Short

SPX - ABC Wave Count - 23/04/22

Updated

Guidelines state the equal extension of 1 is the most common wave C; however, given the current economic environment, a 1.618 extension of wave A may be plausible target.

Given the swift breakdown seen yesterday, it is also plausible that we have commenced wave 3 of the greater wave C down, therefore opening up the possibility of the scenario shown.

1.618 extension would mark a -27.80% correction .

Not financial advice and always DYOR.

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Following on from FOMC pump, we have formed what is a plausible ABC wave directly into resistance @ 4308. If this local top is confirmed and we break down further, the following two possibilities increase in probability:

Option 1 is final 5th wave down of the larger wave C that we're tracking - this is probable as this recent wave down hit 1.618 extension of the wave 1 down from B. Given that the final target would be a 1.0 extension of wave A, this is a probable and common place for the end of the ABC correction. However, if BTC were to fail putting in any substantial rally from that point, it would be at danger of this whole leg having been just wave 1 of wave C, and the next two drives would be much, much deeper.

Option 2 is continuing another 2 waves down to form a larger wave 3, potentially landing on the 2.618 extension of wave 1 (or 1.0 extension of greater wave A like the previous option) and also keeping the current forecast in play.

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Correction: in option 1 I said BTC, I meant SPX.

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First target of extension 1 has been met. Monitoring for further action.

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Mapping out the current micro waves, the probabilities for an extended 5th wave (white) or a continuation 5th wave to form the macro wave 3 (blue) are heavily increasing at this moment in time. Monitoring for confirmation of a local top here.

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Probabilities now increasing dramatically:

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Following on from this recent local bottom (which has appeared just above previous bottom) we are starting to see increased probabilities for a corrective bull phase here. The current wave 3 may be deduced as an 5 wave here, with an extended wave 1 and truncated 5th ending:

Fundamentals that could push this would be seasonal summer demand pulling through across commodities and services, and FOMC minutes being slightly less hawkish. The premise for the current timing of wave 4 (dashed red) is the next potential rate hike.

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To note: the blue wave options from previous update are still probable if we fail to pull a substantial up move by the end of the month.

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Probabilities now further increasing for the downside scenarios again.

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Where are we now? It is possible that we have reached a point for a potential relief rally. We may have concluded a wave 1-5 and the current most obvious options are displayed below.

The two most obvious scenarios are in white, options 1 and 2. These scenarios dictate essentially what is a confirmation or either a local bottom, or just another low. If 1 displays itself as a 1-5 wave that breaks above previous local high, the bear trend could be broken momentarily to allow for correction. If we fail to put in any substantial rally, and even paint an ABC wave, it may be probable that this impulse attempt fails and we keep going down to break the low, and moving onto previous extended 3/5 waves mentioned in previous updates above. Scenario 3 shows a slightly more complex projection; a higher low that may somewhat resemble the right shoulder of an inverse H&S, before continuing on to make wave 3 of the motive wave up.

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Price seems to have bounced on the optimum price level for a well formed right shoulder. We now have 2 and 3 battling each other. One thing to note is the steepness of the neckline of the H&S - this reduces the probability of the measured price target being hit (~4090) as the price has already moved significantly to reach the neckline. Confirmation of the current head being a local bottom would be breaking above previous high at 4100 on a 1-5 wave formation.

There is also the risk of failure of 5 waves above the neckline - if we stop short of the target which sits just below previous high and selling pressure appears, whilst forming a C wave from the right shoulder, this will have bearish implications.

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New challengers have appeared! It seems up til now we have played out almost exactly as predicted in option 3. We now have possibilities here of: carrying out wave B of option 3 ABC correction, commencing option 4 (bearish wave considering potential ABC that is currently unconfirmed), and following through to option 5 which maps out 5th wave extension of the current upside.

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A new challenger has appeared. Option 6 represents a leading diagonal scenario, which could continue on to follow either options 3 or 4, depending on if we have 3 waves or 5 waves down. Option 5 now seems out of the spectrum.

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Option 4 has completed. Technically, probabilities for downside here are high, but please be aware of the economic events this week.

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Where are we now? For this, I present option 7. Considering we broke down from what may have been a leading diagonal, it's plausible to lean more towards a 5 wave down. I shall likely refrain from diving into the micro waves before FOMC is done.

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After completing option 7, it seems plausible that we may be in a wave 4 correction.

The following options 8 & 9 show a) a potential ABC top between here and the 0.382 retracement of wave 3 before the final wave 5 drop, and b) a stronger retracement to ~0.5 - 0.618 of wave 3, also in ABC formation, before a final wave 5 drop.

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After playing out scenario 9, there is potential for a local top soon for the final wave 5 down to complete this idea.

Two areas in particular to watch are the 0.5 fib of wave 3 / 1.618 fib extension of wave A, which we are currently testing and could end this micro wave 5 of micro C; or the 0.618 fib of wave 3 / 2 fib extension of wave A, to extend the micro wave 5 of micro C and give the final high probability end point for an ABC wave.

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Just a quick micro update on how we are progressing with the blue zones so far. We have a potential double top in play and may be commencing the next wave down.

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Hello folks, seems like as good a time as any to update the micro count a little.

It seems that we have a possible wave 3 coming into fruition here after a long winding correction from the initial wave down from ~3950. Confirmation of this leg down would come of a break and hold underneath the previous micro low 1 in cyan.

We've just come off hot CPI and PPI reads, and are gearing up for FOMC at the end of the month. This could be a wild couple of weeks incoming.

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Updated SPX chart:

fvideira

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