Several Paths With One Expectation

As I have said so often, corrective waves are quite variable and often take many twists and turns.  Most of the time, we can see the potentials before they happens, and sometimes we cannot.  That is why I have noted in the past that trying to navigate a specific path within a corrective structure is like attempting to throw Jello for distance.

While 4th wave are definitely the most difficult of corrective structure, 2nd waves are a bit easier . . . at least in my experience.  And, currently, I still view the greater probability as suggesting that we are in a 2nd wave.  Moreover, my primary count is presented in green, and it remains as such, with the yellow count being my alternative. The yellow count is more immediately bullish, with the market needing to really hold the 3200SPX region as support to keep that count in the running.

Yesterday, I outlined an immediate break down potential within this “Jello-structure,” but noted that I have a hard time strongly expecting it since it would have relied upon back to back leading diagonals.  So, the market continued higher into today, and now I can take that immediate break down count off the chart. 

Yet, it still leaves several paths, but the paths are ultimately pointing towards a test of the 3200SPX region.

If you remember from the update yesterday afternoon, if we were going to see a more expanded [b] wave structure, it would likely point us up towards the 3430ES/3440SPX region to complete the c-wave of the [b] wave in the region of the .500 retracement of the a-wave decline, which coincides with the region of the a=c within this [b] wave.  As I write this update, we are still a bit short.

And, if the market is unable to attain at least that target overhead, then it can suggest the potential of a [b] wave triangle, as outlined in purple on the 5-minute ES chart.  Moreover, there is also potential that if we pullback before hitting the 3430ES region that the market can set up for a much higher [b] wave up in the 3500-3550SPX region before we see that [c] wave down.  But, I am getting way ahead of myself regarding possibilities within this corrective structure.

In summary, the 3430ES/3440SPX region is our resistance up here.  As long as the market respects that support, I am still expecting us to be setting up a decline to test the 3200SPX region sooner rather than later.  Whether that happens with a standard [b] wave flat into the 3430ES region or some other way, I really cannot know just yet. 

However, I am going to conclude with a warning for those who are trying to aggressively short within a “jello-structure.”  The lowest risk way to short for a test of the 3200SPX region would be to allow the market to set up a standard and clear 1-2, i-ii downside structure.  Anything less increases the risk to any short attempt.  Moreover, since we are still quite likely in a larger degree bull market, and are only looking for a 2nd wave pullback, your primary focus should be on looking for points to add long positions rather than shorting.  So, if you do intend on aggressively shorting for the test of 3200SPX, please allow the set up to play out to lower your risk.    

5minES
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60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.