The S&P 500 is putting stress on the idea of the lower degree fourth wave but still alive. We probably get 2748 to 2745 SPX tested early this morning. Under that area, I will probably be forced to change my EW count to either consider this decline as part of a larger fourth or perhaps a wave two. Will deal those possibilities after we see how they deal with support today.
With the drop overnight in the S&P 500 futures of about 20 points, I have to at least entertain the idea that wave iii completed last week and that we are now in a wave iv correction. The previous idea, that of a lower degree fourth wave is still possible as long as prices turn up from no lower than 2745 SPX. Under that point, the larger fourth is probably in its first wave lower.
The equity markets took the FOMC rate hike well which I consider a positive for eventually getting a test or marginal new high in the S&P500. That said, it is worthwhile noting that the Russell 2000 and Nasdaq 100 have already made new highs over that of January this year satisfying the macro picture for a new high before a more serious correction process to begin. It also would not be shocking to see intermarket divergence where some indices make new highs and others make lower highs right before a serious downturn. Net, I think there is room for the equity market to extend but it is late in the game.
The S&P 500 spent yesterday in low volatility formation that, with hindsight, was probably the middle of the fourth wave we have been looking for. The S&P 500 E-mini futures dropped overnight in what is probably the last leg of the fourth. I lean toward the idea that the current futures low holds but can imagine the zone is tested early this morning before lifting throughout the day today.
I jumped the gun yesterday advancing my short term wave count since the market only went on to make a slight new high before retracing. So, back to the idea of looking for a relatively minor fourth wave and a rise out of it to at least challenge the May 13th in the S&P 500 and even make a try at filling the overhead gap at 2822. The S&P 500 E-mini futures made a small dip overnight and have been rallying as I type suggesting the low may have been set this morning before the cash open.