Corrective Wave Action Continues

Today's theme was very much a repeat of what we've seen over the past several days—corrective wave action in all directions. After moving lower yesterday in what appeared to be a three-wave move into the afternoon low, we saw further upside action today that also completed a three-wave structure. This corrective action, both up and down, suggests that we are developing either a diagonal or a triangle in this region.

With the market failing to break directly lower, I believe it's becoming less likely that we’ll see an immediate breakdown for wave (b) of the larger wave b. This leaves me leaning toward either a triangle count to finish wave (b), or an ending diagonal to the upside to complete wave (c) of b. At this point, it's difficult to have a high degree of confidence in either scenario, as both are still in the early stages of development. For that reason, until we break above resistance or below support, I’ll continue to monitor both possibilities and see how the market evolves over the next several days.

I'm showing the triangle count in purple. Under this scenario, we should be working on the d-wave of that triangle. We'd need to hold below the 5501 level, then turn lower for a wave e that holds above the 5228 low, before eventually breaking out to the upside in wave (c). Confirmation of wave (c) up would come with a break back above 5501 after the triangle is completed.

If we break out above the 5501 level before completing the triangle, that would give us initial confirmation that we are instead moving higher in wave 3 of an ending diagonal for wave (c). In this case, I would expect wave 3 to take the form of three waves, followed by wave 4 and wave 5—both also forming in three-wave structures—to finish off wave (c).

Finally, if we break directly below the 5146 level, then we are likely moving lower in the yellow wave (b). Since we haven’t yet seen a clear five-wave move to start wave (c) down, this could also be taking the form of an Ending Diagonal (ED), although it's still unclear exactly where we would be within that structure. For that reason, I’ll be watching the 5146 level closely as a key indicator of whether a direct breakdown is underway.