No changes. But let’s review for the sake of clarity. First presented on July 31st, I anticipated a period of rangebound conditions that might end with a spike to complete a distribution before we begin to head lower again. So far, that much has turned out to be basically right.
What I don’t know is whether the high from yesterday was it. At that point, we struck the 250-day EMA and have had a reaction to it. However, I’m not yet convinced that we’re ready to head lower yet and believe it remains possible that we head up again. One reason is that there are more ideal fibs above the high made yesterday. Another reason is the sentiment here, which seems a bit one-sided to me. One more rally can shake that up a bit.
Let’s examine the S&P 500 chart. If we count the rally from blue “b” as an impulse wave, we will want to see a relationship between orange 1 and 3, and 1 and 5.
If we count it this way, Orange 3 is 78.6% the length of Orange 1 (green arrow):
And if today was Orange 4, then Orange 5 would be 38.2% the length of Orange 1 right up there within a couple of points of my ideal fibs:
Can we get Orange 4 to be complete today? Possibly, yes. In the area of the orange box, there aren’t terrific fibs:
There were a few earlier in the session, but as it kept drooping, it didn’t really strike any that I could easily see. However, 15 minutes before the close, the low it made there, does have an interesting strike if I count the red a-b-c as I have it labelled.
Red c came to the 1.618 extension of red a. So, even though it’s not the low of the session, it is a place for Orange 4 to terminate as waves can truncate and do all kinds of other weird things when they need to. And it’s also from that low that I get the nice relationship between orange 5 and my ideal fibs discussed above. So I like it.
We have CPI coming up, it can be a real market mover. That move can be down. And, after all, taking away the counting, we have an upward-sloping channel from which we broke down, and retested from beneath:
This certainly could fail here. But I think it’s just as likely, even possibly more likely, to be a bear trap. And we shall find out soon. I remain short long duration and long some short duration in an effort to try to be prepared for either possibility.
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