Last week, I how there was a Bull vs. Bear battle going on, wherein either the (SPX) was topping out in a B-wave of an irregular around current levels (SPX4440-4450) and was ready to drop to SPX4150+/-50 first before rallying to SPX4700. Or, the index was setting up for a rally to SPX4550-4600 first and would then present us with a ~300p drop. I also showed the price levels to watch to know which of these two options it would be.
Unfortunately, four trading days later and there is still no resolve. Hence, I decided to dive into the micro Elliott Wave Principle (EWP) waves to assess how the market can solve this problem.
Since this is still a long-term Bull market, allow me to start with the Bullish case: Chart on the left.
The Bulls would like to see a small rally to ideally SPX4455 from current levels while not allowing price travel below SPX4423.79 first. That would complete (blue) nano wave-v of (orange) micro-1 of (grey) minute-c, etc. The SPX4555 level will be critical, as I will outline for the Bearish case.
Then a swift micro-2 wave down to ideally around SPX4400+/-10. A break back above SPX4455, the orange waves 3, 4 and 5 will ideally tell us that we are underway to SPX4555. That will then complete (red) intermediate-iii of major-3 of Primary-V of Cycle-5 of SuperCycle-III. From there, we should then see a decline back to about the July 19 lows at SPX4225+/-25 before the next rally (wave-v of 3) to ~SPX4900 starts.
Now, SPX4555 can also still be the B-wave high, as shown in the chart on the right. That price level would then be the 138.20% extension of green wave-a (the July 19 low), a normal relationship for an irregular flat’s B wave. The difference with the Bullish case is the index will not find support at SPX4400, fall below last week’s low at SPX4373, which is also the low of the week before that (!), and continue its decline back to SPX4150+/-50. Besides, the index does not even have to move to SPX4555 first. It can start its decline from current levels. In that case, only a break below SPX4423 is needed.
The bottom line is that the market is now at an even more critical juncture than last week, but it has still kept its near-term intentions shrouded. However, using the EWP principle, we now have explicit if/then scenarios available depending on which price levels are broken to the upside and downside and in which order. We should thus know the market’s real intentions as it shifts from “clear” to “unclear” and back again in a perpetual fashion.