What I Don’t See

Sometimes what you don’t see in the market helps you to decide about what the market is about to do.   

Of late, I have seen initial indications that the market may have finally topped in the rally off the April 2025 low.  But, when we did not see follow through below 6720SPX, it told me to wait a bit longer for more signals.  With the strong rally we saw at the end of last week, I initially surmised that it was a corrective rally, since I did not see any clear indications that the yellow (c) wave rally pointing us north of 7200SPX was taking shape.  

Yet, as of today, I am not seeing any indications that this rally is going to lead to another larger decline. Rather, what I can now outline is a reasonable count for 5 waves up off last week’s low, which I would consider wave 1 of the yellow (c) wave.  

So, unless I see a CLEAR 5-wave decline, then we would almost have to assume the next pullback will be corrective in nature, as with a 5-wave rally potentially completing, I do not see anything outright bearish at this time.  Should a corrective pullback occur over the coming day or two, then I am going to have to fully adopt and embrace the yellow (c) wave higher, with this potential 1-2 structure setting up the next rally.  

Once the market actually completes this rally, I will post the set up for the wave 2 support, which, if held, can present us with an upside follow through of 250-350 points, depending upon how deep the wave 2 takes us.  For now, I have provided a guestimate as to that wave 2 support with the blue support box on the 5-minute SPX chart.   And, once we have the wave 2 set, we can then use our Fibonacci Pinball structure to outline the upside pivot/resistance, along with upside targets for all 5 waves in this yellow (c) wave.

Of course, should the market provide us with a 5-wave decline, then it puts this upside set up into question. And, should we follow through and break down below last week’s low, it would invalidate this set up completely.  

But, for now, it seems the bulls want to push this extended market to even further extensions.   Yet, I am going to remind you of something I said regarding the metals when they went to ridiculously outside extensions – this makes for a dangerous market environment, wherein the reversal can be quite rapid and powerful. So, if you intend on trading for higher levels, PLEASE make sure your risk management plan is well in place and that you adhere to it.