We Were Due A “Bounce”

As I write this update, it would seem as though the market has potentially completed wave iii of 3 in the blue count, ultimately pointing us to the 4000SPX region.

To recap our Fibonacci Pinball structure, remember that wave iii of 3 often targets the 1.00-1.236 extension region of waves 1-2.  And, that is where we seem to have bottomed today – right in the middle of that region.   

Thereafter, the market often retraces in wave iv of 3 back up to the .618-.764 extension of waves 1-2, which is our market pivot, and is labeled as such on our charts.  In our case, I am assuming that the market will likely hold below the 4308SPX region in this wave iv bounce, which is the bottom of the pivot box.  

But, as you know, I have always viewed this blue count as certainly less than perfect.  I have had many reasons to doubt it, and I still cannot say that I am embracing the blue count wholeheartedly.  But, with the break of support, I have no choice but to make it my primary count.  Yet, the alternative I am also forced to track is not ideal either, as you have read from my weekend analysis.  

So, for now, I would say that the 4308SPX region is going to be important in my view of the blue count.   If we break out over that level, and then continue through the 4350SPX region, that opens the door to the green count I am now tracking, which is the ending diagonal for wave [5] of [iii] in the larger degree structure off the March 2020 low.  And, this would likely top us out in the 5175SPX region rather than extend to the 5500SPX.

Now, I just want to give you a heads up, even though it is premature.  Should the market be able to exceed the 4350SPX region, I will then move into the green count, and will adopt a big triangle for wave [4] as my alternative count.  But, again, I am well ahead of myself in this regard, yet I wanted to at least warn you of what is to come if we do see a break out.

For now, as long as the market remains below 4308SPX, I am looking lower towards the 4080-4143SPX region next to complete wave v of 3 in blue.  A break out over 4308SPX is a warning to the bears, as well as the bulls, since any break out into the diagonal pattern will not be easy to trade.

Avi Gilburt is founder of ElliottWaveTrader.net.