Market at First Key Inflection Point to the Downside
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Today, the market moved sharply lower, opening the door for the larger wave (b) top to be in place at the 6/15 high. With that said, we still only have three waves down off that high so far and are currently sitting at several key Fibonacci support levels that will need to break to the downside to keep that path in play. If we are unable to break those levels and instead turn back higher, then it would open the door to a few different paths that could still ultimately take this market higher. While the direction remains somewhat uncertain as we test these key support levels, the parameters are fairly clear, which should help provide further guidance in the days ahead.
Today's low of day (LOD) at 7415 on the ES is quite important in keeping the momentum moving lower. If we are able to hold below the 7488 level and continue to push lower, then it keeps the potential for this to develop into a larger five-wave move to the downside off the 6/15 high. Under that scenario, I would be looking for the wave 3 target zone to come in at the 7376-7309 region below. From there, we would still need one more wave 4 and wave 5 to complete a larger five-wave move to the downside and set up the larger wave (c) lower.
If we break back over the 7488 level prior to making a new low below 7415, then it would leave us with only three waves down off the highs. At that point, the structure of the next move higher will give us a better idea as to whether this market is ready to make a direct push to new all-time highs or whether we still have more work to do on the downside.
If we were to see a full five-wave move higher, then it would open the door for the entire yellow wave ii bottom to be in place, whereas a corrective move higher would suggest that we are still heading lower, only in a corrective fashion.
For now, however, I will be watching the 7415 low and the 7488 level as the first two key pivot levels that will help determine the short-term direction of this market.
