Some days you look at 30 charts and still conclude there’s just not much to add. Today is one of those days — for a more broad overview, please see yesterday’s article.
Both potential short-term counts were expecting a turn, and that’s exactly what we got. No questions have yet been answered as to the degree of this turn.
The wave down off the highs does appear impulsive on most indices, suggesting at least one more wave down is reasonably likely to unfold. The market this year has presented a few prior declines that appeared impulsive, however, and an above-average number of them turned out not to be. Thus: in a normal market, I would have high confidence that at least one more leg down would unfold here — in this market, I’m not so sure. I still have to favor what I see, so I am favoring at least one more leg down after the current bounce completes.
The chart below shows the potentials. I’m favoring at least one more wave down that takes us back into the yellow target box, as roughly sketched-in on the chart.
The next chart is the Russell 2000, which also appears to have formed an impulsive decline, and presents some potentially useful trade triggers and targets.
Ultimately, not much has changed in the outlook since Friday. If this is the start of a much larger decline, then we need to see at least three more waves unfold to the downside and break the prior wave 4 (red wave (iv) on the SPX chart) bottom. At that point, we would have good confirmation of a larger trend change. In the meantime, we’ll have to take it day by day. Trade safe.