Christmas came and went and so the market decided to pass time as well. I hope everyone had a chance to get away from the screen and enjoy some time off with the family. I promised my wife I would leave Friday alone, so indeed I did. It looks like it was a good choice as no fireworks happened as I thought might be the case. In hindsight it should have been more obvious that the odds of a significant wave 3 happening with no one at the wheel was probably 0%.

Looking at the price pattern during this last week gives me two more obvious probabilities: (1) a wave b triangle has ended (top chart) and we'll start tomorrow off on a low note and never take out Friday's high, or (2) we are in wave minor c of a larger zigzag (2nd chart) and we'll top out on Monday before more downside pressure builds. Our first key level to break is SPX 866 and 860. After these fall, we should quickly head down to my target zone of ES 815-840 (3rd chart) before we get another bounce. If ES 815 holds, then that will likely be the end of our wave B correction and we should begin the journey to SPX 940-960 to finish off this wave 4 correction.

It is important w/ EW to take one day at a time. Corrections are always the hardest to forecast and this one is proving to be no exception. We have a good idea of our start and end points, but the path to get there changes all the time. For day traders, the path is very important. For position traders, the start and end points matter more.