It's Déjà Vu All Over Again

Today the market moved higher overnight, only to drop sharply in the early morning session. Since then, we have been range-bound between the overnight high and the morning low. While the action was certainly volatile this morning, the overall count has actually not changed at all, and today's action has put us right back where we were at yesterday's close. I am still viewing the same three counts that I laid out yesterday as viable, and until we see a break of the support or resistance levels discussed yesterday, they will all remain in play.

WHITE COUNT

I am still watching this count; however, with today's action, I am viewing it as slightly less probable than the red count.

Under this scenario, I would view today's low as the bottom of wave 3. From here, I would want to see a corrective retrace higher for wave 4, holding under the 7418 level, followed by one more lower low to finish off wave 5 of i of the larger wave (c) down. From there, I would want to see a corrective retrace higher for a larger wave ii, setting up a bigger decline in the weeks ahead for wave iii of the larger wave (c) down.

RED COUNT

This count is a bit more immediately bearish and would likely be part of a larger Ending Diagonal for wave (c) down. As long as we hold below today's high of day (HOD) at 7496, this will remain my base case.

Under this scenario, any retracements should remain corrective in nature and hold below today's HOD at 7496, followed by a sustained break below the 7376 level. If that occurs, we can further lay out downside targets, but I would expect to see this move decline toward the 7300-7169 zone on the ES before the pattern is completed.

I also want to point out a variant of this red count that would suggest we are bottoming in a larger wave a at today's low of day (LOD), under which case we could still see a larger wave b retrace higher. I am viewing this as a lower-probability outcome for the time being, but I do want to point it out should the market break back over the 7500 level on the ES in a corrective fashion.

YELLOW COUNT

Finally, the yellow count would suggest we are approaching a bottom in all of wave ii, setting up a push to new highs. I have several issues with this count, so it remains very much an alternate scenario at the moment. However, if the market starts to move higher in five waves, the door is still open to this possibility.

I would want to see that five-wave move begin while holding above the 7376 level on the ES, as this is the 76.4% retracement level of the move higher that began on 6/10. As long as the market continues to move higher in a corrective fashion, however, this count will remain an alternate path forward.