$SPX #S&P500 #macro #weekly #weekend
In this weekend update I will be updating scenarios we discussed in details the previous Sunday (Part I: The Bearish Macro and Part II: The Bullish Macro).
Last week S&P hit the upper edge of the Green Box and we got an immediate bullish reaction.
Bulls consider the (a)- (b) – (c) down move off the July high as a corrective wave (iv) down.
Bulls believe that (a)-(b)-(c) move down was just a temporary pause in the ongoing five wave up rally and they felt scared of missing out opportunity to go loong on Friday because that move up off teh support could be a start of a new rally in a wave (v) up.
Under that bullish macro scenario / wave count the corrective pullback in wave (iv) down should be followed by a strong impulsive rally in a subwave (a) of wave ( v ) up targeting the high made by the wave (iii ) up in July 2023 (4,607 for SPX and 4,684 for ES-mini).
The Bearish macro argues the July’23 high was the top of a large corrective wave B up and the (a)-(b)-(c) decline was a micro wave (i) down of a new large five wave down move in a wave C down. If that decline is a wave (i) down it should be followed by a corrective (a)-(b)-(c) up pullback in a wave (ii) up that should make a lower high UNDER the July high:
To confirm that we deal with the Bearish macro scenario bears need to push S&P down one more time to hit that green demand zone on the weekly chart above.
This is how that bearish micro path can look like:
That bearish micro scenario considers the Friday rally as a subwave-c- in a corrective -a- up, — down, -c- up structure of the wave -iv- up. That scenario allows bears to make one more push lower down to the 138.2% ext of the wave ( a ) = 4,167 (SPX cash index).
One more push down would confirm that we deal with the MACRO BEARISH scenario because it would make the (a)-(b)-(c) move down off the July high a way too big for a corrective wave (iv) down.
However, the market likes to keep opened all the paths as long as possible.
Therefore it may try to keep that uncertainty not allowing bears to make one more push lower.
What I mean is that we can be following the micro 1.1. scenario that would keep alive both the Macro Bullish and the Macro Bearish Paths alive:
We can call that micro bullish scenario the primary one. The a-b-c move up we got off the last low (could op on Monday or can make a slightly higher high on Sunday night or on Monday morning) can be counted as a wave ( a ) up that should be followed by a corrective wave (b) down.
Note that a corrective pullback in a wave (b) down would complete our favorite reliable bullish reversal setup, the Inverse Head and Shoulders setup.
Let’s come back to the Macro Bullish scenario:
If bulls manage to defend the lows made last week and keep pushing S&P higher the moment of truth will happen when price hits the lower red box “resistance”.
In conclusion:
(1) the Friday rally did not invalidate the micro bearish scenario that allows bears to push lower one more time to complete the (a)-(b)-(c) move down off the July high. See potential bearish micro scenario 1.2 shown above.
(2) the Friday rally stopped right under a very strong resistance 4,333 for SPX cash index.
(3) Even if the (a)-(b)-(c) move down off the July’23 top bottomed last week I would expect an a-b-c down pullback this coming week. A corrective a-b-c move down to a higher low would complete a bullish reversal setup based on the Inverse Head and Shoulders pattern, a reliable money maker.
