We are still sitting here now, as we have for days, waiting for the E-mini S&P 500 futures to break out in this potentially bullish pattern. But, several times now, the index has been turned away at resistance.
I currently have a 1-2, i-ii, (1)-(2) count set up to take the S&P higher, but the market must respect support at this time in order for that pattern to play out. Ideally, the market should manage not to decline below the 1463 level in a wave (2); the it should take out the highs for a nice gap up Thursday after the open. In order to take an index above the kind of heavy resistance we're currently seeing, a gap up is usually required.
However, there is one possibility that only very few analysts have even brought up. We could count the decline from the prior top as a five-wave leading diagonal. Yes, as longtime readers will know, I don't prefer to trade those. But in this instance, Wednesday's three-wave climb into the session high could be seen as a wave ii, represented in yellow. That could take the Es down to 1445 in a very quick move, as it would constitute a wave iii down off the top.
This is why I stress that, ideally, 1463 must hold as support -- but that a break down below this level, further confirmed below 1459, would make the yellow scenario much more likely.
Assuming the Es is able to break out to the upside Thursday, the next resistance region we have to watch will be between 1481 and 1484. This could mark the completion of an ending diagonal to an alternative wave 1 top in the larger diagonal pattern. So if the S&P does make it up to that region, 1471.5 will loom as very important support, and any drop below that level at that time would signal the start of a yellow wave 2 corrective decline -- which would likely take the price down to the low-1400 region.
So, again, I cannot stress enough how important it is for the Es to maintain 1463. A break down below 1459 would have me leaning near-term bearish.
See chart illustrating wave count on the E-mini S&P 500 here.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.