Shot Across The Bow

While the market has broken below the 3100 micro support level, as I write this, it is trying to climb back over that level.  So, I am going to outline what we need to see to begin the pullback we have been expecting.

As I have outlined in the past, we need a sustained break of 3100, with follow through below 3075SPX to confirm that we have struck the top to the rally begun in October.  At this point in time, we do not have that confirmation just yet.

With regard to the wave structure with which we have dropped today, the best I can come up with is a leading diagonal to the downside.  I have noted many times that I do not rely upon diagonals, until the market proves them with more of the larger wave structure filling in.  Therefore, I will need to see how the market breaks down below 3075 to have a better feel for the micro structure. 

Ideally, I would like to see a 5-wave structure taking us down to the 3020/30 support below us.  Such a 5-wave structure would keep me in the green wave count I have outlined on my charts many times.  If we do not see such a 5-wave structure, and the market breaks down in a more corrective structure, then I will have to much more strongly consider the purple and blue alternatives we have outlined of late.

The other point I would like to make is that the MACD on the SPX daily chart has not yet turned down.  Until such time, I still have to be somewhat cautious regarding downside follow through, especially as long as we remain over the 3075SPX confirmation point.  Ideally, I would like to see that break down this week, which should also turn down the daily SPX MACD.  Once it does turn down, please take note that there is plenty of room below until it reaches support.  This can certainly support the type of downside I expect in my green count. 

But, for now, the market is still trying to climb over the 3100 region as I write this update.  So, I will await for the break of the 3075SPX region in order to become more immediately and confidently bearish.

Avi Gilburt is founder of