The market opened to a huge rally in the Russell. While the S&P was in a W-shaped wave 2 pattern, the Russell was in the midst of a 5th wave up while the Nasdaq was in the midst of a drop. With all the indices doing different things it has been extremely difficult to decipher what exactly will play out. I usually look at all indices in conjunction, so it’s quite perplexing when they are all doing different things at the same time. At the moment, my best guess is a potential fractal replay in the S&P as described below.
Notice not just the corresponding vertical and horizontal circles — but also the region in between them and preceding them.
Notice in the first red circle, we have a 3-wave pattern up both on April 14 and April 20. In the chart above, I have that labeled as a b-wave high.
What follows next is a wave 1 down followed by a wave 2 pop. The ave to pop is how the Friday on April 15 ended off. Is it possible that today April 22 — also Friday that the pop we aw into the close was also a wave 2 pop up? If so, then what would happen next is a gap down on Sunday night.
Is that possible? Maybe we don’t gap down but instead drift down? If so, there might some oil-related news. If not, then something else might be playing out.
Betting on gap ups or downs is nearly impossible, but I see significant resemblance between these two A-B-C 4th wave patterns where we have a B-wave high (which is atypical) — followed by a wave 1 down — and then a pop — and then a break of the bottom of wave 1 — followed by a recovery of the bottom of wave 1 — in a wave 2 high that was very close to the high of the previous little pop.
I’m not sure how reliable these patterns are in terms of magnitude and shape — particularly going into a weekend. So we’ll see how it plays out.
What makes me hesitant about being bearish on the S&P is that the Russell made new highs — even higher than the highs that were made earlier in the week for the S&P and Nasdaq. In fact, it ended Friday at the absolute highest point of the day — quite rare to see. I can potentially count 5 waves into that top, but this market is so bullish my counts might not even matter.
So while the Russell is making new highs, the Nasdaq was going in the opposite direction.
With the Nasdaq in the down trend and the Russell in uptrend, it makes it very difficult to make a good educated guess as to what the S&P is doing.
Nasdaq also touched into support at the 4430 levell — so it’s possible the Nasdasq may bounce here. If the Nasdaq bounces back to highs and the Russell is also making new highs — then I’d have to lean towards up for the S&P.
However, I also see the possibility of that fractal pointed out earlier above — if that plays out, then that favors further downside. Moreover, the pattern — even with the strong rally back above through resistance towards 2086 and spending pretty much the entire Friday afternoon at 2086 — still technically is valid within the pattern. 2089 must not be breached if we are to see further downside. Even a print of 2090 would suggest new highs in the immediate term.