Thinking Ahead - Market Analysis for Feb 2nd, 2022

I usually try to think several steps ahead of Mr. Market, and I try to outline my thinking to you well before any changes are made to my analysis.  That is my way of being as transparent as possible.

So, with today's push higher in the futures, I am looking at this week as ultimately the key.  Either the market tops out imminently, and turns down for a 5th wave lower low, or I am going to be moving into the blue count as my primary, and I will use the yellow count I have on this chart as my alternative AT THAT TIME.

You see, the reason I am giving the market just a bit more room in the green count is two-fold.  The first is because the initial move down in wave i counts best as a 3-wave structure, which would then suggest this c-wave is an ending diagonal.  And, ending diagonals most often see overlap in waves i and iv.  The second reason is that the initial move off the lows was also best counted as a 3-wave structure, suggesting this can still be a [c] wave in a corrective [a][b][c] structure. 

However, if all we do is pullback correctively, and continue higher into next week, then the blue count gets adopted as the primary - ie.  change to green, and we make the yellow count as our alternative.  The ONLY way I would accept the yellow count as a real likelihood is if the initial drop off whatever high we make in this rally back towards the highs is a CLEAR 5-wave structure suggesting a c-wave decline is under way.  Moreover, since we have a high probability target at 5500SPX, once we do top out in wave 1, I will then calculate what level wave 2 would be at to project a 2.00 extension to 5500SPX.  Should we break that level (whatever it would), then I would adopt the yellow count as being more likely.

So, for now, as I said yesterday about breaking out over the prior resistance, I am going to remain neutral and allow the market to tell me where I intend on putting the rest of my money to work.  For now, as long as we do not see much more than the 4585SPX region, I am still going to give the green count some room, but it will have a short rope.

But, please do not get confused by the yellow count right now.  It is not a 3rd option I am tracking RIGHT NOW, but it will become my alternative if we complete wave 1.  And, I would not have a high probability on that alternative if we complete 5 waves up for wave 1.

Avi Gilburt is founder of