While I am still uncertain as to how the SPX is going to take shape as we look into January of 2024, the IWM still is relatively clear.
As you can see from the attached 3-minute IWM chart, I am viewing the current pullback/consolidation as wave [iv] within wave v of 3. That means that as long as we hold over 201 in IWM, I am still looking for a rally to at least the 207 region, which is the larger degree 1.618 extension (as can be seen on the 60-minute chart) and the ideal target for this wave 3.
But, that now brings us to our next order of business – wave 4. I am expecting a sizeable pullback as we start out the new year of 2024. The reason is due to the theory of alternation. Based upon the size and time length of wave 2 (which was very shallow and short), I am assuming that wave 4 will then be relatively deep and take up much more time.
Now, if the SPX does not see some major extensions in the coming next few days, then it is actually quite reasonable to assume that while the IWM sees a wave 4 pullback, the SPX can see a yellow b-wave pullback. The main reason is that the SPX is still quite far from its minimum wave 3 target in the 4900SPX region. Moreover, should the yellow b-wave in SPX coincide with wave 4 in the IWM, then the SPX can potentially outperform the IWM in the rally thereafter.
For now, as long as we hold 201 in the IWM, I am looking for one more rally before the larger degree wave 4 pullback takes shape in the coming weeks.