“Now that enough re-distribution has taken place, we need to extend the decline from the 2375 (s/b 2378) secondary top.  This is what my indicators are currently projecting and, if they turn out to be correct, a resumption of the downtrend should start immediately and could extend to a new low before the next consolidaton takes place.”

Last week’s forecast turned out to be correct. SPX lost 26 points for the week, closing at 2329.13, about 7 points above its correction low of 3/27. The 2329 close represents only part of the count generated by the original distribution pattern, and it may also have completed a subdivision of the total count which could bring about a counter-trend rally. Positive divergence has begun to appear in some of the hourly indicators, with some being very oversold. This would suggest that over the next couple of days, the index could start moving in the opposite direction.  

There are some differences with last week in reversal readiness. Then, the indicators had already turned and this made the index more vulnerable to a correction.  As of Thursday, the indications of a reversal were not quite as clear and much depends on what happens early next week.  

I have marked the 2378 level as the high of the B-wave, but if we we do not break below the former low of 2322 before reversing, it opens the way for a potential mid-point rally slightly beyond the 2378 high for an alternate B-wave high. This is not the preferred scenario. We may be too close to the cycle lows for such a move to take place, but it is possible. A preferred scenario would be to rally 50% of the decline from 2378. That would place the index at about 2353 before the nest reversal downward occurs.  

Daily chart

SPX has now broken through the bottom of its channel from 2084 as well as through the 55-day MA — but not by much so far — and it is approaching the former low of the correction.  Because some positive divergence is beginning to show at the hourly level, it could hold here before rallying.  The fact that this move represents filling a phase count of the distribution top adds to that possibility. If Monday does not materially exceed Friday’s low, we could see a counter-trend rally start on Tuesday.