The Inmates Are Running The Asylum

Impulse waves seem have become a thing of the past.  They have not followed through on the upside or the downside, and this has been going on for weeks.  And, with the break out over 2055SPX we saw this morning, the red impulse down broke as well. 

Whenever we see crazy action like this, many assume that the market has gone crazy.  But, in truth, action like this often denotes either a triangle or a diagonal.  And, for now, I am going with the diagonal.

As you can see on the 5 minute chart, I have modified the expectations to this being an ending diagonal for the c-wave of wave (2) in the green count.  This means we will likely continue with this up/down whipsaw, but while continuing to lower levels into next week.  As long as the market remains below 2080SPX, this will be my expectation. 

However, if the market is able to strongly break out over 2080SPX, I have to consider that this is a 4th wave triangle in the yellow count, or we are going straight up to complete the c-wave of the 5th wave in wave (1) in the yellow count.  For the latter to apply, I will need to see a solid impulsive structure off the lows, followed by a corrective pullback, and then a take out of the high of the initial impulsive structure.  So far, I cannot count a full 5 waves yesterday’s lows.  That full 5 waves would likely take me to the 2100 region if I were to assume the move off the lows was a leading diagonal. 

5minSPX
5minSPX
1turnchart
1turnchart
Avi Gilburt is founder of ElliottWaveTrader.net.