Market Pulls Back But Still Over Support For Now
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After grinding higher over the past several sessions and hitting the upper end of our Ending Diagonal target, we saw the market move lower today. We are, however, still trading over some key support levels below that we would need to see broken to confirm that we have indeed completed the Ending Diagonal pattern off the 4/23 low, or whether this still has some unfinished business to the upside before that ultimate top is found. With today's pullback, the parameters are fairly straightforward at this point in time, so it's simply a matter of seeing how the market reacts over the next several sessions to know which path we are going to follow.
Today's pullback has allowed me to clean up the charts a bit from what I presented yesterday, and I am now only tracking the white wave (v) of v as the completed Ending Diagonal as the primary count, and the green count, with wave (iii) having already put in a top, as the alternate.
Under the white count, today's move lower would count as the initiation move of a larger drop to come in the days ahead, which should ultimately target the 7128–7082 zone as the reversal zone for the completed Ending Diagonal. To confirm this count is indeed underway, we should hold under the 7395 level upon any move higher, with initial confirmation of a breakdown coming from a sustained break under the 7300 level. Further confirmation that we have topped in all of the Ending Diagonal would come with a break under the 7200 level, at which point a fairly sharp drop down into the reversal zone noted above should be underway.
If we are unable to break through the 7300 support zone, but rather hold that region and then turn back higher, it would still leave the door open to seeing another push higher to finish off the move from the 4/23 low as a larger Ending Diagonal, as I am showing in green, potentially targeting the 7470–7551 region before any lasting top is found.
For now, my base case remains that we have topped in all of the Ending Diagonal, as shown in white, but we still will need to watch the support levels below to give us further confirmation that a top has indeed been found. Until those support levels break, I still have to allow for the possibility of seeing this push to new highs before that top is found.
