Test Of Support - Market Analysis for Jan 25th, 2021

Over the weekend, I outlined that as long as the market remains over 3790SPX, we have a very bullish immediate structure, which is pointing us to the 4165-4300SPX region for wave 3 of [3] sooner rather than later.  And, today, the market tested that support with a low of 3797SPX.But, simply testing that support is not enough to assure us that the next rally phase to 4165+ is in progress.  

As I also outlined over the weekend, we now need to break out over the micro pivot presented on the 5-minute SPX chart, and rally towards the 3913SPX region, which will then make our micro pivot our new support region to keep us pointing towards the 4165SPX region in a direct fashion.

There is something of which I want to remind you, which is quite commonplace within bull markets.   You see, more and more market participants become bullish during a 3^rd wave rally.  It is the one point in the market structure wherein the great majority of investors can be bullish and one should not view that as a contrarian indication.  Please read what I just wrote again.  During the heart of a 3^rd wave, you do not want to be a contrarian.  Understanding that we are in a 3^rd wave provides market context to know when not to be a contrarian.

For this reason, I have been patiently waiting for the market confirm the heart of a 3^rd in the SPX which can allow me to abandon any reasonable expectations for any further 2^nd wave pullbacks.  And, should we see a break out over the micro-pivot on the 5-minute chart, and continue to hold over it on any pullbacks, we will have our strong indication that we are rallying to 4165-4300SPX for wave 3 of [3], with the likelihood of then rallying to the 4600SPX region after we see a wave 4 pullback.

So, the market now has a set up in place to provide us with confirmation of the heart of a 3^rd wave break out.  Whether it takes the opportunity over the coming days or whether it breaks 3790SPX support for more of a wave 2 first is not something that I can answer with a high probability expectation just yet.  But, as it stands right now, the set up is certainly in place.

The last point I want to make is that it is also quite commonplace to see strong spikes to the downside during the c-waves within a bullish trend. You see, as the market continues to grind higher during a 3^rd wave, those c-wave spikes are what provide us with just enough bearish sentiment to re-set our ability to continue to march higher in the 3^rd wave structure.  So, continue to focus on the support levels we outline, and try to not let the strong spikes cause an emotional reaction in your trading/investing plan.   Know where your support resides, and adjust accordingly.  It will likely only be a matter of time before this wave 3 makes itself known and abundantly clear – as it already has in so many other charts.