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The price action on Tuesday looks like a bullish consolidation and fits as a b-wave correction (wave A up from Friday, wave B pullback and then to be followed by another rally leg for wave C). The question is how large of a correction/consolidation we'll see for wave B. I think we'll get another leg down as part of the b-wave before the next rally leg gets started and could look something like what I've depicted on this SPX 60-min chart:

[Image 1]

The correction to the rally leg off Friday's low looks too small (subjective part of EW analysis) so that's why I think we'll get another leg down as part of the correction. I show two possibilities for another leg down--the 820 area which I had discussed earlier in the day (38% retracement, 11/13 low and 11/20 high) and possibly as low as 790 (62% retracement). I then show Fib projections up to either 917 or as high as 995. The 917 level is the price level resistance from previous highs on November 11th, 13th and 14th. It's also a level off the Gann Square of Nine chart. The 995 area is close to the broken uptrend line from 1990 (not shown on the chart) and is a projection from a possible inverse H&S pattern as noted on the chart.

So that's the setup I hope to see on Wednesday--a leg down to finish the correction for an opportunity to get long for another rally leg. These are only trades, both directions, as I think that's the environment we'll be in for at least a couple of months.

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