When Friday's rally from the bell died a quick death, it became obvious that we didn't have a 5th wave exhaution gap on our hands. The market sold off from there and kept going until finding support in the 1130/1135 area.
Based on the price action, here is what I'm seeing for Monday morning:
- We have either ended or are in the process of ending a subminuette wave 4.
- A non-subdivided wave 5 appears to target the 1113 area
- Next week is options expiration week, which is generally bullish
- The .786 retracement support comes in at 1087. I expect an extended wave 5 to not be able to make it past this zone without a significant bounce
- There will likely be a lot of volatility around this area where the bulls think they have survived the crash and the bears don't. I expect the hourly 34 SMA to provide resistance on any bounce. If the bulls get through that, then I draw the line at 1160. Any move over that and the bulls have earned a new rally high. If the bulls can't hold .786, then we should get a 3rd of 3rd move down starting either at the end of next week or the beginning of the following week.
Best of luck, and let's see if this bull's back will finally be broken...
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