Was That It?

Well, this morning, both the IWM and EEM made lower lows, and they could be considered completed in their downside structures.  But, as we know, the ES tested its lows overnight, but did not exactly make a lower low.  This type of action makes it much harder to provide confirmation that the low is indeed in place.   But, I think the weight of evidence is starting to shift towards that conclusion.  So, I am going to work on that assumption for now, but I am going to keep one eye open for the potential of a lower low.

As I outlined in the live video this morning, I am going to be watching IWM and EEM to see if they get 5 waves up as that could suggest the potential that this rally will have more legs than just a corrective move higher.  And, that may even begin to increase the potential that the SPX can follow the yellow count to new all-time highs.  As of now, both still look like only 3 waves up off the low, needing a 4-5 before they can complete 5 up.

So, for now, I am going to view this rally as the [a] wave of the b-wave in SPX, as shown in red on the 60-minute chart.  We will be on the lookout for a corrective retrace now in a [b] wave.  And, I am seriously hoping that it takes us some time to pullback from a 600-point rally off the recent lows.  Pretty amazing when you think about that.  But, for now, I think the reasonable perspective is to expect some kind of corrective pullback, and it normally would take us weeks to correct that type of move.  But, in this environment, who knows.

I am going to be watching IWM and EEM over the coming days, as I am going to be very curious as to whether they will be able to get one more 4-5 to complete 5 waves up off the recent lows, which, as noted before, can put a bit more of a bullish spin on this action.  But, before you turn uber-bullish, also keep in mind that [a] waves can be 5-wave structures too in a minority of circumstances.  So, we will still have to retain a VERY cautious view of this market.

For now, I would reasonably expect some kind of corrective pullback to take us well into next week, if not much longer.  But, I also just want to point your attention to the fact that we are almost at the bottom of the resistance/target box in SPX.  So, as long as the next pullback is corrective, we will maintain our plan.   However, if the next drop is CLEARLY impulsive, we may have to even consider that the b-wave may be done.  I have a hard time buying into that premise at this point in time though.