Corrective Rally Or Something More Bullish?

With the SPX’s inability to break below the 2027- 1.00 extension off the February lows, it has left the door open for a higher high, as noted last week and over the weekend.  Moreover, today’s action made it clear that the bottom created last week was a bit unorthodox, as there was no standard completed pattern developed into the lows.  Rather, the low was made with a complex structure.  However, we have to deal with what the market provides, and we were well aware of the potential for this move.

So, for now, I am viewing this rally as the initiation of the (b) wave, with us potentially topping in the a-wave of that (b) wave today.  Confirmation of this potential will be seen by a drop tomorrow below the 2060ES region in the futures, which would point to the SPX heading down to the 2030-2040SPX region for the b-wave of the (b) wave by our next turn date of the 26th.  That would likely set us up for a c-wave rally which can take us as high as the 2090-2100SPX region. 

While many were looking for the August fractal to play out to a large decline, to me, this action is more akin to the market action seen in the November/December time frame.  Should we see confirmation tomorrow with a drop below 2060ES, it places us in the December 15-17 timeframe.  While I am not expecting a similar type of decline as seen in January, I am expecting a (c) wave down in wave (2) to take us down to the 1950SPX region should this pattern play out.

Alternatively, if the market is unable to break below the 2060ES region into tomorrow, then it opens the door to the market heading up to the 2111-2134SPX region to complete yellow wave v.  However, the projections for such a rally seem to top in the 2111SPX region, so unless some serious extensions are seen tomorrow in this rally, I don’t see the potential for a significant higher high over the April high struck.  Should this pattern play out, it would suggest that it could take the entire summer to complete a wave (2), with the wave (3) beginning in the fall.

1turnchart
1turnchart
Avi Gilburt is founder of ElliottWaveTrader.net.