Will We Be Seeing Red?

While I have always maintained a bullish bias and expectations for the S&P 500 (SPX) to rally to 3000+ before we saw a 20-30% correction, I was hoping we would see a clear 4th wave complete before the 5th wave began.  Unfortunately, the market had other ideas.

As I have also noted, it seems likely that the market is on its way to the 3000 region in this current rally.  However, the micro-path with which we get there is still a bit unclear.  Moreover, I have also outlined the one way we may be tripped up and not headed directly to the 3000 region, and today’s action has slightly increased that probability.

I have been outlining the red wave count on my 60-minute chart for some time, but have noted many times that this is a lower level probability, which would point us back down to the 2480 region on the SPX before we head to 3000+.   But, the overnight rally in the ES seems to have developed 5 waves off yesterday’s low.  Moreover, the pullback seems to have been corrective.  So, as I noted earlier today in an update, if the market is able to exceed the high struck today, then we likely have another 5 wave structure in progress, which seems to be pointing us up towards that 2823 region of bearish confluence.

Now, just because we head up to 2823 does not necessarily mean it must resolve in a short- term bearish manner, pointing all the way down to 2480 SPX.  We still need to see an impulsive drop below 2760 to make this potential a higher probability.  But, if the market does rally up to that level and turns down, the multiple points of confluence residing around 2823 should at least cause a certain amount of caution for anyone who is outright bullish. 

For now, if the market is able to break back down below the lows struck today in the futures, then it would maintain us confidently in the more immediate bullish patterns.  However, if we do continue to rally up to 2823 in the coming days, then some amount of caution should be considered.  And, if the market does then drop below 2760 in impulsive fashion, then I would likely be suggesting that we consider shorting the bounces with an ideal target of 2480 on the SPX.  But, for now, the market has a lot to prove to put me into that primary count.  For now, I am still in the immediate bullish camp.

Avi Gilburt is founder of ElliottWaveTrader.net.