While I have been expecting us to rally to the 4300+ region before we see any larger decline set ups, I still have a hard time assuming the SPX is going to get there in a manner in which there are no pullbacks to speak of, such as we are seeing in this rally off last week’s low.
If you look simply at the SPX chart, there really is no real 1-2 structure of which to speak. While the ES does have one potential that I have outlined in dark green, it is certainly less than ideal, as it is more akin to the start of a diagonal than a standard impulsive structure.
As I write this, we are hitting our head on the pivot on the ES chart. And, if we break out, then I will be forced to adopt the more aggressive count outlined in dark green. But, I have made a slight adjustment to it, as it seems more in line with a diagonal, and that is how I have adjusted waves [iii], [iv] and [v] to read. Moreover, this would still likely point us to the ideal target for wave v of 3 in the blue count in the 4282SPX region, which is the 1.618 extension of blue waves 1-2.
So, again, if the market is going to break out sooner rather than later, then I will be moving into the blue count, but with the dark green path on the 5-minute ES chart being the primary one which I will adopt.
When the markets move as erratic as we have seen for many months, it is not an environment in which one can trade aggressively or confidently. Rather, for most investors, if the market provides a low-risk, high-probability set up, you can consider taking it with risk management parameters well in place. Yet, many investors have no interest in the long side, and I do not blame them. And, if we head higher, I will likely raise even more cash from a number of the positions I currently hold.
Yet, there are still some stocks that are trying to bottom out in a corrective pullback, which can see some substantial runs higher in the coming month or so. So, I really do not want to get too bearish too soon, as I have been saying for quite some time.
In fact, if the market moves through 4195SPX, then I will be taking off the purple count from my 60-minute chart as it would invalidate as shown. But, if you have been following me closely, you would know that I really did not have confidence in that count at all, but just kept it there to remind you of the potential that we can be setting up for a sizeable decline later this year.
In the meantime, keep in mind that if we are going to get that decline later this year, it will be a c-wave decline, and we will likely see a 5-wave drop off a high to alert us to its potential. So, again, I am not going to get prematurely bearish, as I intend on waiting until the market provides me that set up. While I may miss 100-200 or so points off the high, the 1-2 set up will still likely provide us with 800-1200 points to the downside if it develops. So, again, I really do not want to be shorting too early. Others may differ with me.
To be honest, I am still not completely convinced that we have struck the long-term top to the market, as I have not been able to come up with a reasonable 5-wave structure into the 2021 high, as I have discussed many times before. So, until the market actually provides to me a CLEAR 1-2 downside structure, pointing me to a c-wave decline towards the 2700-3000 region, I am just going to remain cautious on both sides of the trade for now.