Structure Remains Sloppy, but the Simpler Path Still Points Lower for Now

Today, the market moved lower once again; however, the action to the downside is far from what I would consider a clean and textbook impulsive move off of the 9/3 high. With that said, we are still following our fib pinball guidelines on this move down from that high, which is still suggestive that we are still working on our larger wave c of 3 as part of a larger ending diagonal off of the 8/28 high.

So for now, as long as we continue to hold under resistance, I have to give the benefit of the doubt that this will continue to move lower to fill out this larger pattern. Should we move higher in five waves and break over resistance, then the door to a push to new highs would be opened, but for now, and as long as the action to the upside remains corrective in nature and we hold under resistance, I still have to look for this to resolve lower.

As shown on the 60-minute ES chart, the blue count remains the primary count for the time being. We still need to break through the 7567-7516 zone to further confirm that we are indeed following this path; however, given that the alternate yellow count would have this tracing out a larger leading diagonal as part of a wave i of larger 3, it is very difficult to rely on this interpretation, as it is quite rare to see a wave i of 3 being in leading diagonal form.

So with that, the blue count that still would take us lower in wave (c) of either a larger wave 2 per the blue count (or wave a per the red count) remains the primary path forward for now. If we can hold under the 7676-7686 zone on the ES chart and continue to push lower, then I would be looking for wave (3) of (c) targets to come in at the 7619-7610 zone below and wave (5) of (c) targets to come in at the 7594-7553 zone below. Once we reach that zone, however, because we are likely dealing with an ending diagonal, the wave 4 retrace may take us back up towards current levels, so the move lower is still likely to be a bit choppy.

If, however, we see a clear five-wave move up off of the lows and break over the 7676-7686 zone as shown on the ES chart, then it would open the door for this to see a push higher in wave (c) of (v) of larger i in that yellow count. Again, because this yellow count would now suggest we would be working on a leading diagonal for a wave i of larger 3, I have to adopt the simpler and more common pattern, which again still suggests lower before moving higher.

So for now, the bottom line remains that as long as we hold under resistance and the action to the upside remains corrective in nature, the near-term pressure remains down.