Small Discrepancy Between Futures and Cash Market
By
Avi Gilburt
Small Discrepancy Between Futures and Cash Market
When the futures display a different pattern than the SPX cash market, it does lead to some uncertainty. And, that is what I am seeing in the difference between the SPX and ES at this time. Allow me to explain.
The overnight action in the ES last night provided us with a higher high, which does make the rally off last week’s low seem more like a 5-wave structure for wave 1 of the c-wave rally in green. However, the SPX does not have that additional move higher. It still remains below its resistance of 6774SPX . . for now.
Moreover, to complicate matters a bit further, the only way I can count a 5-wave decline in SPX is with a leading diagonal. And, those that have followed my work for some time know that I do not see leading diagonals as strong trading cues.
So, we are now left with support levels. Our first support is last week’s low of 6646SPX. I will need to see an impulsive follow through down below that level to make it a much higher probability that the yellow c-wave path projecting to a break down of the important 6550SPX region is going to take hold. Until that happens, I have to still view the green path as a reasonable probability. But, at this time, I would say it is about 50/50, with part of me wanting to slightly lean bearish, while also respecting that no real downside set ups have followed through in this market for quite some time.
Also, due to the deeper drop today for the potential 1-2 green count, I have lowered the pivot on our chart. Remember, in order to make the green count a higher probability, we will need to break out through the upside pivot, and then hold it in a corrective wave iv of 3 pullback. That would make a rally to higher highs a much greater probability.
But, until that happens, the bears have a set up in place to take this market down as deep as the 6200SPX region. Let’s follow the parameters noted above to see if they are able to capitalize on this near term bearish opportunity.
