Testing All-time High

With the break out through resistance overnight, the market has made that yellow ending diagonal count a strong contender.

At this point in time, I cannot say that I have a “preference” between a higher b-wave count, or the ending diagonal.  Rather, much will depend on if we top today or tomorrow, or if the market pulls back again and then attacks the 2500SPX region.

The issue with ending diagonals is that they can mirror a complex triple-three combination b-wave rally.  But, if the market were to pullback, and hold the 2473-2480SPX support, then I will move into the ending diagonal as my primary count, which means we would start that wave (4) all over again.  However, I will still maintain the b-wave count as an alternative as I do not want to be too bearish once we test the 2380SPX region.

As you can see, when the market does not provide strong impulsive structures, it leaves some open questions in the wave count.  From a larger degree perspective, the larger wave structure still looks like it “needs” a wave (4) to drop to at least the 2380SPX region.  That is what the standard structures we follow would call for.  The current pullback to 2417 seems a bit too shallow and a bit too short from a time perspective to fit as the larger degree wave (4) we are seeking in this region.  For this reason, I am still maintaining an expectation for a larger degree pullback once this rally runs its course.

But, as I warn over and over, this is still a bull market, and you should be more focused on the larger degree upside towards 2600SPX rather than aggressively trading any downside we may see.  Yet, after conferring with our StockWaves analysts (who follow hundreds of individual stocks on a daily basis), the stocks which comprise the “stock market” mostly look to also need a larger degree pullback from this region as well.  So, I have another perspective supporting the larger degree pullback in a wave (4) since, after all, this stock market is still made up of thousands of individual stocks, which also seem to need a bigger pullback.

For now, 2473-2480SPX present us with support which can still push us to the 2500SPX region.  Should we break below 2473 from here, and follow through to break down through the uptrend channel, it would suggest a fast move back down towards the 2420-2430SPX region.

Avi Gilburt is founder of ElliottWaveTrader.net.