On Monday I left readers with this chart showing my expectations for the remainder of w.4. The Market continues to follow my preferred count of an expanded flat. With three waves complete, the Market has arrived at a critical juncture.
A Bullish Stampede
If the Bulls are to make a run to new highs, then today's high of 1293.75 must be taken out tomorrow and price must enter into the territory of w. 1 low of 1308.75 (red dashed line) to negate any further bearish stance. Should this happen, wave overlap would occur and confirm that the decline from 1367.25 was in three waves... a corrective move that will eventually be fully retraced regardless of what larger pattern develops.
A Bearish Mauling
If the Bears are to remain in control of this Market, it is imperative that a lower low be made during the next swing down. My reasoning is that a new low meets the minimum criteria of a five wave structure that would confirm that an interim trend change had occurred. Several of the wave relationships for the termination of w.5 would place a new low at or just slightly below 1252.25 that I am considering a lower probability at this point. However, since w.2 was a zig-zag, w.4 should be a sideways correction due to the rules of alternation. I can't rule out the possibility that the move from 1252.25 - 1293.25 is actually part of a more complex pattern where w.4 isn't complete. Only a print below 1261.25 would confirm that w.4 was complete and that w.5 was unfolding.
If w.5 is unfolding, the more likely termination point for w.5 is where w.5 = .618 w.{1-3} @1222.75
Let's see what develops tomorrow.
Best of Trading
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