Door Open To Direct Topping, But I Have My Doubts
By
Avi Gilburt
I have been outlining the IWM throughout this rally, as it has presented as a clearer picture as to how this market can top in the bigger degree. While the SPX is completing a 5th wave of a 5th wave off the 2020 low in a more variable diagonal structure, the IWM has struck its top long ago and is in the process of completing a larger b-wave corrective rally, as its completing a more reliable 5-wave [c] wave structure..
Within that larger degree corrective b-wave rally, we still need a 5th wave to complete the [c] wave of that b-wave. However, I have been expecting more of a 4th wave pullback before that 5th wave takes us to the 210-215 region in the IWM to complete. This has been represented on the 60-minute IWM chart.
With the move through the initial resistance I noted over the weekend in the 202.20 region, it has certainly opened the door that the market is going to complete this 5th wave sooner rather than later. But, I am still quite skeptical. Again, due to the move through resistance, I cannot say that I am as confident that we are going to see another decline in wave 4, but I can say that I am personally not going to be aggressively playing the upside in the IWM unless I see more of a wave 4.
If you remember, I have noted that when a 3rd wave does not reach its ideal target of the 1.618 extension of waves 1-2, we often see the b-wave of the ensuing wave 4 come back to strike it. And, there is potential this still may be happening in IWM. But, due to the structure of the current move, I am unable to distinguish – to a high probability – between that potential and the wave 5 completing sooner rather than later.
So, I have added the path for the wave 5 in yellow. And, within that structure, the 197.50-199.20 region is going to be the support for wave iv of 3. I want to add that even if we do get a corrective pullback to that support, and then continue to rally, it still can be the expanded [b] wave in the bigger wave 4. At that point, it will depend on whether the market can hold the smaller degree 1.00 extension just north of the 202 level.
Therefore, we are forced to take this one step at a time. A corrective pullback in the coming days that holds the 197.50-199.20 region can point us next to the 210 region to complete the expanded [b] wave or the yellow wave 3. However, if we see an impulsive decline below that support, it would suggest that the [c] wave of wave 4 is in progress.
In the SPX, we are approaching the next resistance region in the 5057SPX region. And, support remains the same between 4980-4997SPX. So, nothing has really changed in our analysis in that regard.
Lastly, I want to remind you again about aggressively shorting this market before a support is broken. It has been wise advice since October of 2022, and it still remains as such for most of you.
