I maintain what I mentioned yesterday: "I am expecting another down leg,
a wave (C), off the April 2 peak that should at least match the 64.80 points
drop of the first down leg."
Monday's doji proved that the wave (B) was not over. The internal price structure
suggests that price is unfolding a counter trend Zig Zag bounce that should
be capped at 1398.
In this zone we have a cluster of resistance with the 1 x 1 target = 1396;
the 0.618 retracement = 1397,51 & a gap fill = 1398, which should represent
a potential reversal point.
If the assumed wave (B) tops in this area then the following wave (C) down
could aim at the 20w MA = 1328.
On the other hand if price is able to achieve an eod print above 1398 then
even though the idea of pending wave (C) down will not be invalidated price
could retest the April 2 peak. If this scenario plays out then price should
be unfolding a Flat, in which case the pending wave (C) will most likely bottom
at last Tuesday's lod = 1357.58
The EWP of IWM (Russell 2000 etf) is probably the best example that suggests
that we should expect more weakness ahead.
Here we have a clear impulsive down leg followed by counter trend move. This
price structure strongly suggests that there is at least one more pending
down leg.
Yesterday strong rally has pushed Trin into overbought territory, while the
RSI has reached the Trend Line Resistance. Therefore today the odds of a reversal
are large.
Last Thursday, I mentioned that VIX could bee involved in unfolding an Inverted
H&S, by shaping the right shoulder. So far the idea is on track. If this
pattern plays out then the target is at 28.60, which should coincide with
the expected SPX wave (C) down.
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