Very Controlled Market Decline

With the market finally breaking support, it did not fall away as I would have normally expected.   It tells me that the buy-the-dip crowd is still very much alive and well.  But, that does not change my view of the larger structure.

The break of the support makes it much more likely that we are within the larger degree pullback, for which I have been expecting for some time.  But, with the continued up/down action, it seems to suggest the c-wave of this (a) wave pullback is taking shape as an ending diagonal.

The question is if the 3^rd wave of that ending diagonal has completed at the overnight low?    And, I can easily count it as completed, thereby putting us in a wave 4 bounce.

But, just as with triangles, we often view diagonals are comprised of 3-wave structures which make them just as variable as corrective structures and just as treacherous.  So, however this does take shape in the coming days,  I have to assume we still have waves 4 and 5 to complete.  And, my minimum expected target for this (a) wave will be the .236 retracement of the entire rally from the April low.  

This is actually quite shallow for an (a) wave, as they typically target the .382 retracement of the entire rally.  So, this does provide a bit more support for the potential blue path on our charts. Moreover, since we have not seen a reversal that is indicative of the completion of a very large ending diagonal, this also adds a bit more evidence to the potential for the blue count.

In the near term, I am still expecting more up/down action, and it could take us quite a bit of time before the entire (a)(b)(c) structure completes.  Thereafter, we will be watching how the market rallies off that (c) wave low.  Remember, if it is impulsive, then that would be indicative of wave 1 of the c-wave to new highs.  If the rally is corrective, then we have to prepare for a mini-crash down to the 3800SPX region as per the purple path.  For now, we will likely be stuck in this region for a bit longer.