Stuck Between A Rock And Two Fibs
By
Avi Gilburt
With the market pushing higher overnight, I outlined the potential that we could be seeing a very shallow 4th wave structure developing as a flat for the blue count. And, as I write this update, this is still a strong potential right now.
With the market dropping from the 2nd strike of the recent high, this can easily count as an a-b-c structure, as outlined in blue on the attached 15-minute SPX chart, which is also presented on the 5-minute SPX chart.
If this was really going to be the start of a larger c-wave decline, then the rally which topped in the early morning hours should not have exceeded the .764 retracement, and then provided us with a 5 wave decline for wave (i) of iii of wave 1 to the .618 extension of waves i-ii. As I write this update, the market has spiked down below the .764 extension of waves i-ii, which often suggests that this is not wave (i) of iii.
In fact, when we see a direct move beyond the .764 extension it either means that wave (iii) of iii is already in progress and that wave (i) was very small, or that this is actually a c-wave decline targeting the 1.00 extension for an a-b-c corrective structure. And, that is what we may be seeing right now.
So, with the 7082ES level being the 1.00 extension, as long as we remain over that support and then see a 5-wave structure develop, then it would tell us that we have likely begun blue wave v. But, if we break down below the 1.00 extension or we only see corrective bounces thereafter, then it could just mean we have begun that larger degree c-wave down in a bit of an unorthodox manner. But, the fact that it is taking shape in a bit of an unorthodox manner is our clue to watch for the potential of that shallow wave iv in blue.
So, we are going to be watching that 7082ES level very carefully. Should we see a 5-wave rally begun over that support, then we have to switch gears to the potential for completing 5-waves off the recent lows. And, that could lead to a much more bullish outcome sooner rather than later as we look into the last half of this year.
But, for now, I do not see a 5-wave rally having completed off the intra-day low, but I also do not have a strong downside set up in place since we went beyond the .764 extension. So, for now, the 7082ES level is going to be the key focus over the next 12-24 hours. And, as long as bounces remain 3-wave corrective structures, pressure will remain down.
