This is an excerpt of a special update sent out to our premium members yesterday evening due to the strong open of the Futures market yesterday.
Today’s price action warrants an update to yesterday’s post as we were looking down, but clearly that was wrong and we have to revise our count (welcome to a 4th wave). However, it actually fits better with the initial POV we had: “intermediate-iv should be a flat-correction since intermediate-ii was a zigzag.” I have had this in the back of my mind, but the market simple stopped given me the cues I was looking for that minor-b was underway (breadth, TIs, price in relation to trend lines and the 20d and 50d SMA, etc). Until now.
Figure 1. SPX 60min chart: minute-c of minor-b underway to ideally SPX2377-2407.
Minute-c of minor-b is now underway to SPX2377-2407. See figure 2 above for Fib-extension targets. Since in flat correction wave-b is at a minimum >90% of the prior wave-a, but at a maximum 1.382x wave-a, the SPX2396 to 2407 target zone is the most likely target and our cut off level is then SPX2431. In addition, the symmetry we mentioned between a possible minor-a and minor-c wave (46-35-68 vs 49-32-xx points so far) is lost with an open above SPX2367, thus telling is we’re dealing with a different wave degree.
The main reason why we continued to remain bearish short term, besides the overlapping advance, is because price remained below the 50d SMA, 20d SMA (which crossed bearishly), as well as below the descending trend line in place since the SPX2401 high, the TI sell signals (no ideal buy signals), weak breadth etc. The weight of the evidence told us so. But sometimes that’s simply not enough. Now price has a chance to open above the 20d and 50d SMA as well as the black descending trend line, which also tells us we’re dealing with a different wave degree.
Figure 2. SPX daily chart. Price bac above the 20d and 50d SMA as well as descending black dotted trend line.
Now you may ask, rightfully so, why intermediate-v hasn’t already started. The answer is simple: there’s not been a clean non-overlapping 5-waves up off the SPX2329 low: see Figure 3. Can’t it be a wave 1, 2, i, ii set up then? Certainly possible, but wave-i is most often NOT larger than the prior wave-1. Wave-i is 0.618 to 0.764x 1…
Figure 3. SPX 1min chart: overlapping advance off the SPX2329 low not an impulse. DOW made lower low.
Lastly, the DOW made a lower low this week, below the SPX2322 equivalent, and has no 1, 2, i, ii set up at all. It only has a possible 1, 2 set up. See Figure 4 below.
Figure 4. DOW hourly chart: lower lows below SPX2322 equivalent. No 1, 2, i, ii set up.