The SP500 either completed an impulse wave at today's intraday low around 1:30pm or will do so with one more 4th wave and 5th wave. While I show waves [i] and [ii] on the small swing on 10/21, I don't have a high degree of confidence in that labelling. I show the alternate labelling for [i] and [ii] at the 10/22 and 10/23 low and high, respectively. One reason to believe that today's low was all of minor wave 1 or intermediate wave (A) down is the positive divergence buy signal on the 30 minute chart. Even if there is a new low, it will likely just be a retest of today's low.
Given the fact that my position is that we are in a correction of the rally from the March low of uncertain duration and depth rather than a full blown resumption of the bear market, I made a descretionary decision to exit my index short positions today shortly after the intraday low.
I will be looking to re-enter those positions after a sharp retracement to around the SP500 1075 level, which should complete wave 2 or (B). We can then assess the subsequent market action to determine if it is in wave 3 or (C). The impulsive nature of the decline makes it clear that we must be in wave (A) of a zigzag (5-3-5) or wave 1 of an impulse (5-3-5-3-5) movement. The depth and intensity of the next 5 wave down move should help us determine which interpretation is the correct one.
In the event that the market gaps down to a new low, I will evaluate whether it is the end of wave [5] or the beginning of wave 3 based on the action in the first 30 minutes to 1 hour of trading. If it does appear to be wave 3 down in that case, I will re-enter the short positions. However, at the moment that outcome does not appear to be likely.
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