Moving Into The Diagonal

With the market continuing down today, we have not only made the diagonal count much more likely in mu humble opinion, but we have even invalidated the impulsive count.

So, now that the standard impulsive count has invalidated, I am getting a number of questions as to my bigger expectations in the market.  So, even though I am traveling, I found a small corner to be able to write an update to make my perspective rather clear.

While I am getting a number of questions as to whether the bigger wave 4 pattern is going to come back in my analysis, I cannot say that this is the case due to how high the SPX has come.  While I am adopting this count in the IWM, and targeting the 123 a=c target in 2020, I cannot say that I can reasonably view the high we struck just below 3400 resistance is a b-wave.  But, I will certainly keep the potential for a running 4th wave flat in the back of my mind for now.

Rather, I am primarily viewing the SPX as tracing out an ending diagonal for the 5th wave off the 2009 lows.  And, while it can project a lot higher for the 5th wave off the 2009 lows (potential is 4300-4600SPX), the structure will be much more volatile, as that is the nature of ending diagonals.

Furthermore, this now makes a lot more sense to me when considering my struggling in 2019 to count the rally as a standard impulsive move off the December 2018 lows. 

So, where we stand currently is that I think we are in a wave ii retracement, as you can see from the daily chart, and the ideal structure should have it take shape as an a-b-c structure.  In fact, there is strong potential for us to have completed that a-wave today, which means we can see a multi-week to multi-month b-wave retracement before we drop down towards the 2800 region for the c-wave of ii.

Once we have a better indication of the a-wave having bottomed, I will post targets for the b-wave rally. 

As I was noting many times at the end of 2019 and early 2020, the first quarter of 2020 will tell us how the rest of 2020 will take shape, and even well beyond.  And, in the bigger perspective, this action makes it quite likely that we will see a wonderful buying opportunity later in 2020, as we set up another major rally as we look towards 2021.

Avi Gilburt is founder of