There's been no material change in the outlook since last update, except to note that the first downside targets have nearly been captured for the S&P 500 SPDR Trust
(NYSEARCA:SPY). SPY so far has come within 0.12 of the target -- which isn't too shabby considering that thesis was originally put forth before the market had even reached the 184-186 upside
target zone, much less reversed downwards. Momentum has confirmed the low, so the charts appear to suggest at least one more wave down lurking in the market's future. Another wave down would serve two functions:
1. It would capture the first target zone.
2. It would give the decline an impulsive appearance, which would suggest another leg down after the next bounce.
Stay alert to the fact that, at the moment, the market is behaving like it's in a crash wave, so I'd suggest staying very nimble on any long positions if 1772 fails.
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Near term, the S&P 500
(INDEXSP:.INX) presents two options, as discussed on the chart below. If we're forming a standard impulsive C-wave, then any opening declines should find support north of 1772 -- and the impulsive c-wave actually suggests a decline toward gray 2 to start the session. Please read the annotations below for discussion of the potential of a "failed" c-wave and the implications.
Click to enlarge
On the 30-minute SPX chart, it's interesting to note how the market was drawn to the confluence of support lines on Friday's chart. It's also worth observing how the well-traded range of the noise zone provided virtually zero support, also as noted on Friday.
Click to enlarge
In conclusion, bears have done what they've needed to up to this point -- if they can force another new low, either directly or after an impulsive c-wave rally, then we'll have what appears to be a five-wave impulsive decline. On the flip side, if bulls are going to stick-save this market and build an intermediate bottom, then now's the time. Trade safe.
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No positions in stocks mentioned.
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