Market Has Narrowed Down Our Options

With the break out today, the market has now narrowed down the options we are tracking.  And, I am going to assume that this week will likely decide how we progress to determine where wave [4] bottoms.

I want to start by saying that I am still very much in the wave iv wave count.  What I am still counting as my primary wave count is the former purple count, which is now being presented in green.  As you can see from the 60-minute SPX chart, we are approaching the resistance for wave iv, which would complete an [a][b][c] corrective rally.   That means that as long as we hold the resistance between 4509-4535SPX, then I am still expecting a wave v decline, pointing us to a lower low.

If you want to zoom in on the 5-minute SPX chart, you will see that we are now approaching what is likely the completing of wave 3 within the [c] wave of wave iv.  The target is in the 1.618 extension of waves 1 and 2, which is in the 4492SPX region.  

Support for wave 4 within this 5-wave [c] wave count is the 1.00 extension of waves 1 and 2, which is in the 4430SPX region.  Therefore, as long as the market holds the 4430SPX region on the next pullback, then I expect one more rally to test the resistance noted overhead in the 4509-4535SPX region.   

However, this is where I have also provided a bit more clarity to the potential that wave [4] may have ended, as presented by the blue alternative count – delineated with the “alt” designation.  The only reasonable way to count this rally as starting the larger degree wave 1 of [5] of [iii] on the daily chart is through a leading diagonal, due to the overlap we have seen within this rally off the low.

Leading diagonals look way too much like corrective structures, which is why I do not trust them until proven.  So, my primary count must remain in green.  However, if the market is unable to hold the 4430SPX support at the bottom of the pivot on the 5-minute SPX chart, then I will have to more strongly consider the blue alternative.

You see, if we complete this upside at the impending high, then that would be a 3-wave rally off the recent pullback low struck on Friday, which would be more indicative of an a-wave within wave iii in the diagonal count.   

So, in summary, we have resistance overhead first at 4492/93SPX, followed by 4507/09 on the micro level.   As long as the market respects resistance, pulls back in a corrective manner and holds the 4430SPX support, I am going to expect one more rally into our bigger resistance region between 4509-4535SPX to complete wave 5 of [c] of wave iv.  This should point us down later this week to begin wave v to a lower low and to complete all of the larger degree wave [4].

Anything that diverges from this plan will make me question if wave [4] is over and we have begun wave 1 of [5] of [iii] sooner rather than later, ultimately pointing us to 5500SPX later this year or early next.

Avi Gilburt is founder of