The Floor Is Certainly Creaking

With todays break down below 3415SPX sooner than I expected, the market may be signaling the heart of the c-wave down also sooner than I had expected.  

Normally, when we trace out a leading diagonal, the market oftentimes provides us with a deep 2nd wave retracement.  Unfortunately, if we have begun a 3rd wave down in the market, we did not see the usual deep 2nd wave, and only saw a shallow 2nd wave.  Even the NQ seems to have a wave 2 that is almost non-existent, as it was so small and shallow if we have indeed begun the wave 3 down.

So, what are our guidelines right now.

Well, if we have indeed begun a 3rd wave down, then I have added the micro pivot on the 5-minute SPX chart.   So, let’s go through the progression.

IF we are indeed following through to the downside in wave iii as shown on the 5-minute chart, then we need to break down below the micro pivot and head down to the 1.00-1.236 extensions of wave i and ii in the 3300-3330SPX region.  At that point, all bounces should remain below the micro pivot on our chart, and it will be pointing us down to the 3250SPX region next.

In very simple terms, a break down below the 3360SPX lower end of the pivot makes the 3385SPX region the main resistance in order to keep pressure immediately to the downside.

However, until we are able to break down below that micro pivot in a direct fashion (below 3360SPX), there is still some potential that we can see a “stick save” for a bigger i-ii as shown in the alternative yellow count on SPX, and the 1-2 in yellow on NQ.

At this time, I am still not confident of the micro path lower, but I can say that I still believe we have lower levels to target in this c-wave of wave [ii].  Moreover, if the NQ chart is unable to bounce, and soon, it will likely lead us lower in the heart of a 3rd wave sooner rather than later.  And, as I outlined over the weekend, if that should happen, then I do not think we will find meaningful support in the 3200-3250SPX region, as we will likely head directly down towards the 3050SPX target region.

So, overall, 3360SPX is now our lower end to the micro pivot, and a break down below that would strongly suggest we are heading lower to test the 3200-3250SPX region next, with 3385SPX becoming micro resistance.

And, until such time we are able to continue below 3360, there is still some potential for the market to provide us with the bigger bounce in yellow wave ii.

Unfortunately, when we are forced to deal with an overlapping diagonal structure such as the one which has taken us down from the 3450SPX high we struck the other week, it does not offer a higher probability expectation as to how the decline will initially develop.

Overall, I am still expecting a test of the 3200-3250SPX region next, but the question still remains if it is direct – green – or indirect – yellow. 

Depending upon how the rest of the day transpires, I may do another update this evening.  So, while I still maintain an expectation for lower levels, I cannot say the market has provided us with an easy and clear path to those levels just yet.  

Avi Gilburt is founder of