The Floor Is Creaking But Has Not Yet Broken

We certainly did see downside follow through as we generally expected, but the fact that the SPX/ES refuses to really break the recent support region of prior lows is leaving me seriously questioning any potential downside follow through.

In truth, the manner in which we are currently set up would normally point us to the lower end of the support box below. But, the fact that we have not broken down yet does leave me concerned about that follow through.

While this could be a 1-2, i-ii, (i)(ii) structure in the making – which means the morning high should not be broken to the upside – we will need to see downside acceleration sooner rather than later. And, I am not sure we will see this before the Fed announcement tomorrow, even though we are set up for such a decline.

At this point, I have to note that pressure remains down as long as the morning high is respected in the ES. Over that high, and we move into no-man’s land. And, as long as we remain below the wave 2 high, I have to favor downside resolution. But, as I have been noting of late, should we exceed the wave 2 high, then I have no choice but to adopt the yellow count.

For now, the best guidance I can provide is to note that as long as we remain below the morning high – wave ii – then pressure remains down. Over it puts us into a bit of a question as to the market’s intention in the near term.