Today we saw the market roll over and finally get some decent downside follow-through giving us an early signal that we may have put in a top in the wave (a) in green or (1) in yellow. We did however come up a bit short of breaking that important 3895 support level. So with that, I still can't fully rule out that we may still see another push higher to finish off the green wave (a) however at this point in time and as long as we hold under the 3968-4016 resistance level I am going to give the benefit of the doubt that we have put in a top. We do have some fairly clear parameters to work with however which I will lay out below.
As I noted above my base case is that we have topped in either the green wave (a) or yellow wave (1). I am counting the move down into the lows as the initial wave a of the wave (2)/(b) down. The low today counts as a fairly clear completed ABC pattern for that wave (a) with the move up off of the lows as the start of a b wave retrace. Resistance for that wave b comes in a the 3968-4016 zone and as long as we hold under that zone I will be looking for a wave c down to break back below the LOD at the 3906 level. Breaking that low would then give us further confirmation that we have indeed topped.
If we manage to break out over that 3968-4016 resistance zone then it would open the door for the low that was struck today to still be a wave (4) of c of (a) which I am showing in dark green on the 5 min chart. That wave 5 would target the 4050-4100 region however at this point in time and as long as we hold under that 4016 resistance level I am giving the benefit of the doubt that we have indeed topped in the the wave (1)/(a)
From a bigger-picture perspective, things for the most part have remained unchanged from what we have been noting over the past several days. That is as long as the SPX can hold over the larger degree support at the 3800-3700 zone on the next pullback, the next rally should take us towards the 4300 area into the end of the year and possibly the early part of next year. How exactly we get down into that zone is still likely going to take a sloppy path as we are dealing with a larger degree corrective pattern. So with that caution and patience is going to be key as we push lower and deeper into the support zone below.