As long as the market remains below the 1334 level, I cannot feel comfortable in advising anyone to hold long positions overnight, as the bearish patterns are still too dominant. I have 3 different color possibilities being presented tonight, so let’s go through them.
Yellow Count: Within the yellow count, there are actually two possibilities. The first possibility is that we completed 5 waves down from the high made yesterday and today almost completed a wave (2) retracement. What supports this count is that the initial move up off the 1294 low really counted best as a 3 wave move rather than a 5 wave move, which would classify it as an a-wave with the impulsive move up at the end of the day counted as a 5 wave c-wave which could still have a little more upside left. Additionally, if the dollar and the S&P continue to trade in identical patterns, as they have of late, then the dollar count supports the yellow (1) (2) count with wave (3) of wave v of 3 about to begin.
The second possibility is that we have completed waves a and b of a wave iv flat, with the c-wave completing either overnight or early tomorrow morning below the 1325 level, which is the .764 extension.
Purple Count: This count is similar to the yellow wave iv, but would provide a higher target where a=c and where the .382 retracement both reside at the 1334 region.
Green Count: Although I have a very hard time trying to find a way to count a completed pattern to the downside in a corrective fashion when the IWM has given us the signal that it has most likely topped, there is, nonetheless, a bullish count on the chart which will clearly have to prove itself by moving over the 1334 level in an impulsive fashion. The target for such a move would be the 1357 level, which would be the 1.618 extension of green wave i. Depending upon how the market pulls back from its next top within the next 24-48 hours, we may be forced to adopt this count. But, for now, this is clearly one of my lesser favorite counts since the market is truly set up in a much more bearish posture.
Originally published on ElliottWaveTrader.net.
