Market Still Hiding Near Term Intentions

As I noted over the weekend, the SPX will have to break below 2645SPX to suggest that we are in a wave 3 down in the ending diagonal. But, since we broke over 2674SPX today, the ending diagonal potential has slightly shifted with this rally still only being a part of wave 2 of that ending diagonal. 

In order to provide even an early signal that the upside may be completed, we need to see a sustained break below 2657, with follow through below 2645SPX.  But, any break down now would only be the a-wave of that wave 3 in the ending diagonal, rather than the c-wave of that wave 3.

However, even in the wave 2 of the ending diagonal scenario, as presented in green, we can still see another 4-5, as presented on the 5-minute chart, before this rally completes.  And, as long as we hold the 2657SPX region, that remains my primary count.  And, with the market hitting the 1.618 extension off last week’s low (wave 3 in green), we will need to see that support region tested in the next day or so to tell us we are in the green wave 4. 

However, if the market does not pullback imminently, and, instead, breaks out through 2690SPX, that will put me in the purple count, which is pointing up towards the 2720-40SPX region, depending upon how extended any further upside moves become.  But, the purple wave v of 3 seems to be setting up to target the 2716SPX region if we do get that gap up and break out tomorrow.

So, while the market continues to machinate in this region up here, my expectation is that tomorrow will likely make its decision between these two potential wave structures.

Ultimately, I don’t think the market is ready to break out in any major way, as even the yellow alternative presented on the 60-minute chart will need to complete 5 waves up and 3 waves back. 

So, as it stands right now, I don’t see any high probability potential for an imminent break out, whereas the market is still more likely setting up another pullback.  The question, of course, remains whether we break below the February low or not.  Whereas the ending diagonal will break below the February low, the purple or yellow counts suggest we wont, but will still see a pullback.  But, we need to see where this rally tops out before we can make any further determinations regarding the larger degree pattern scenarios as to where this 4th wave ends.

Avi Gilburt is founder of