The move down on $SPY from the top is a complete mess to try to count with any strong degree of certainty. We can certainly take any number of guesses, but it’s too hard to say for sure, I think, one way or another. And getting it right sort of matters.
If it’s a 5-wave move down like this (and every single bear out there right now says it is), then we would expect a 3-wave move back up, followed by another devastating 5-wave move down. It would mean that the correction is not over.
Last discussed here, I have been expecting $XLF to complete a pullback of minor (green) 2. And it appears to have done that today. A good retracement, a good 3-wave look to it, twos should be nice and sharp. So, next should be a 5-wave advance to the orange box, and that’s my call.
(Also, I forgot to draw it, but see if you can spot the cup & handle.)
After correctly predicting $XLF’s move to $39 over the summer here, I believe it has completed a first wave of a new 5-wave structure.
The question at hand is: is the green 2 in or not? The expected depth is to the lower orange box where I have minor (green) 2 placed. If that is where it needs to go, we may expect a short rally to the orange box just above us, then a second leg down.
However, if green 2 is already in, it may begin its rise to green 3 now. To be on the conservative side, my prediction will be lower first before higher.