I don’t have a preference here on how to count the local structure. I don’t see anything yet that strikes me as the very best way to do it.
But, there are a few things I can say. It seems clear to me that the WSJ article was a test. So, if the Fed wants lower asset prices in the fight against inflation (and if they also know they will eventually pause), they send out a pause thought to see what the market does, and +4%. Now, what do we do with that? IF they think that’s too bullish of a reaction (remember their purported regrets over the August rally, thus Jackson Hole), they will probably use that to tailor their message on FOMC day.
That may all be fine, but I’m not sure how that can help us in a trade just yet. In other words, we’re in a blackout window, so they can’t do anything yet anyways.
At any rate, I will at least say this. As things stand, this structure doesn’t strike me as particularly bullish:
Obviously, if there’s a lot of short covering to be had still, we can keep drifting up until someone big enters the chat.
For the very bearish outlook (here), I was hoping to see a triangle form, and we didn’t get that. So it is possible that we’re closer to the end of a “2” than that count suggested, and if today’s highs hold, we do have a fib relationship, like this:
But I am not sure if this is the best way to count it. The whole structure from the CPI print gap down “looks” corrective to me. That doesn’t mean that we have to fall right away. But even in the temporarily bullish count, we may still be putting in the top of an “A-Wave” soon, like this:
So, I am still inclined to the downside for now.
Between the two options, I am slightly more inclined to the very bearish view, because this feels like a short squeeze, and I would rather the market have stayed very suppressed with a lot of fear in place, so we can see a good accumulation. But if this is just short covering and/or retail buying on Fed-pivot-hopes, that’s maybe not so great.
I am comfortable for the time being to sit on my puts since I have some duration on those.