Now We Watch the Character of the Decline Over the Next Few Days

The cash S&P500 formed a downtrending price bar on Monday making last Thursday’s high a fractal, CIT (Change-In-Trend) and Level 1 Price Reaction Point (PRP). As such I have high confidence that it marked the end of the Elliott Wave up from the March 6 low. “IF” this wave was the C-wave in an Expanded Flat from the November 2008 low then we are going to make a new low (below 666) by May 7 before we go back above 833. If the current swing down from last Thursday does not complete by tomorrow (April 1) then we can have even more confidence in this scenario.

The next significant technical support area to watch for is 764-769. This area includes a previous swing low and PRP at 766.20 (March 20); Fibonacci confluence; a Gann target, and the intermediate moving average I like. There is only minor support at 773.

On the flip side, the next short-term upward move (which will most likely be here and gone by the end of this week) must not make a new high. The “I was wrong” point (stop loss if you will) remains at last Thursday’s high of 832.98.

Still Watching 804.30

The cash S&P500 made a slightly higher high on Thursday before ending down. This keeps us all guessing as to whether we will exceed the 804.30 level.

At this point the market has respected the Fibonacci cluster adjacent to the wave i’ low (804.3) and the downtrend line drawn from the start of the proposed Elliott pattern across the ending point of wave ii’.

However, price action still remains within the recent upward regression channel shown in today’s chart. If weakness continues we will want to start seeing signs that the wave up from March 6 is complete. Breaking out of the channel is one such sign. A move below 749.93 would be proof (that is the current PRP trend change marker).

Any break of 804.30 and the alternate wave count discussed Wednesday becomes the new roadmap. Elliott is the roadmap used to map how we get from one point to another. The destination right now (next Level 5 PRP) is a new low (below 666) before a potentially large multi-month rally can unfold in equities.

At this point I am in a waiting mode. With a bearish bias I wouldn’t even think about the short side until 749.93 is broken.

Roadmap Dead End?

Further rally in the cash S&P500 on Wednesday has pushed the wave iv’ scenario as far as it can go. We can’t exceed 804.30 under this scenario, which is just under the next Fibonacci cluster (805-809). Any break of 804.30 and the alternate wave count discussed yesterday becomes the new roadmap. Elliott is the roadmap used to map how we get from one point to another. The destination right now (next Level 5 PRP) is one more new low (below 666) before a potentially large multi-month rally can unfold in equities.

Note that the high on 3/16 and low on 3/17 have now been marked as Level 1 Price Reaction Points. The Elliott Wave from the 3/6 low can not be deemed complete until either the Level 1 PRPs show a trend change or a CIT is reached.