Nothing has changed regarding my views all this week that lead me to believe this countertrend rally is ending. I spent much of the week seeking wave balance at these highs for instruments across the board, and we have some lovely structure that has developed. All of those relationships remain valid today as we opened little changed. The two most significant levels of balance for $SPX were 4003 and 4009 both of which we poked through during the first hour of today’s trading.
Super zoomed in, the S&P 500 counts well as an impulse wave down, and there is a retracement in the afternoon that is at least consistent with a wave 2 of a small degree, because there was balance right at the close for that small rally:
This is at compatible with us entering a third wave to the downside on Monday. This will typically produce a gap. The typical extension (it can go lower, too) for such a wave here would carry us to 3852, which also happens to coincide with a trend line below us:
So, at least in principle here, there’s nothing stopping this from falling lower into next week if it wants to do that.
In support of this, there are good developments in other assets.
The Dollar Index has a very clean structure here. It counts well, and given the excellent wave balance at the low, this is at least consistent with its pullback being complete.
It’s possible that it needs to attain a different wave balance for Green C, but if it rallies from here, it counts well as complete as it stands now. So, that should put pressure back on equities if it does.
Bitcoin did two things that I wanted to see. It got back into its bear flag, and late today, it also broke the narrow channel its been rising in. So, this, too, has everything it needs in place for a resumption of its down trend.
And finally, I just want to point out two trend line/channel tags that occurred today in two leading stocks, Amazon and Tesla. Rejections at these places in both names will spell trouble, and both were—at least so far—rejected this morning at these important places:
So, we’ve got everything we need to see further selling from here, so let’s see if we do, in fact, get it. I think there are excellent odds that we do.
Have a nice weekend. If I think of anything else crucial to bring up this weekend, I will bing it up, but things looks pretty good so far.
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