Stuck In The Middle

When you start looking into the micro counts on the SPX, I really cannot say there is much of an edge that we can glean for the moment.  We are truly stuck in the middle, and the market is going to need to clarify this smaller degree region before we can start developing higher probability expectations in the smaller time frames.

While I can actually analyze for you 6 different patterns that I am seeing in the SPX right now, it would seem that the least likely is that the 4th wave has already concluded.  I am not going to take the time to outline all 6 potential patterns, as I think I would probably confuse too many of our members.  But, I will note that it is certainly “possible” that the market has begun a leading diagonal off a truncated bottoming pattern (meaning that wave (4) has completed), those are rare, so I view it as the least likely count that I am personally following.

Moreover, while I still like the triangle, as presented in purple on my chart, I really need to us to head higher than the level struck last week before I see it as a higher probability.  And, until such time that the market is able to outline a more appropriate d-wave rally, the potential still exists that we can drop to lower lows in a more direct fashion, as presented in green.  Ultimately, this means that as long as we remain below the high struck on April 18th, pressure is certainly down.

What makes the market terribly treacherous, especially if we begin to drop right now, is that we really don’t have the cleanest 5 wave structure off the April 18th high.  The issue is that if we were going to drop directly towards lower lows, it would be with a 5-wave c-wave.  And, without any strong indication that we have an initial 5 wave structure in place to begin that bigger 5-wave c-eave drop, it is hard to suggest that we have a strong probability of dropping directly to lower lows. 

While we certainly may have a 1-2, i-ii off the 4/18 high, unfortunately, it would take a break down below 2626SPX (a=c off the 4/18 high) to make that a stronger probability.  So, today’s action effectively lowers our initial support from 2640 down to the 2625SPX region.  And, this is just one of the difficulties when we are trading within a larger degree 4th wave. 

I tried warning you several months ago, after we rallied back over 2730SPX off the 2530 region lows that the market action will only become much more difficult from that point forth.  And, nothing has changed my expectations.  But, I do promise you that as soon as we see more of the wave pattern clearing up over the coming week or so, we will certainly inform you as to what may be considered a higher probability expectation.

For now, I simply have to view the market as maintaining pressure to the downside as long as we remain below 2717, with the most immediate pressure down being maintained as long as we remain below 2698.  But, please keep in mind that there is nothing that I can personally see that is of higher probability trading value based upon where we stand at the time of my publication of this report.

60minSPX
60minSPX
Avi Gilburt is founder of ElliottWaveTrader.net.