No Bottom Yet - Market Analysis for Oct 4th, 2021

With the market being unable to hold support and provide us with a 5-wave rally off the recent low, it because clear that the correction has not yet completed.

I am going to start this update with the bullish indications I am seeing.  First, as mentioned over the weekend, the MACD on the daily SPX chart is now even a bit more oversold that it was during the wave [ii] pullback last year.  Moreover, we are now solidly in the bottoming region for this indicator, based upon historical norms.  Of course, there is still a bit more room deeper into this support, but this is a very oversold indication.  

Moreover, the 60-minute MACD is actually providing us with a positive divergent set up at these lows.   Should this hold, and we see a strong rally through 4320SPX, then we have an initial indication that the market could have bottom.  And, if you are aggressively shorting down here, keep in mind that this type of oversold condition on the daily chart, coupled with a positive divergent set up on the 60-minute chart can provide us with a very powerful reversal.

Next, I am going to remind you that main support is 4165-4270, with our next higher target being the 4900SPX region.  So, being below 4300SPX suggests that the upside potential far surpasses the downside risk.

I have modified the 5-minute SPX chart  - which outlines the more bullish immediate count – to show that we can see one more lower low to complete this entire c-wave of wave 4.  But, remember, in order to now begin our confirmation process that the wave 4 is done, we need to see an impulsive 5-wave rally take us through Friday’s high.

So, while there are some indications that a turn around can be imminent, I want to stress again that we need to respect our confirmation process.  This appropriately prevented us from getting too bullish due to Friday’s rally.

Now, as far as the deeper pullback structure, I am using the 5-minute ES chart to outline this count.   This suggests we are currently within the c-wave of wave iii.  In fact, the market gave us a wonderful shorting opportunity this morning, as I outlined in my updates starting around 6am.

In this current structure, as long as the market remains below 4306ES, I am looking for further downside potential, next pointing us to the 4240-60ES region.  

To keep is simple, as long as we remain below 4305ES, pressure remains down.