Rubber Meet Road

Well, the market followed through to the upside on the c-wave set up it left us with at the end of the day on Wednesday, and we are now in that target we had on our smaller degree 5-minute SPX chart. And, as I write, the micro structure looks to be filling out an ending diagonal to potentially complete the 5th wave off the low struck yesterday.

So, as the title suggests, we are now just below the main resistance in the SPX of 2939SPX.  As long as the market continues to respect this resistance, we are likely tracing out a triangle for this b-wave.

Moreover, the IWM is now also completing what looks to be a c-wave rally in what I had outlined as wave 2 on my charts.  And, most specifically, it also seems to be completing a 5-wave c-wave as I write this update.  The ideal target for this a-b-c structure for the wave 2 is in the 149.60 region.

Now, out of the two charts, I noted yesterday that the IWM is the much cleaner pattern, and also was pointing higher to complete a wave 2 in the more ideal structure.  And, since this chart is a much cleaner view of the market to me at the moment, I still have to respect the high struck last week, which is still well above us, at least relative to the SPX, which is much closer.

Should the SPX break out over 2939 then it puts the prior 2960SPX region as resistance as a more complex b-wave.  And, that is going to remain my expectation until the market invalidates the set up in the IWM.

Now, before you run off to accuse me of being an uber-bear, I have to remind you that the structure we have been tracking, most specifically in the IWM, has been one of the more textbook patterns I have seen in that chart in quite some time.  So, until that pattern invalidates, I have to continue to respect it. 

Furthermore, for those that are more bullishly inclined, I would strongly suggest you review the underlying stocks which drive this market.  Remember, this is a market made up of a stocks.  And, when the great majority of the stocks we track still have not completed their respective corrections, there is no way I can maintain a bullish bias  - at least until the IWM breaks this potentially bearish immediate set up.

Now, for those that are a bit more conservative on the short side, I have been speaking many times in my updates about how I cannot get very aggressively bearish until we have a 1-2, i-ii structure set up to break us down in the c-wave lower.  Thus far, we have not really been presented with that opportunity just yet.  So, today, I outlined what that would look like in the IWM, and it is presented on the attached 3-minute IWM chart.  That is the set up which would get me much more bearish in the near term, especially should we then break down below the bottom of wave i should we develop that 1-2, i-ii downside set up.

So, for now, as I also highlighted last night, we have a potential bearish set up developing, with the market now at the main resistance points which we were targeting yesterday.  Its time to do its business, or get off the pot.

And since we are at that inflection point right now, I wanted to send out my evening update early.  Should we see something further which is important to update, I will gladly post a supplement tonight.   

5minSPX
5minSPX
60minSPX
60minSPX
3minIWM
3minIWM
60minIWM
60minIWM
Avi Gilburt is founder of ElliottWaveTrader.net.