Break Down - Market Analysis for Aug 5th, 2024

While I was not expecting a break down this fast - as I did not find a clear set up for it, the market had other plans.  Yet, that is what is happening. The market has broken below our initial signal point of 5191SPX, which has been noted as our initial indication that a major top has potentially been struck.  But, that does not mean we will continue to drop in a straight line.

Rather, I would reasonably expect to see a rally.  And, if that rally is clearly corrective, I may view that as a shorting opportunity.  The best way to see this is in the IWM. 

We now seem to be completing 5 waves down off the recent high in IWM.  And, if you remember when I was providing a chart in the room when the IWM was hitting its recent high, I noted that it could actually be completing an ending diagonal for the final 5th wave, which would complete the (c) of b.  And, since we are now seeing 5 waves down, that seems to be the most reasonable assumption when it comes to IWM.

Therefore, should we see a corrective wave 2 rally back to the box, then I would consider an initial short position, with a stop just over the top of the box.  Should the market provide us with another 5-wave decline for wave (i) of 3, then I will add short positions in the wave (ii) bounce, and place my stops at the high of wave 2.  In other words, I want to see a bit more action to allow me to layer into a short position in the IWM for what seems to be a declining pointing down towards the 150 region.

I am viewing the SPX a bit differently, with this being an a-wave decline, and the next rally being a b-wave.  Thereafter, I will be looking for a 5-wave decline for wave 1 of the c-wave.  And, the reason I am viewing it in this manner is because the decline from the recent highs do not look like a clear 5-wave structure.  

Therefore, the indications have grown that a major market top has been struck.  We will need a bit more evidence over the coming weeks with the 1's and 2's as noted above, with a follow through to the downside.  Should this develop over the coming weeks and months, then we will likely have a major signal that a major market top has likely been struck,

So, for now, I will await the next rally and see how it develops. But, as I have been stressing for some time, risks have been rising and they continue to rise.