We Are Again At Major Support

I am posting this evening’s update early because we are now in the heart of our target zone for a 4th wave.

We use our Fibonacci Pinball methodology to gauge where we are within a market move.  And, as the market respects or does not respect the levels outlined within our Fibonacci Pinball structure tells us a lot of where we are in the market.

Wave [3] of iii within our Fib Pinball structure will target the 1.00-1.236 extensions of waves i and ii.  Moreover, wave [3] will often target the 1.618-1.764 extension of waves [1] and [2] within wave iii.

In looking at the 60-minute SPX chart attached, you will see that wave [3] topped at the 1.764 extension of waves [1] and [2], which happened to be in the middle of the 1.00-1.236 extensions of waves i and ii.

After wave [3] completes, wave [4] of wave iii will often target the .618-.764 extension of waves i and ii, which in our case is the 3103-3192SPX region.  Moreover, wave [4] within wave iii will also target the 1.00 extension of waves [1] and [2], which is 3155SPX in our case.  So, my ideal target for this pullback has been the 3155-3192SPX region, with 3155 being a truly perfect target, with the maximum we can accept being that 3103 level.

Moreover, the theory of alternation suggests that 2nd waves and 4th waves will often take different shapes and times.  In our case, wave [2] took two months and went sideways.  This wave [4] dropped us straight down into our target in a rather quick wave fashion.

So, we are now FINALLY within an ideal pullback region for wave [4] of iii within the SPX, with defined parameters of support, and an ideal target overhead of 3711SPX, the 1.618 extension of waves i and ii.  The risk to reward ratio here is rather good.

As far as our micro structure, we seem to now be completing a 5th wave in a c-wave down.  The micro resistance right now is 3207, and we will have to see an impulsive move through 3255SPX to suggest that our wave [5] to 3711 has likely begun.

Now, moving onto the IWM, I have to say that the depth of this pullback is a bit more concerning to me, and is getting me to lean more towards the b-wave potential we have been outlining.  As we can still count this pullback as either a wave [2] in yellow (more bullish count) or a 4th wave in green, we still have the same issues we have been addressing for months.  Either the IWM is going to significantly outperform the SPX in the coming months to “catch-up” in its 3rd wave, or we are going to top out in a b-wave, and drop down to the 125-136 region for a much larger c-wave within a larger degree 4th wave. And, lastly, if we see the SPX break down below 3155 and follow through below 3100, it likely means that the c-wave down in IWM is taking hold sooner rather than later.

In conclusion, the market has finally seen a reasonable pullback that works well within our Fibonacci Pinball standards.  In fact, this is the first time we have seen a pullback maintaining standards for quite some time.  And, as long as the market respects the support outlined through our Fibonacci Pinball standards, then we have to view this as a very bullish structure, pointing us to the 3711 region in 2020 to complete wave [5] of iii.

Alternatively, should we see a break down below 3155, with follow through below 3100, then it opens the door to next target the 2800-2950 region.  Again, for now, that is simply our alternative as long as we maintain over support.

5minSPX
5minSPX
60minSPX
60minSPX
1SPXdaily
1SPXdaily
60minIWM
60minIWM
Avi Gilburt is founder of ElliottWaveTrader.net.