Silver Lining

Do you remember this thought from the other day? Let’s bring that back up now.

If the market is bullish (still an if), it would be a shame to realize that in a 3rd of a 3rd to the upside (discussed here). Why? Because it would mean that we’ve missed a good entry prior to the most powerful leg of a rally. And if that’s so, it’s just going to get mostly congested in fours and fives soon before slowly rolling over and eventually having a choppy pullback in the fall. Well screw that, that’s not much fun.

However, if—from a technical perspective—we actually only bottomed on Tuesday, we’re not going to miss any third of a third at all. In fact, we would just now only be in a little tiny itsy-bitsy first wave right now.

There’s not even any full wave yet:

SPX

Let’s zoom in.

Notice that we came to the 1.618 extension of that first (orange) wave. That may mean we finished a first “3” (as that is the exact extension at which we like to find them). If we see anything like a consolidation and one more high, that could be a “1” of a higher (blue) degree. And if we then see a 3-wave pullback that does not take out Tuesday’s low, then we may enter a really big wave, just days ahead of us. That wave alone can carry us to 4300 but from 3990 or so. So maybe the party’s just getting started.

SPX

And in a weird way, this would sort of vindicate me a little bit, as maybe we haven’t really missed the beginning of a bullish run after all, given the technical fact that the bear market only ended on Tuesday (if this interpretation turns out to be true). Coming out of a bear, one would want to enter near the low, at a 2, and not chase into the middle of a 3 and that can actually happen here still.

So, what we need to watch is: do we sometime soon get only a pullback that looks and feels like a “2,” that does not take out Tuesday’s low? And if so, there’s a buying setup there where we’re not trying to chase into the center of a third wave, but catching it right where we would want to at the 2 instead.

This is all a big if right now, but I will be sure to update this thought over the coming days if I see what I am looking for.


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