Some Granular Details On The Structure

I will share in greater detail why I like today as a top.

Up until now, if we try to count the S&P’s decline from top to bottom as a single structure (in a single, Pink A), like this:

SPX

We need there to be a relationship between the orange A and Orange C that compose it (wherever we end up putting them) in order to defend the idea that they are of the same single structure. If we try to do that in the most obvious way (highs and lows), we don’t have any relationship:

SPX

Counting it that way leaves us well in between fibs, and so that’s no good.

We can then try alternatives, such as this:

SPX

Because by selecting a different high for Orange B and a different low for Orange C, we get a very nice equal legs (1:1) fib strike by doing that.

But this can then introduce new problems (at least given today’s gap).

Because in order to use that count, the legs of Pink B must also now have a relationship, and today’s gap was too high, as it passed the last fib I had been considering:

SPX

This could simply mean that it just needs to go higher still (perhaps to the 2:1 extension) but it’s starting to feel absurdly too big given the proposed Orange A of Pink B, especially in terms of time.

And so, an alternative is to view those structures as totally unrelated, like this (which is what I discussed earlier):

SPX

For this, we need two things, we need waves to line up internally, and with each other. We have already long established a relationship between Pink A and Pink B, and I noticed today at the high that there is, in fact, a good relationship between Orange A and Orange B:

SPX

Orange A = 1.618 x Orange B to the tick. That’s very nice because it doesn’t feel forced and allows me to use all highs and lows alone, without trying to niggle out a count by using offset highs or lows anywhere.

And furthermore, we should also see a relationship between Orange C and Pink C with their parents, and we get this:

SPX

A beautiful 2:1 and 1:1 relationship at the same spot below, giving us a very good target for the C’s if this high does hold.

We’re not out of the woods yet, however. We still need to see a full 5-wave move down, and so far, we only have 3, and we remain above the 250-day EMA.

Are we in the middle of a large impulse wave now, like this?:

SPX

Are we going to gap under the 250-day like we gapped over it? It’s possible, but until we see it, we cannot yet rule out today being a corrective a-b-c pullback in a still larger 5th wave, like this:

SPX

That will need to reveal itself to us, which is why I’ve chosen to remain hedged. I think I would rather have seen just one larger wave down today, for some kind of “1,” followed by a retracement of some kind for a “2” of some degree. And seeing this has muddied things.

But, I like the high where it was today. I like that the Nasdaq 100 rejected its 250-day EMA, and failed to breakout:

NQ

It is the only index which has not recaptured that EMA.

So, let’s see what happens and I hope whatever happens, that it’s at least somewhat intelligible. It does feel like the economy is headed off a cliff and it will be difficult to accept a bull market in the midst of that, so I do hope we don’t keep shooting up much more (if at all).


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