Today we saw the market open higher having pushed up into the overhead resistance zone that we had labeled as the "Danger Zone" for the past several days. After hitting this zone we saw a sharp reversal with the market giving up the past several days of gains in just one session. While we currently are still holding all of the possible paths that we had laid out previously the velocity and depth of this drop is certainly opening the door for this to see further downside action and a push under the lows that were struck on 4/14. With that being said we are still over the key support levels even on the smaller timeframes so until we actually break the 4/14 low the market still can continue to push higher following the green count which at this point in time still remains the primary count. Caution however still remains warranted and the hard rejection at the overhead resistance, or Danger Zone, is certainly making the yellow and blue counts much more probable at this point in time.
From here and if we are going to hold the green count we need to hold over the 4354 low on the SPX and ideally over the 4372 level which represents the 88.6 retrace of the move up off of the 4354 low and into today's high. From there we would need to see a full five up off of one of those levels to give us a signal that we may have begun the wave c up back over today's high. If we are unable to see a full five up off of the next low then it would suggest that further downside action is likely and that we will see another lower low under the 4354 level. If we do break 4354 then we would be left with the yellow and blue counts.
Personally, I still would prefer the yellow count over the blue if we do indeed break as I think it fits better with what I am seeing in other places we do still have some good support below for that yellow count. The first level of support under the yellow count would come at the 4301 level followed by the 4221 level. The 4221 level represents both the 100ext of the initial move down off of the highs as well as the 76.4 retrace of the move up off of the Feb lows. IF that level breaks then it would open the door to seeing a deeper drop and move to new lows under the blue count but again as long as we can hold those larger degree support levels I still would be leaning towards the yellow count should we indeed break under the 4354 level.
While we still are holding all of the counts including the immediately bullish green count the sloppy price action up off of the lows continues to make this difficult to track on the smaller timeframes and gives us quite a bit of whipsaw action. So with that and while the larger degree upside setup is still very much in play here caution is still very much warranted for those attempting to trade the smaller degree and shorter timeframe price action. Unfortunately, this type of sloppy price action is likely to continue in the near term so patients is going to continue to be the name of the game here as the market continues to work its way through this region.