Thanks God it is Friday, I am looking forward to "shelve" a boring week. Hopefully next week price will finally put an end to this tedious choppy action.
As a reminder of the SPX's Elliot Wave Pattern location, in my opinion price has completed the 3 -wave up leg off the October 4 low.
The internal structure of the first down leg from the April 2 top is clearly corrective, hence we already now that the intermediate trend remains up.
Therefore, in my opinion, it is reasonable to expect that price will retrace only a portion of the 3 - wave up leg off the October 4 low.
At the moment it is anyone's guess how price will achieve this correction, so far I can only highlight 3 potential EWP: 1) Zig Zag/Double Zig Zag, 2) Flat or 3) Triangle.
We also have to take into account the time factor since if indeed price is on the verge of taking a breather the expected correction should satisfy some time relationship with the 6 months rally, this is why, as a guess, I have mentioned that it could take us into the month of June.
We also have 2 obvious target zones: 1340 and the range 1300-1288.
We also know how far could price drop without endangering this scenario as the 200 d MA = 1273 should not be breached.
Short-term price action:
In my opinion on April 10 price has completed the first down leg of an initial Zig Zag = wave (A)
The bounce form the April 10 is clearly corrective therefore price is unfolding a counter trend wave (B).
Once the wave (B) is in place we will get an impulsive wave (C) down that should at least match the length of the wave (A) = 64.80.
Then if this obvious and logical short term scenario plays out the "target 1" zone will most likely be challenged.
Once the wave (C) is done price could complete the first part of a larger corrective EWP.
It is unquestionable that the short-term price action is bearish, warning of a pending deeper setback.
Yesterday I mentioned that: "What is not clear yet is if the assumed current wave (B) rebound will stop at the 1398 area or it will attempt to retest the April 2 peak."
Today, after yesterday's reversal the odds that the wave (B) will be capped below 1398 are larger.
Therefore even if the choppy price action may allow that the wave (B) could extend a while longer, the agony of these disjointed moves is doomed to end with a bearish resolution.
Given to the fact that off the April 10 low "everything" has been corrective, even yesterday's sell off cannot be counted as impulsive, maybe price is unfolding a Triangle wave (B) that may allow price to delay the next directional move until next week's FOMC day on Wednesday. But this is only a reasonable guess.
In the mean time the Inverted Head & Shoulder project for VIX is progressing in the right direction. The right shoulder is in the process of being formed. The neckline is at 21 while the target is at 28.5
As long as VIX does not breach the horizontal support at 16.40 this pattern could pan out and should coincide with the assumed SPX wave (C) down.
Have a great weekend everyone.