Market Failed At Resistance, But The Pattern Remains Cloudy
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Overnight, the market failed right at the key resistance level that would have needed to break to signal that we were heading directly higher per the yellow count. Today we saw additional downside follow-through; however, the move down off the high is counting better as a corrective wave pattern rather than an impulsive move.
This wave structure still leaves several potential paths, and there remains quite a bit of uncertainty as to which direction the market will ultimately break in the near term. I will note that the failure to move through resistance yesterday has made the potential for a direct move higher much less likely. The bigger question at the moment is whether the market will break directly to new lows or if we will turn back up over today’s high of the day before seeing any further breakdown.
The yellow count is essentially on life support at this point. The only reasonable way I can see the market pushing higher while holding the 6717 low would be if we are forming a larger diagonal. Under that scenario, however, we would still be very early in the structure, making it a rather unreliable path. I am leaving this possibility on the chart for now, as there are not many other scenarios that point higher, but as noted above, the failure to break through resistance overnight has reduced the probability of this outcome.
The two purple counts, both of which point lower, appear much more likely at this point. However, which of the two paths the market ultimately follows is not entirely clear. I can also see the potential for the market to hold over the 6717 low and make another push back over the 6901 level before turning lower. Under that scenario, support would come in around the 6761–6730 region. If we hold that zone and turn up in five waves, it would open the door for another move back over the 6901 level before rolling over once again.
If, on the other hand, the action to the upside continues to take on a corrective structure, then it would suggest that we are likely to push lower while remaining under the 6901 high.
For now, I will continue to monitor how the price action develops over the next several sessions, but as it stands, the near-term picture remains somewhat cloudy.
