With the market breaking down below 4070SPX, I posted an alert yesterday noting that I am modifying my alternative count in blue on SPX.
Pursuant to Fibonacci Pinball, wave iii of 3 will usually target the 1.00-1.236 extensions of waves 1 and 2, and then pullback to the .618-.764 extensions in wave iv. Therefore, with the market topping out about a week and a half ago in between those two levels, I am now considering that the wave iii of 3 in the alternative blue count, with this pullback now being wave iv.
The caveat, of course, for this alternative count is that we should hold the .618 extension in the 4050SPX region on this pullback. And, if we see a sustained break of that level, then even this blue alternative count will head to the trash pile.
Yet, I still struggle with the triangle a bit at this time. You see, the IWM has now re-set its potential 2/[b] pullback with the depth of this current pullback. So, I am not really sure how much deeper it can support, especially if the SPX does fulfill the e-wave of the [b] wave triangle. Since I would suspect the e-wave should see at least the .618 retracement of the d-wave – which is still 100 points lower than where we reside today, it does make me question the potential for the e-wave, especially since it seems a bit more likely that the IWM should rally for its c-wave.
I know a lot of this sounds complex, especially to our newer members. So, allow me to distill this into as simple an analysis as possible.
As long as the 4050SPX region holds as support, I can still maintain the blue alternative, which still points us north of 4300SPX sooner rather than later. However, the market MUST hold that support and begin an impulsive 5-wave rally for wave [i] of v of 3 in the coming days.
However, if we either break down below 4050 directly, or we rally in a corrective fashion (green [b] wave on 5 minute chart), then I have to assume the e-wave is taking shape. And keep in mind, once the e-wave does complete its [a][b][c] structure, which then completes the [b] wave triangle, I am then expecting to set up a [c] wave rally to 4300+ to complete the larger b-wave rally off the October 2022 low.
As of now, most people should simply be waiting for the next 5-wave structure to give us an indication for the highest probability trade and expectation to develop. Until then, we can continue to whipsaw with these 3-wave structures.