The cash S&P500 pulled back yesterday as it appears that we have completed the end of wave 3 in a suspected five wave impulse sequence from the June 24th low. Note the Fibonacci confluence area of 1)Wave 1 projected from the end of wave 1 (the boxes); 2) the retracement of Wave 2; and 3) Wave 1 projected from the end of Wave 2.
At the July 22 closing high the RSI (top pane) indicator poked to a new high for the move while the Composite Index (middle pane) did not. I believe this bearish divergence marked the end of wave 3 as oftentimes the composite will record its max reading with wave 3 of 3.
In my ideal scenario: going forward the current fourth wave pullback will be followed by a rally to a new high that is accompanied by another bearish divergence with the RSI/Composite and a DeMark exhaustion signal. Right now the TD Combo is on countdown bar 11 (shown in the chart) and the Sequential is on bar 9. Such a high would then have to be placed within the larger price structure.
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