While Garrett has provided you with an accurate depiction of the market potential right now, I did want to post a few additional thoughts.
Elliott identified that 5 wave structures were most often associated with continuation of the current trend. So, if I see a 5 wave move off a low, my senses have to perk up and recognize that the immediate trend may not have concluded. This means that today’s action has caused me to view the probabilities of the market making a higher all-time high as a bit higher than they were yesterday.
Today, with the higher high in the SPX relative to yesterday, we have what MAY be considered 5 waves up off last week’s low. While an (a) wave of the green b-wave can certainly also be 5 waves up, they are most often only 3 wave moves. With this action today, I have added an alternative count represented in yellow, which can push the market as high as the 2530SPX region before we drop down in earnest back towards the 2300SPX region.
I have been discouraging traders from aggressively trading the short side since bull markets are difficult to short, and 4th waves even more difficult. Rather, most should have been increasing their cash positions until wave (4) has run its course. Today’s action makes me even more confident in that suggestion, especially since I think attempting to aggressively trade for higher targets comes with just as much risk right now as trying to short the market aggressively.
Now, let’s assume the market begins to collapse in the c-wave of the (a) wave. While you may feel as though you have missed the trade if you were not aggressively positioned for it, look at bit more to the right as to where I believe the (b) wave of wave (4) will likely bounce up towards. If you are able to maintain a certain amount of patience, I do not believe the market is going to be making much overall downside progress for quite some time, even if we do collapse tomorrow. In other words, I believe the market will likely come right back to the region we now find ourselves within during the (b) wave rally.
Remember, you do not always have to be in the market, especially when you consider that the best traders are only in the market about 30% of the time. But, when you do move into the market, you want the probabilities to be on your side of the trade. At this point in time, I do not see the probabilities for any aggressive trade to be high enough for either the bears or the bulls in the short term. While my primary expectations still remain that we are in wave (4), I would say that today’s action has weakened that a bit, at least until we are able to break down below last week’s low, or if I see another Fibonacci Pinball clue as the market develops in the coming week.