The last several weeks, if not longer, may have caused market participants to develop a whiplash, but all this back and forth has not changed our perspective. So, allow me to refresh your memory.
Namely, two weeks ago, we found using the Elliott Wave Principle (EWP):
“…although it would look better on a daily time frame with a more pronounced green W-3, 4, 5, the hourly resolution (not shown here) does suggest red W-c/y can be considered complete. Besides, the index reached the upper end of the red target zone where red W-c = W-a. Thus, a move back above … SPX3980 will tell us the current decline is over. The index will then have to break above the February high to confirm black W-c is underway, which could rally to as high as SPX4500+ for a standard c=a relationship.”
Although many were fighting it, the index bottomed that same day of the update. It rallied to SPX4040 on the FED’s decision to keep raising interest rates to fight inflation while the banking system is crumbling under these ever-increasing rates.
Regardless of what we may think of the FED, we are still left with only three (green) waves from the March 13 low to the March 22 high. See Figure 1 below. That is in and by itself still corrective price action. Thus, if the upside is corrective, the downside is the leading direction.
Figure 1:
For the bulls to prove their mettle, we are tracking a leading diagonal potential for (red) W-i. Within that structure, it seems last Friday’s low was W-4. And, as long as the index holds SPX3905 support, wherein a=c, we keep this view of the current structure. The ideal upside target for green W-5 is SPX4040-4070. However, should the index break down below support, it opens several cans of worms.
The first can of worms will allow for a low around SPX3850+/-25 before we see the W-c rally to SPX4300-4550. More about that option in later updates, if necessary. However, below SPX3825 and the other can of worms, as shared in our last update, will be our main staple. See Figure 2 below. Since we do not have a clear impulsive decline from the SPX4040 high or the February 2 SPX4195 high, we have to assume this is a less likely scenario, especially if the index remains above support. But forewarned is forearmed.
Figure 2:
Although many would like it not to be the case, the financial markets are not linear but stochastic. Thus, given the ambiguity of the recent price action, i.e., overlapping, we do not have a clear winner for the three options.
We all wish it were different, but we don’t make the markets. We track and trade them. Besides, when we realize the stock markets are not always transparent and do not move from A to B in a straight line, we can have peace with what we are dealt. However, that doesn’t mean one cannot successfully track and trade the markets; one has to shift focus and timeframe. We have been able to forecast where the indexes will top and bottom rather consistently. See, for example, here.