S&P500: the market took the alternate route.

Last week I presented two options " The first is that the S&P500 has completed classic symmetrical triangle. It is a continuation pattern, meaning that the move going into the triangle will continue. In this case it was the move from 3029 DOWN to 2822 that was the initiation move. Assuming SPX2939 was the top of the b-wave, then simple symmetry targets: 2939 - (3029-2822) = 2732. Applying triangle "rules", then depending on where exactly price will move below the lower trendline of the triangle -say at 2829- then we're looking for 2622. So we have a SPX2732-2622 target zone, which we can refine once more price data becomes available.

The other options the market still has at this moment is to complete a diagonal pattern (labeled as "alt: 3", alt: 4"). A simple 5=1 then targets SPX2957. This would best count as what is called an ending diagonal in Elliott wave terms as the sub-waves count best as 3s and not 5s. A break and close below SPX2890 will take IMHO this option off the table. Note how price so far pretty much bottomed right there today... keeping us guessing a bit longer... ;-)"

While the 1st option looked best, also because the QQQ's had a nice triangle pattern forming (see here) up to last Wednesday, on Thursday the markets threw the proverbial curve-ball as it often does and thus kept us guessing longer and yet again. The price pattern in the current rally still looks and counts best as that of a diagonal, albeit it has already (far) exceeded the ideal price target of SPX2957 I was looking for in that case. BUT, with today's price action we're right back at it as price reached the 78.60% retrace of the prior decline in early August ;-)

So what does all this mean? 1) the recent price action continues to morph into other options as the market provides us with its twists and turns. This constant morphing and adjustment of Elliott wave counts keeps me cautiously bullish as price is moving higher, but normally Bull runs are more straight forward and require less re-adjustments as impulse move much more predicable than corrective structures. 2) There's a considerable amount of upside gaps left below current prices, which may need to get filled first. 3) price is currently sitting right at support, which must be respected until broken. 4) not shown here, but the 50d SMA is currently sitting at SPX2948 and price will have to close below it to change trends from up to down.

So as the markets continue to pull all sorts of confusing stunts I am therefore still viewing this as part of a very complex b-wave. Currently, I have no clear immediate downside set up in place, and with price above its rising 20d, 50d and 200d SMA I am therefore cautiously Bullish. IF you wonder if the rally to SPX2800-4200 has started, I must admit I have no high probability count for that yet. Until then, being cautious is probably the best approach for now. Watch the 50d SMA for further clues.