Stocks managed to fall again yesterday, with the slumping 1.1%. The index got as low as 3,965, or 15 points from 3,950, and good enough for me, target hit.

Believe it or not, this is where the hard part starts; because of this zone, I think it will determine a lot. I will sort of watch to see what the market does at this point before making more bold calls. The last three weeks have been tiring. But from today’s close to 3918, it is essential and will tell us much about what happens next.

If we drop below 3,920, it will not only open the door for more gap fills but also invalidate any hopes bulls have that the recent rally in the market has been the start of a new upcycle. It is possible to count the move starting with the June lows as an Elliot wave impulse or 5-wave cycle. The recent pullback could, in theory, be a wave four down and, if valid, lead to a wave five higher.

But if this move down or “wave 4” goes below 3,920, wave four would fall below the top of wave 1, which would invalidate the bullish count.


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