Within the context of this morning’s post, we have not completed an impulse wave to the upside. That said, as I noted there, that does not—to my mind—also imply that the 5/2 low will not hold.
And, as a matter of fact, I believe it will hold. This decline today can be interpreted as the “right shoulder” of an inverse, and I have noted the target for such a structure in the chart below.
There are some psychological advantages for the bulls here today: anyone who got really excited by yesterday’s rally will be cast into deep uncertainty here, and bears, who were discouraged yesterday will be reinvigorated. They can say, “Just as I thought, every rally can be sold.” So, we have a recipe for a rally. I cannot guarantee that will will bake one, but I believe there is a good chance that we will.
I will maintain this view so long as the 5/2 low holds. In the event that it fails, I will simply have to observe some more. I cannot readily produce a high confidence downside target at this point.
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