Market Closing In On Key Support

After holding on to upper support for the past several days we finally saw the market break down and head lower in the afternoon session giving us what is now looking like a larger wave iv from the initial move up off of the May lows. As we move into the final hour of trading the move down into the larger support zone is still holding as we have both the 100ext as well as the 76.4 ext of the initial move up off of the lows still sitting at key support below. Those levels come in at the 4047 and 4006 respectively on the SPX chart and are really the key levels that should hold if we are indeed going to see another push higher to finish off the wave v of 1 as shown on the charts. 

Zooming in a bit to the 20min ES chart this move down still looks a bit incomplete on the smaller timeframes as we still likely need another wave (4) and (5) to finish off the wave c of that wave iv. This price action should take a bit more time to fill out and because we are likely dealing with an ending diagonal for the wave c of that iv that path lower may still be a bit complex and give us a bit more unreliable price action on the smaller timeframes. The key however is going to be holding over the 4006 level on the SPX as noted above and as long as that level can hold we are still well within wave iv territory for the SPX. 

If we are unable to hold that 4006 level on the SPX then it would give us the initial signal that we may have topped in the a wave as shown in yellow on the charts. This would make the next leg up off of the lows quite sloppy and more difficult to track. That said,  as of right now and as long as we hold over support I am going to give the benefit of the doubt that we are indeed following the impulsive path up off of the lows still needing another higher high to finish off the wave v of 1 up off of the lows. 

ES  20m
ES 20m
SPX 60m
SPX 60m
Michael Golembesky is a senior analyst at ElliottWaveTrader covering US Indices, the US Dollar, and the VIX. He contributes frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trading service.