Here Are My Thoughts About the Next Few Days for the S&P 500

Though I continue to maintain a bullish bias for the long-term, and continue to believe that this is merely a correction and not a bear market, I am gaining confidence in the possibility that the correction did not come to completion on February 24th.

So, let’s discuss the structure.

In the most basic sense, we need to deal with this thing:

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  1. What is it? and
  2. What might we do with it given where it is?

Large, messy, time-consuming consolidations like this are typically found in 4th waves of impulse waves, diagonals of some form (either leading or ending), or B-Waves of corrective waves.

If this is a 4th wave, it should have been preceded by a large 3rd wave, and I see nothing to its left of sufficient size to justify that interpretation. That is why I began leaning toward a more bearish view last night, as this structure has revealed itself to us (and since then, the structure has only become even larger).

If it is a leading diagonal (proposed among recent counts such as here, for instance) then it sort of lacks the contraction we typically like to see. (And there are some other measurement complaints I have, but I won’t bore you will all of the details about those).

So, to my mind, this structure fits best as a B-Wave of some 3-wave correction, which fits nicely within that large ending diagonal proposed last night. I believe we are in the 4th wave of that diagonal. I believe this is the minor (green) B wave of that 3-swing move needed to complete the intermediate (orange) 4 of that much larger structure:

ES

We would like to see a relationship between the length of minor (green) A and minor (green) C of intermediate (orange) 4. And I’ve noted a good place for the count I am preferring for the moment: 4471.75 is the spot.

Another reason I don’t think we will puke hard tonight is the day of the week. It’s just something I’ve become accustomed to. There are many people trading very short-term options these days (1-3 DTE) and “they” make it supremely difficult for those traders. I think we are going to drop, but I’ve caught several of these over the last six months by being very patient. They rarely pull the rug on a Thursday night. And here’s why I think that is the case: there are plenty of bears out there right now. And what a lot of them will do—especially in a news-dominated cycle—is take long OTM overnight Friday puts at Thursday’s close. They’re super cheap. And if we puke, a small fortune can be made. If we don’t puke, they average them down on Friday and hope we puke during Friday’s session.

It’s too easy, and what I’ve seen time and time again is a Friday that won’t break down enough to let those profit. And then, to make matters worse, the same bears will try the same strategy into the close on Friday, buying overnight Monday puts, again super cheap. And then, come Monday, maybe the market will look like it’s primed for a dump, and they’ll average them down there, too, and then the market just grinds them to death all day long. The bears get frustrated at that point, and the last thing they want to do, is try that strategy again, with this time having to pay much more for them, needing to buy 2 full days of time to get Wednesday puts.

And then the rug pull happens Monday night into Tuesday. It doesn’t always work this way, but it’s happened enough that I won’t be surprised if it happens this time too.

So, on the chart above, maybe we head up for the green C (which will be 5 waves from here to there—if I’m right). And perhaps we spend a lot of time on Friday up there in the 4 and 5 of that 5-wave move.

And then the move to green A below needs to be a 5-wave move, too, and I bet we spend Monday in the 1 and 2 of that. So maybe we get stuck up there in a somewhat tight range for a couple of days before beginning the decent in the middle of next week or so.

So, that’s the thought.

If instead we break down now below where I have my minute (blue) “e” labelled, then we’re already in the green A and should expect the green B to begin (I don’t think this outcome is as likely, so, just pointing it out so you can be prepared). Of course, as things develop between here and there, I will keep updating the count I like best on the S&P Count Page.


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