Yesterday, the preferred count expected a bounce, which we got. Problem as I’m writing this is that ES futures are up about 9-10 points.
As I mentioned in the body of the article yesterday, the wave iv target could run all the way up to the gap fill, although in looking back at yesterday’s chart, I didn’t quite draw the target box to match that statement. This is another reason it’s important to actually read the articles, although the people who just look at the charts will no doubt miss this portion of the article suggesting they read the articles. Catch 22.
Maybe if I say it really loudly: HEY YOU FOLKS WHO JUST LOOK AT THE CHARTS, READ THE ABOVE PARAGRAPH. There. Certainly made me feel better.
Anyway, if this 9-10 point ES rally sticks, while a big retrace is not outside the realm of possibility for the fourth wave as counted yesterday, it’s less likely because it will break the top line of the 1-3 trend channel (not shown). So today I’m going to lead off with another potential short-term wave count.
The count below would be yet another head-trip from this market to add yet more confusion to the fire. Or fuel to the fire, as the case may be — I guess confusion doesn’t burn too well. “Add more fuel to the confusion fire” sounded dumb though, so I had no choice but to mix metaphors. Looks like the shoe’s on the other hand now!
I really can’t blame the people who just look at the charts.
This is an entirely new option shown below.
And here’s yesterday’s chart, which discusses the short-term invalidation levels, and shows some ST support/resistance zones.
And next, the bigger picture SPX chart, which didn’t show the alternate count yesterday, so I’ve updated it.
As I talked about at length yesterday, there was nothing in the decline which should lead one to become ultra-bearish. There are still numerous possibilities on the table, and until the market confirms a larger impulsive structure to the downside, it’s entirely possible that there are new highs still coming.
Even with the rally in ES tonight, the odds still favor a new low for this move, for a number of reasons:
1) It’s challenging, though not impossible, to count the decline as a complete wave.
2) Declines with the level of momentum displayed on Tuesday rarely mark the exact bottom of a move.
3) Tuesday had very high levels of distribution which, again, rarely marks the exact bottom of a move.
So the odds still favor a new low for the move, and thus a sell-able bounce. Of course, there are exceptions to every rule — so these things are merely probabilities, which is all we ever have to work with as traders. Trade above the 1378 high would negate all downside projections. Trade safe.