, but only as an ending diagonal. If weakness persists below 2791SPX, then it opens the door to 2600SPX, and quite rapidly.