Yesterday we posted our preferred count, which tracked the market remarkable well until… well… today (we shouldn’t have posted it ;- ) ). Since we always let price dictate our POV we are therefore forced to change our count -by admitting one is wrong one can start being right- and today we take a look at the RUSSELL 2000; $RUT, which has led the market and which also counts remarkably well; see Figure 1 below.
Figure 1. Russell 2000 in intermediate iv of major 3
We can observe how price has been consolidating over the past 2 months, after hitting the 1.382x extension of (red) intermediate i, from ii, and which is a rather typical 3rd wave Fib-extensions, to the T. This suggests the $RUT is now in intermediate iv and will ideally find support at the 23.6-38.2% retrace (red box: $1300-$1335) of all of wave-iii. This level coincides well with the green support zone. Note, this is healthy behavior after a 20% run in just one month and a few days.
Hence, this index supports a minor 3, 4 count on the SPX, and that downside will be limited as we expect $1300 to hold. For the SPX this translates to SPX2350-2335 for minor 4.