Market Pulls Back, But The Pressure Remains Up As Long As Support Holds
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Today we saw the market move lower after moving higher on Monday and consolidating on Tuesday. Avi noted the potential for this pullback in yesterday's update, and today it seems to be taking shape. With that said, as long as the structure of this move down remains corrective in nature and we are able to hold over support, the simplest path still remains higher before breaking down under last week's low. If, however, we begin to break support and do so in five waves, then it would open the door for a break of last week's low. There are some issues with that potential path, so for now, and as long as support holds, the near-term pressure will remain up.
With the pullback today, the base case is that we have topped in the wave a of the larger wave (v) of the leading diagonal for the wave (i) of the larger wave 3 that we have been tracking per the yellow count. Under this case, support for the wave b of that wave (v) comes in at the 7710-7602 zone as shown on the ES chart. As long as we maintain that zone, then the yellow count will remain the base case.
Should we see a full five-wave move to the downside and then a break of that zone, it would open the door to seeing a larger wave c down, with the overnight high having been a wave b (shown in purple). The major issue with this count is that the move from the 6/9 low and into the 8/13 high counts best as three waves. This makes it less probable that we have struck any sort of significant top and is more suggestive that we still have missing waves to the upside to complete the pattern for at least the yellow wave i.
Assuming we do make another higher high, then we will need to continue to watch how the market reacts after making that high, which will give us better guidance as to whether the next high is indeed just part of that yellow wave i or a larger top per the red count, as Avi had laid out in detail in yesterday's update.
For now, however, and as long as support holds, the market does seem to have some unfinished business to the upside. Exactly how much business is left is still yet to be determined.
