Five Waves Down?
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Today we saw the market finally move lower after what has seemed like a relentless run higher that has continued to extend. Moreover, that move down does count best as five waves off of the high. So with that, we do seem to have at least a local top in place at the moment. We are however still trading over even the uppermost support so while I think it is likely that we will see more downside action in the days ahead we still have some more work to do before we can finally confirm that we have indeed put in a larger degree top as we have been laying out in the bigger timeframe charts.
As we can see on the five-minute chart we have a fairly clear five down off of the highs after getting a full pattern into today's HOD. So from here if we are going to see further downside follow-through then we should see this hold under today's HOD at the 5707 level and continue to move lower and develop a full five down of one larger degree. From there we should then see a break under the 5200 level on the ES to further confirm a larger degree top and that should then be followed up with a break under the 5271 level. If we are unable to see a break under the 5200 level but rather see a retrace that holds that level that is followed up with a full five waves up to the upside then it would open the door for this to see another higher high perhaps following a more bullish count that is currently laid out in blue on the five-minute chart. However at this point in time I still have a difficult time accepting that alternate path as highly probable.
While there still is some more work to do to confirm the larger degree top I still remain quite cautious in this region as this market remains very extended on the larger degree timeframes and now with an initial five down we are beginning to see the early signs of a more immediate top. We should have a better idea as to whether we will get that confirmation of a more significant top over the next several weeks but for now, we have price and pivot levels that we can watch to help give us guidance in the near term.
