Trying To Clear This Up

With the drop today in the IWM, it would seem we are coming much closer to a bottom in a 4th wave off the August lows.  As I have mentioned several times before, it would seem that the IWM is still missing a 5th wave off the August lows before we can consider the entire rally completed off that low, and all of wave (3) as completed.  Then we can begin to look for a larger degree pullback.

While we may still see some more weakness, as the ideal target for the IWM is the 1.0 extension in the 145 region, we have certainly pulled back enough now to provide us the minimal waves to complete wave 4, as shown on the attached 60-minute chart.  It would take a breakdown below 143.75 to suggest that we have a top in place already, but that is not my expectation at this point in time.

So, in order to align the SPX with the IWM, I am going to expect continued grinding higher in the SPX, as long as we remain over the 2570SPX region.  Therefore, it would take a break down below the 2570SPX region to even consider that the market has completed all of wave (3) at this time, especially since we now have the minimal number of waves in place for a diagonal to be completed.  But, we certainly have not seen the strong reversal that usually accompanies the completion of a diagonal, just yet. 

Therefore, based upon what seems to be a missing 5th wave in the IWM, I am going to assume the SPX is going to continue to rise towards its target box overhead on the daily chart.  And, when the IWM and SPX complete this next 5th wave higher, then I will be expecting a test of the bullish support region below (2520-50SPX), which will then determine if the bigger wave (4) has begun. 

iwm 60min
iwm 60min
IWM daily
IWM daily
5minSPX
5minSPX
1SPXdaily
1SPXdaily
Avi Gilburt is founder of ElliottWaveTrader.net.