Market Testing Key Resistance


We opened lower today, only to see a retrace higher into the afternoon session. At this point, the move off Monday’s high into this morning’s low still counts best as a three-wave decline, but the market remains capped beneath a key resistance level. As such, we cannot yet rule out the potential for this structure to develop into a full five-wave decline, opening the door to a more significant top having been struck.

As I’ve been noting in prior updates, the resolution of this initial structure off the high is critical. If we do see a five-wave move develop, it would lend support to the idea that a larger-degree top is in place, thus opening the door for a drop back below the April lows. On the other hand, if resistance breaks, it would suggest the initial decline was corrective (i.e., three waves), potentially pointing to a more complex pattern or even the potential for a push to new all-time highs.

So far, this morning’s low came in just above the 161.8% extension of wave a, supporting the count that labels it as wave iii/c. The subsequent bounce has stalled beneath resistance at 5894, keeping the door open for this to be a wave iv bounce. Should the market hold below that resistance and break beneath 5823, then we would have a potential five-wave move to the downside in place. That would imply that red wave b may have already topped, and we would then be tracking red wave c down, with risk to the downside increasing.

Conversely, a sustained break above 5894 would favor the view that we only have three waves down from the high, supporting either a completed purple wave iv as shown on the ES chart, or setting up a more complex correction per the blue or yellow alternate counts on SPX.

In sum, patience remains key. We do not yet have confirmation of a larger-degree top, but we are approaching an inflection point. The next few sessions should provide important clarity on whether the recent high marks a more meaningful pivot, or if further upside remains in play within a more complex corrective structure.

SPX 522 12 60min
SPX 522 12 60min
ES 522 12 5min
ES 522 12 5min
Michael Golembesky is a senior analyst at ElliottWaveTrader covering US Indices, the US Dollar, and the VIX. He contributes frequently to Avi's Market Alerts service at EWT while also hosting his own VIX Trading service.


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