Option Investor
Update
HAVING TROUBLE PRINTING?
Printer friendly version
Today's bounce is too large to consider it as part of the leg down from last Thursday (from an EW perspective). That's subjective but it fits better as a correction of the decline as SPX has nearly retraced 50% of the decline (806.42). It's either the first leg up of a larger bounce, shown in pink on the updated 60-min chart, or it's all of the bounce which will be followed by another leg down. In either case I'm looking for another leg down but I would feel less confident about that if SPX were to rally above gap close at 816. NDX just closed its gap at 1250.82.

SPX 60-min chart:
[Image 1]

The pink wave count now calls for a pullback and then another leg up on Wednesday/Thursday to then be followed by a decline similar to the one from last Thursday to yesterday's low. The dark red wave count calls for a resumption of the selling following this bounce, with a drop below the 50% retracement at 750. In between is the dashed line that calls for a decline following the current bounce but only to equal the drop from last Thursday to yesterday's low, so a downside target near 753 (two equal legs down from last Thursday if it starts back down from the 805-806 area) which is also close to the 50% retracement.

Because we're in a corrective price pattern this is why I'm saying we need to play this one leg at a time and see where price takes us. Corrections are very difficult to predict in real time but at least after the pattern is near complete I should have a better feel for what the market is up to. In the meantime trade very carefully and keep in mind that flat is a position.

Market Monitor Archives