A Quick Update on the S&P 500

Unfortunately, I do not yet have my electrical situation resolved. The man who owns my house is delaying and I may need to simply move.

But, I do have a couple of things I would like to point out regarding the S&P 500, and so I’ve come to a coffee shop with a laptop so that I could write a more proper article using their wifi here (besides the couple of visits I’ve made to the chat lounge in the last couple of days).

In my last post, I was looking for lower prices, and, so far, we’ve gotten the lower prices as expected. The main view has been consistent from the beginning of April: for the time being, I believe we will ultimately head lower, at least to around 4200 (though lower is also possible, but it’s too early to speculate about that here).

I have been counting the move down from the end of March as a nest of ones and twos, and until today, I’ve been okay with it. One problem with nesting endlessly is that at some point, you really need to start getting the threes or else it’s all just wishful thinking.

If we want to nest this over and over and over, we need to do something like this:

SPY

This count remains possible, but I would have expected far more powerful moves lower today. I know we did sell off, but it wasn’t much given the size of the prior waves. If we’re in the 3rd of a 3rd of a 3rd, I actually would have expected a gap and go today. So, it’s still possible if we gap down on Monday, but I’m not too sure we will. It also would have been better had we had some short covering into the close, instead of capitulation into the close. That doesn’t bode well for a gap down (doesn’t rule it out, but reduces its probability).

So, the nests could still work, but I would rather these have progressed faster than they have. Let’s look at an alternative that I began considering today.

It might make more sense to consider this whole structure as a complete wave:

SPY

As I’ve pointed out before, the move I expect from intermediate (orange) C to D should be any 3-wave move, and perhaps we’ve simply done the first of those 3 waves (the minor [green] A):

SPY

Remember, this is killed with a strong gap down on Monday, but if that doesn’t happen, I can point out two things about this that are promising.

For starters, there is an inverse here at the moment:

SPY

Of course, it doesn’t have to break up, but if it does, that’s where it could be headed.

And secondly, the price action today wasn’t what I was expecting. I was expecting a strong 3rd of 3rd of 3rd, and we should have had an unmistakable impulse wave today. But instead, we started off the morning with a 3-wave move (green arrow), then we had an overlapping mess in the middle part of the day, and the selloff into the close only equaled the selloff from the morning in length (to the tick, in fact):

SPY

And to me, this looks rather like a 3-wave A-B-C correction and not an impulse wave. We also couldn’t even take out the lows from yesterday. So, I’m not impressed.

At any rate, it’s possible for us to go lower, but I think it may be more likely at this point for the next move to be up for a bit. If it does, I would target the inverse target pointed out above, and if it still looks strong up there, it’s also possible to revisit the 3/29 high.


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