Once in a while the market provides a crystal clear road map. Today is one of those times.
The triangle broke down on Friday. And once again the market broke on high volume which, once again, is a warning not to fall in love with it. People wonder where the volume is. It's right there, on the downside, every single time. That's not healthy no matter how high prices get.
There is now a clear wave structure for a bull or bear scenario. That is all anyone can ask for. This is the "official" Elliott wave count, and it's as bearish as it can get. Believe it or not, that's a good thing.
Elliott waves travel in 5 waves with the trend and 3 waves while correcting the trend. The chart above is an aggressive wave count with 3, 4, and 5 to come, then iii, iv, and v, then (iii), (iv), and (v) projecting into the 1530s or thereabouts.
That's good, because if for any reason today price climbs into the area marked 1 (which is 1647.62) on the chart above, it will be an immediate signal that the above wave count is wrong. The odds will then flip to new highs once again.
The only comfort to the bulls thus far is that price has not gapped down this morning. It easily could have. But the day is still young, and what really matters is the cash S&P. Where and how the S&P opens will determine a lot. Any failure to head much lower today and tomorrow (small bounces notwithstanding) will be a clue to cash in shorts and get long.
I have added to the SPXU position in the pre-market and will add more on any bounce unless the 1640s are threatened. Then I would strongly consider positioning for a bear trap with 1647.62 as the trigger.