The Bearish Option

On yesterday's intraday SPY chart, we did post the red label of or Top at the A wave location upward. Here's why. Downward price movement on Friday got prices down to near (but not quite hitting) the 78.6% retrace level in the ES futures. From here prices could turn up to make a larger C wave up or they could easily continue lower. If this is a true bear market, they might do the latter. Earlier we had posted the nested 1,2 count. And we have shown elements of the count before. Here is the update of the nested count which looks the best in the Dow Jones Industrial Average.

Notice that this count is consistent with degree labeling. Wave Minor 1 is smaller in price & time than wave Intermediate (1), so it may be considered as a subwave, and wave Minor 2 is smaller in price and time than wave Intermediate (2), so it may also be considered a subwave. Further wave Minute ((i)) is smaller in price and time than the prior largest Minor wave, wave 5 of Intermediate (1), down, so it may be considered as a subwave, as well.

We have counted out the Dow's expanding leading diagonal before. It has perfect form with wave lengths 5 > 3 > 1, 4 > 2 and 4 overlap 1 without going over the high of wave 2, all as three-wave zigzag sequences. We have also shown the potential contracting diagonal for the Dow before for Minor 1..

If wave Intermediate (2) is a double zigzag, then wave Minor 2 is an expanded flat.

Wave Intermediate (3) could become a 1.618 or 2.618 leg because the retrace for Intermediate (2) is greater than 50%+.

Unfortunately, this count is not yet active. It would not be activated until/unless the low of minute wave ((b)) is exceeded lower as per the chart note shown. Yet with yesterday's significant price drop and as yet unfilled gap, the odds have tilted a bit in favor of the full-on bear count. I would rate them at about 40-60% bull vs bear right now. Either could happen, but the current trend should be given the odds. The onus is now on the bulls to make a higher high than the highest high within prior Minor 2 to invalidate this count.

P.S. You might not be able to find this count in your favorite equity index - whichever it is - because of the way that index is weighted, or the number of FAANGM stocks it contains. That's not my fault. The Dow is a particular index with a particular make-up and number of stocks which is somewhat different from others. Please count each index on its own.

Have an excellent rest of the weekend,

TraderJoe