Friday provided a new low, but it wasn’t really the “type” of new low I was looking for — it was too shallow. So there are still several options open. As I stated on March 16, when I suggested a turn was coming, the bigger question is what degree that turn would be. Well, now we’ve had that turn, but the market still hasn’t answered the question.
I’m still leaning toward the view that there is now a more meaningful top in place… but in continuing to attempt to examine the charts as objectively as possible, I believe the bears absolutely have to keep this market below the prior swing high — if they can’t, then we’re almost certainly headed into the mid/high 1400’s… or beyond. In fact, some quick “back of the napkin” calculations suggest the 1500’s would be on the table.
I see very little in the way of middle ground here, so this strikes me as another critical inflection point. A big reason for that view is the NYA chart. A fair number of Elliotticians are still looking at this as a larger possible fourth wave correction, but NYA has ruled that out, due to key overlap of the first wave.
So, from what I see, this is either the start of a bigger decline — or it’s only a 2nd wave correction, which means there should be a solid amount of continued upside. In fact, if this is a 2nd wave correction, then that suggests a strong wave up is on deck.
On NYA, we can also spot a nice clean red wave (iv) triangle just above the recent lows.
As noted on the chart, trade above 8252 will increase the odds of eventual new highs. Trade above that level doesn’t mean the correction can’t stretch on further first, but it does greatly increase the odds that this wave is only a correction.
Let’s look at some other charts. As I said: objectively, these all look like small A-B-C’s right now. The only thing still leaning me toward a bigger top is the larger structure.
Short term, the SPX has a small overhead gap that could become a retrace target.
RUT should also provide some good clues. If the overhead triple-confluence resistance level doesn’t contain the market, then bears will probably need to wait a while for another intermediate-term opportunity.
Here’s a bigger picture chart of the SPX showing the two potentials. If the recent highs are taken out, then we can expect the trend will remain pointed up for at least several more weeks. If they’re not, then bears have free reign to run with the ball.
In conclusion, I’m sticking with my call for a larger turn based on the bigger structures — but the short term structures have added zero confidence to that call, and in fact seem to be suggesting the opposite. A break of the recent highs will turn me short-term bullish. As I see it, the trend of at least the next few weeks should be determined by what happens at this juncture. The good news is: whatever happens here should provide some solid trade opportunities for either shorts or longs. Trade safe.