The Complexity Continues - Market Analysis for Mar 8th, 2023

After seeing what could be counted as a clean and clear five-wave move yesterday the market saw a shallow retrace today followed by a break of yesterday's low. This action makes what was a clear five-wave move to the downside far less clear and much less reliable thus leaving the door open for the market to continue to take a more complex pattern as we move into the week ahead. 

I am watching three possible paths with this move to new lows thus giving us what can now be counted as either three down or five down off of the 4081 high. I am showing those paths in green, blue, and purple. The purple count would require a five-wave start off of the 4076 high whereas the green count could begin with a three-wave move, however, it would have to take the form of an ending diagonal to do so. The blue count would require three down off of the 4076 high as this is suggestive that we are bottoming in a wave (b) of b of a larger wave b. So with that, if we are unable to maintain an impulsive five-wave move to the downside then we will be able to eliminate at least one of these counts. Furthermore, the structure of the next bounce to the upside should also give us further clues as to which of the possibilities we are following. At the time being however, things are still quite complex and we simply need to wait to see how this reacts from both a price and structure perspective over the next couple of days to help clear things up a bit. 

Green Count
The green count remains the primary count for the time being and is suggestive that we have already topped in the wave b of larger wave (b) at the 4076 high. Under this case, we need a five-wave move to the downside to finish off the wave c of y of (b). This five-wave move could take the form of a diagonal or impulsive wave structure with the impulsive structure is a far more reliable path. Under that impulsive case, we should hold under the 4005 level on the ES and continue to move lower through the pivot below at the 3943-3928 zone. This should then be followed up with a break under the 3904 level en route to the 3846-3957 zone on the SPX which are the ultimate targets for the wave y of (b) as shown on the 60min SPX chart.

If we are unable to maintain under the 4005 level then we likely will have lost the five wave move to the downside off of the 4081 high thus making the green count less probable but not quite dead. If that break to the upside comes on a three-wave move then we still could allow for the wave (c) of y to be taking the form of an ending diagonal to the downside. We still would have some work to do to confirm this as we would be very early in that count but a break over 4005 AND three up off of the lows would put this count very much on the radar. 

Purple Count
There really is not too much to add to the purple count since Avi's last update. I will simply note that in this case we need to continue to move impulsively lower as a diagonal path would not satisfy the count where we currently sit. So with that, a break over the 4005 on the ES would make this count less probable at this point in time.

Blue Count
The blue count would suggest we are bottoming in a wave (b) of a larger wave b of (b). This would be the most painful of the counts that I am watching and would leave us with quite a bit of whipsaw-type action over the next month or so. Under this case, we should hold over the 3940 level AND see a full five up off of the next bottom. This should be followed up with a break over the 4005 level. From there we would need a break over the 4060 level and then ultimately over the 4081 high. Once we break that 4081 level I would be looking for a move back under the 3932 level back down towards the 3846-3957 zone for the ultimate wave (b) targets.

This blue path would make things difficult until we finally see the break below the 3932 low but if we break over the 4005 level on the ES on five waves I think it would be the most likely path. 

So while today's action has certainly made things a bit more complex again, we do have some fairly clear parameters to work with here and at this point, it is simply a matter of being patient and allowing the market to lead the way to help give us guidance as to what it's intention is over the coming weeks.