Market Still Holding Support, for Now
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We saw ES move lower on Friday and again during Sunday night’s session, only to recover much of that decline into the afternoon. As of now, we’re trading roughly flat compared to Friday’s close, though still below the prior high. From a wave count perspective, not much has changed since last week, as key support levels remain intact. So with that, I’ll reiterate much of what was noted previously.
As we've been tracking, the count in this region is quite full and extended across multiple timeframes. That said, without a clear break of support or a clean five-wave decline, we simply don’t yet have confirmation that a top is in place.
Turning to the RUT, the structure still appears to be carving out a fairly clean ending diagonal off the May 23rd low. Within that, a smaller-degree diagonal remains visible off the June 25th low. While we’ve now broken below the lower trend channel of the larger ED, giving us an early warning signal, we still need to see a bit more downside follow-through before confirming that the pattern has completed and a top is in.
This setup, particularly in the RUT, leaves the current region increasingly precarious. While confirmation of even a local top is still pending, the structure here warrants a heightened degree of caution.
On the ES, from a smaller-degree perspective, I’ll continue watching the 6,285 level as an early indication of a potential local top. Initial micro support remains in the 6,185–6,135 zone. A break below that area would be our first sign that a larger-degree top may be forming. Beneath that, the next meaningful support on the SPX comes in at the 6,064–5,929 zone. A sustained move below that region would offer the first stronger confirmation that we’ve likely topped in either the blue wave a or red wave b.
As we have been noting, the structure of the next move down—if and when support gives way—will be critical in determining whether we’re tracking the red or blue path laid out in prior updates.
