Can We See An 18-Handle?

I said last night that the set up in the market was quite bearish, and I expected downside into today.   However, the manner in which the market reacted to take us down overnight and this morning did not provide me with the confirmation to assure me that we are in the bearish count.  Rather, it was quite overlapping and did not exhibit the impulsive structure that one would need for a wave iii down.

So, rather than attempt to force that bearish count, as I said in my first Alert this morning, the market action made me believe that the drop was potentially corrective in nature, and that we were potentially going to see a rally from the lows today.

After that rally began, and as we moved to the .382 extension of what could be a 3rd wave up, we did not quite reach the .382 extension, and were consolidating just below that level.   So, there was clearly a question in my mind as to whether the consolidation represented wave (iv)of (1) or if it was a high level wave (2) consolidation.  Either way, the pullback region would have basically been the same for a potential buying opportunity (which was a question many had as to why I noted that region, even if we did not top in wave (1)), so I posted the following Alert:

Therefore, any pullbacks into the 1759-1762ES region can be a buy - again, assuming you want to go long - with stops just under 1757 if you want it tight, or just below the low we hit today if you want it a little looser. It is from this region that we would target 1787ES next - again, assuming we maintain support.

Clearly, the market bottomed just under the 1762ES region and took off to the 1774ES region resistance.  Now, the technicals that took us into the 1774ES region were weaker than those that took us off the lows.   So, we can have two potential explanations while we are below the important 1774ES resistance – that last leg up was indeed a 5th wave for a bigger wave (1) of iii, which concluded at the .618 extension, or, this move up was an a-b-c move higher in a larger y-wave of a red wave ii.   Yes, the red ii does not completely go away until we are able to exceed the prior high, but it is much less likely at this time, and becomes more likely only if we break today’s low in an impulsive fashion.

So, my expectation is that we can still see higher levels, and a strong break out over the 1774ES region will have us targeting the 1787ES region for the top of wave (3) of iii of 5.

And, for those that really want to wait for the break out, remember, there will be a wave (4) of iii pullback after we hit the 1787ES region, at which time you can enter the market if you want to go long, for a run to the 1800 region.

 Elliott Wave Chart