As I have outlined today, we have a path before us as to how the yellow count can take hold, and point us to as high as the 2925SPX region in the coming weeks. But, there is going to be a major test of this potential coming up, even if we should break out through 2683ES.
I have highlighted several things on the 5-minute ES chart attached. First, support for the yellow count now resides at 2635SPX. Should we break down below that, it would open the door for the market to continue down to 2585/2600. But, in this structure, it would suggest that support over 2585SPX would not likely hold, and the market can continue much lower in wave iii of 3 in green, and ultimately point us down below 2500 in the coming weeks for a larger a-wave of wave 4.
However, if the market can break out through 2683ES, it would likely target the 2700-2725ES region, as outlined by the blue box overhead on the 5-minute chart. This will set us up for a major test for the market, for which I have added the market pivot box. Should we move up to the blue box over 2700ES, then the pivot will determine whether the green count or the yellow count is operative.
If we can pullback correctively, and hold the 2685ES support, we have an open door to run to the 2745 region to complete yellow wave 1 of the c-wave rally.
However, if the market drops from the box over 2700ES in impulsive fashion below 2680ES, then it would suggest the green i-ii structure in wave 3 down is in play, and we are likely heading down to the levels below 2500 to complete a larger degree a-wave of wave 4.
So, the market has provided us with relatively clear guideposts right now. Should we move up to 2700ES or higher, traders may choose to buy a corrective wave (iv) pullback to the market pivot, with stops just under the pivot, with targets over 2740ES to complete wave 1. However, should we break down back below that pivot in impulsive fashion, then traders may choose to short bounces as we are likely going to be heading down strongly in the heart of a 3rd wave lower.
And, again, I want to remind you that the market is still quite treacherous within this region, and that capital preservation should likely be your primary focus.