Yellow Less Likely Right Now

While the market certainly provided us that “bounce” that I called for in my update yesterday, it actually bounced a bit too much to make the yellow count a strong probability.  You see, when the market moves past a .618-.764 retracement of the prior move, then the probability of a continuation move in an impulsive manner becomes less likely, at least based upon my decades of experience.

Yet, we still need to break out over yesterday’s high to invalidate that potential. So, it now provides us with several paths to follow.

There is potential that the 5-wave decline we completed yesterday is the c-wave of a running wave 4 flat, as I am showing on the attached 15-minute chart. And, that means we may have developing a i-ii break out set up for wave 5.  And, just to remind you, that 5^th wave would complete the [c] wave rally.  And, once that rally is completed, we will need to watch the ensuing decline very carefully to determine if it is impulsive (the red 1) or if it is corrective (the blue b-wave).

The other potential is that wave 4 is ongoing.  And, I would suggest that the market really should not break down below the 1.00 extension in the 5474ES region.  A sustained break of that support can open the door again to the yellow count, despite my views currently about yellow.

So, to keep this simple, as long as the market holds over the 5474ES region, then I am expecting a 5^th wave higher towards the 5686ES region, which is the 2.00 extension of waves 1-2, and the typical target for a 5^th wave in a 5-wave standard Fibonacci Pinball structure.  It would take an impulsive break down below 5474ES to bring back higher probabilities for the yellow count.

I want to conclude this update with an alert I sent out in the trading room around an hour ago:

“Bigger picture moment.   While the 60-minute chart is exactly where we would want to see it and with negative divergence right now developing, I do question whether the daily chart MACD has bounced enough to support a potential c-wave decline.  So, I am not going to guess.  I am going to let the nature of the next larger decline tell us how we move forward, as per our plan.”