This Bull Loves To Extend

While I cannot tell you what will certainly happen in the market, I can provide to parameters which guide our expectations as to what is most probable.  That is why I outlined two nights ago that as long as we held support, we were projecting to the 1.382 extension in the 4531ES region.  And, we are now there.

So, the market has now rallied to the 1.382 extension of waves [i] and [ii] within the leading diagonal scenario we have been tracking as the bullish potential.  But, I have to also note that I have rarely seen a leading diagonal wherein the wave [iii] substantially exceeds the 1.382 extension.   

What this means is that if the bulls want to retain the advantage they have developed in rallying beyond the 1.00 extension, they really have to provide to us a wave [iv] pullback sooner rathe than later.  For if we extend much beyond the 1.382 extension in direct fashion, then I may have to reconsider the b-wave potential more strongly.

But, I also want to note that if the market does push to new all time highs, then we seem to be targeting the 4555-70ES region.  And that would be hard to view as a 3rd wave in a leading diagonal, as it is well beyond the standards we normally see.

In either case, I am still looking for the next pullback to provide us with the higher probability guidance between the green and the purple scenarios.  And, with coming up this high, we have to allow the market to break down below 4508ES before we can assume a top is in place. Moreover, the manner in which we break back below 4508ES should provide us with an initial indication as to whether the pullback will take shape as a corrective or impulsive one.  

Remember, a corrective pullback will keep us well within the green count, and expect a 5th wave higher towards the 4600SPX region to complete wave i of 5 of [3].  However, if the pullback is clearly impulsive, then we have to view this high as a b-wave, with a c-wave pointing us back down towards the 4230-70SPX region.  

Lastly, for those that do not think a b-wave can provide us with a higher high, go back and take a look at the high of February 2020, as that was a VERY larger b-wave high.  

So, for now, we have no indication a top has been struck.  And, until that top has been struck, and we see an initial decline below 4508ES, we cannot ascertain whether this is green or purple.  For now, I am giving the edge to the bulls in the green count, but we will need to see a pullback very soon to keep this within the standards of a leading diagonal.  

Lastly, I can now state that the 4370-4400SPX region will not likely be broken, whether that be in wave [iv] or in wave ii if the bulls have truly taken charge.  So, let’s have a bit more patience to see how the next pullback takes shape.  But, over 4508ES, the bulls are in charge in the very near term. 

However this resolves in the next few weeks, I fully expect to be within wave 5 of (3) on our way to 4900SPX by the time we get to Thanksgiving.

5minES
5minES
5minSPX
5minSPX
60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.