SPX Update: Market Captures Target and Reacts to Monday's Inflection Zone

In the prior update, I warned bears that it was finally time to be cautious:

The market's been pretty straightforward for the last couple weeks with "no change/still pointed lower" being the preferred outlook each day. And, of course, that outlook has since proven to be correct. While there have been a couple minor inflection points along the way, we are finally reaching a more significant inflection point: The point where an ABC down from the all-time high could be complete or nearly so. 

That warning turned out to be timely, as the market did indeed react to the major inflection point with a blistering rally that began in that very same session.  But that wasn't all there was to it:

Additional consideration is that if we WERE to form a b-wave low near current prices, it would cause the most confusion to the market, since this is also the previously-discussed ABC inflection zone. The ensuing rally toward "or 2/B" would cause bulls to become bullish again, and the impulsive nature of that rally would really throw everyone for a curve. 

Sometimes the market instinctively chooses "the path of most confusion," so again, at least stay alert here.

The problem now is that, as I concluded in Monday's update:

In conclusion, there's no real change to the intermediate outlook, but we have reached the first 3/C inflection zone, and the market may react to it. If it DOES react, and especially if we get the complex correction, then things will become a bit less straightforward. 

For the record, "a bit less straightforward" was an understatement.  The market has now opened up no less than four viable potentials.  Let's discuss those in turn:

1.  One option is for the low to have been ALL OF an ABC off the all-time high.  That would culminate in new all-time highs.  I view this as an underdog to the remaining options, but I can't rule it out.

2.  Another option is for the low to have been the oft-discussed B-wave low, with the rally as a big C-wave that would retest or best 2892 before reversing lower in a big way.  Under that count, the rally is a higher-degree SECOND wave.  That count is near-term bullish, intermediate bearish.

3.  Unless/until the rally overlaps 2854, it could be a lower-degree FOURTH wave.  In that case, the rally would complete relatively soon and reverse to new lows.

4.  The most bearish option is for the three waves down to Monday's low to be a large BEAR NEST.  Instead of an ABC, it's wave 1-down, wave 2 up (to 2892), then a smaller wave I-down (to Monday's low), wave ii-up in progress.  The second I-ii is internal to wave 3 -- they're subwaves of wave 3, with iii of 3 still to come.  For that reason, if there's any breakdown at Monday's low in the near future, bulls should be VERY cautious.

So, that's where things sit at the moment.  All four options are viable, but I'm assigning the lowest probability to Option 1... however, a lot of that is gut instinct, and as I said, I can't rule it out on a technical level.

Thus, given that option 1 and 2 are both bullish for at least the next 90 points or so, bears might want to await an impulsive decline before acting with much aggression.  In the event of options 3 and 4, though, an impulsive decline could come as soon as today.

And let me just take a moment again to reiterate something from Monday:

Sometimes the market instinctively chooses "the path of most confusion."

Since I just outlined the wave counts, and it makes for even more confusion to attempt to chart all those options, today we're just going to focus on classic TA:

In conclusion, when I penned Monday's update, this is pretty much exactly where I did NOT want us to be today, but where I suspected we might end up anyway.  It is what it is, and all we can do is see how the market handles it next -- and at least we have some good roadmaps depending on the market's next move.  Trade safe.