Market Breaks Lower, Providing Further Confirmation of the Downside Count
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After testing the 7660–7640 support zone on the ES chart over the past several sessions, the market finally broke below that zone and moved through the lower pivot at 7611. This provides further confirmation that we are following the downside pattern.
While we have not yet broken below the ultimate support level for the alternate wave (iv) count, today’s action supports the need for further downside before a lasting bottom is found. Keep in mind, however, that we are likely working on an ending diagonal down from the 8/13 high. The path lower will therefore likely remain sloppy, with subdivisions that are difficult to track. Once the diagonal is complete, I would expect a sharp reversal higher, but several waves still are still missing before we can look toward that scenario.
As shown on the ES chart, we are now below the first key pivot at 7611. If we are following an impulsive count lower for wave c of 3, we should see a continued move below 7603 while remaining below 7652.
A move back above 7652 would complicate the structure of wave c of 3, but it would not necessarily invalidate the downside count. Instead, it could suggest that wave c of 3 is itself taking the form of an ending diagonal.
A move above 7700, followed by a break above 7749, would provide an early indication that the immediate path lower has failed. A break above 7834 would be needed to fully invalidate the downside path and provide an early indication that we may be following the yellow count higher.
For now, as long as upside action remains corrective and we stay below the key pivots noted above, the near-term pressure remains down. The larger-degree correction likely still has more work to do to the downside before it is complete.
