Will The Market Give Us One More Push Higher?

Yesterday, I laid out the parameters which would align the market with the purple wave structure relative to the green wave structure.  And, I also noted that I thought today would likely decide between the two.

As it stands at the time of my writing this update, the purple count for the triangle has become a lot less likely.  The only way I can really buy into the purple wave count at this time is if we see some massive extensions in a rally from support.

That basically leaves me with the green count, which seems the most likely pattern left on the chart.  Currently, the market is testing the support for wave 4 in that count.  Support resides between 2649-2657.  As long as that support holds, I will be looking for a 5th wave rally to the 2690-2700SPX region to complete wave 5 of c of 2 in the ending diagonal pattern.

However, if the market were to break down below support, and continue below 2645SPX, it opens the door to us already being in the a-wave of wave 3 down.  While a break down from here can even provide us with a WXY pattern for the purple count, I have a hard time buying into such a complex structure, and would need to have it prove itself.  But, I am getting way ahead of myself right now, as we are still over support.

So, based upon this action today, it would seem that the market may finally be setting up to drop to the 2450-2495SPX region, but it may push us out into the June time frame.

Yet, I will continue to remind you that we are still likely in a 4th wave structure.  For this reason, I am going to maintain an open mind as to what may still play out, and possibly something that I cannot even foresee as of my writing this update.  So, there is no slam dunk just yet, even if the green count is starting to gain in probability.  In fact, I still have the yellow count in mind, especially if we complete 5 waves up in the green count, as that can also be a wave 1 off the lows in the yellow count.

Remember, even if the ending diagonal does play out, the whipsaw we will experience will still be quite strong, especially as we have to play out as an a-b-c structure for wave 3 down, and then see further whipsaw with a 4th wave rally thereafter.   So, even if we do get the set up for the ending diagonal to the downside, it will NOT be easy.

So, even though the probabilities are starting to shift towards the green count, do not get overly aggressive as there are still a number of possibilities on the table, and we still have to respect the fact that this market is likely still within a 4th wave.

Avi Gilburt is founder of ElliottWaveTrader.net.