Wild Action, But Bears Have Not Moved That Needle . . YET
By
Avi Gilburt
Today, the market spiked and reversed the low struck earlier this week. And, while it invalidated the “immediate” bullish potential in a 1-2 to the upside, I cannot say that it has moved the needle to providing a strong bearish option pointing us down towards the 6175-6300SPX region. We are still way over standard support for a 4th wave – which is the top of the support box below on the 5-minute SPX chart (.382 retracement of wave iii) – and the decline has not really taken a clearly impulsive structure to the downside.
In fact, it is quite rare to see a i-ii, (i)(ii) downside structure where both 2nd waves retrace almost the entire size of their respective 1st waves – as we have seen here in the futures. So, when looking towards probabilities, I would not call that a high probability set up to the downside, as it is quite low in probability in my humble opinion. Moreover, the SPX does not have the same set up as shown in ES.
Until the market provides us with a better downside set up or at least provides more proof for the current one in the futures, I have to much more strongly consider the iv-v in blue for now. While I can give this current potential c-wave of iv a little more room to the downside with one more lower low, I would suppose that the next fib lower in the 7058ES region is support that MUST hold to maintain this immediate count. Should we take that support out, then I can re-assess the potential for a bearish path down in wave 1 of a bigger (c) wave decline pointing to 6175-6300SPX. Until that happens, I think the more reasonable view is this being a blue wave iv.
Now, with that being said, the marginally higher high in SPX has now reset the high for the c-wave of (b). And, the decline today can be seen as a 5-wave structure. I have presented this on the 60-minute SPX chart. Therefore, if all we see is a corrective “bounce” followed by a strong drop below 7058ES can place that downside path front and center again for the (c) wave decline.
So, I think the action we see as we approach the weekend can potentially clarify this for us between these paths. But, for now, I have to lean towards wave iv in blue as long as we are over 7058ES.
