Market Is Just Teasing Us

Don’t you love it when we are watching the 3439SPX level for a strong signal that the b-wave has topped, and the market bottoms today at  . . . yup . . . 3440SPX.  (Sigh)

So, lets go through what we know, and try to make a determination as to where we are.

First, we know from our Fibonacci Pinball structure that if the market rallies to the 1.236 extension in a potential wave [3] of iii, it “should” hold the .764 extension as support before rallying further.  Well, the 3466SPX level was the .764 extension in our case, and the market broke below that today.  

However, we also know from our Fibonacci Pinball structure that should the market break below the .618 extension, it makes is likely that the prior rally was not an impulsive rally, but rather a corrective rally.  In our case, that support would be the 3439SPX level, which is exactly where the market held today.

Normally, if we hit the 1.236 extension and then break below the .764 extension, that is a strong warning that the market may not be as bullish as it may otherwise look.  So, clearly, I am questioning the yellow count even more than I have before, and I still remain in the green b-wave camp.   However, until the market actually breaks below 3439SPX, I really have no strong indication that the b-wave has indeed topped.

So, let’s discuss market structure.  If the decline had provided us with a clearly impulsive 5-wave shape, I would have been much more confident that the potential b-wave has topped on the break of the .764 extension.  However, the best I can come up with is a large leading diagonal down off the high, and even that would “look” better with a 5th wave lower low that breaks below the 3439SPX level.  So, the downside structure is not adding to any confidence that the b-wave has indeed topped.

Moreover, the rally off today’s low is also quite overlapping and does not provide me with an impulsive start to wave [5] in yellow to the higher target box. (However, I do have to add that IWM does look like a 5-wave rally off today’s low).

So, in summary, the decline is still not providing us with a clearly impulsive start to a c-wave down, nor is the rally in the SPX off today’s low looking terribly impulsive.  Therefore, I think the most reasonable conclusion to which I can come is that we have to look higher as I cannot rule out a rally to the higher blue box . . . that is, for as long as we remain over 3439SPX.  Should we break 3439SPX, then I would suggest we have likely begun the green c-wave down.   For now, the market is hanging by its fingernails as it just barely held that 3439SPX support.

5minSPX
5minSPX
60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.