Turn Down In Progress

I may be a little premature with this post, but assuming we see a strong break down below 2159SPX, then I am going to begin tracking our downside set ups. I have modified the chart in anticipation of the break down below 2159, but, again, I may be premature.  Should we see a rally over the last highs, I will be placing the more bullish blue count where it was previously.

Due to the seemingly 3 wave structure off the June lows, the market has left us with several potential counts we have to track, and, as you can see, they all have very different targets.  The manner in which I am playing this is that I will be exiting protective puts at each target region, so I have 3 tranches in place right now.

But, as we know, we are looking for a 3rd wave to take hold in the not too distant future.  That means a very strong rally to at least the 2300SPX for just the wave iii of (3).  For this reason, if we take out the new all-time high we have recently made, that is a very strong warning that the run to 2300SPX may be in progress.  But, for now, until I see an impulsive structure off a low, I am going to begin to look lower, and even still potentially as low as a 19 handle.

As the downside pattern takes shape, it should provide more clues so we can eliminate some of the alternative counts.

Avi Gilburt is founder of ElliottWaveTrader.net.