Bulls and bears weighing whether this is just a pullback or points to lower levels in S&P 500 and equities markets

The retail sector etf (RTH) already poked under its important swing lows of late May and June, but the S&P 500 has not. At right is an illustration I've marked showing the dilemma facing many traders, whether to hold or fold going into the holiday weekend. (Not a dilemma for traders who close out each day or each week of course.)

I already described my point of view last night here, but to see both sides of the trade, I've marked the levels that can help focus whether the bearish count, or something more bullish, comes into play. The idea of a pullback can be different from the ABC I marked (which would be an expanded flat in EW terms), but you get the idea. It looks like the SPX tested under the 904/906 level I explained this morning, and not quite to the 898 level. Finishing the day by not rising above 906 doesn't look good, but could be explained away as saying that the "C" wave I marked just needed to fully complete.

The bearish view, which I didn't mark onto the chart because (1) I don't want to clutter it up too much, and (2) I bet we're already feeling bearish! counts out like this - that yesterday and today are the initial movements down in a larger wave (C) or wave 3 that points the market to either 880, or 850, or restesting of the March lows (or in the worst-case scenario, down to about 400 SPX). This is consistent with the Objective Elliott Wave count that Tony Caldaro has ably been tracking and describing at his Elliott Wave Lives On site (see links at right).

Once again, closing the week in a manner that doesn't nail down the exact count, meaning it doesn't confirm the more bearish point of view that I'm tilting to unless the markets prove otherwise. The markets cannot prove a more bullish point of view without rising above 921 - hey, there's our number around 922 again! Sure looks like the 922 level has operated as if it were a pivot this week. Clearly that would mean closing today's gap down and let's face it, the markets cannot prove the bullish case without getting above 932 again. Perhaps Andre's 946 would still be a level to watch before getting to and above 956. But traders will need to think much harder about revisiting the head and shoulders and similar scenarios, since we're so close to that key 888/889 level (the correspondending level to which, the RTH has already fallen under).

Just because retail fell under its corresponding level doesn't guarantee the other indices follow suit, but it can be a canary in the coal mine.

A reader commented yesterday that we should look at the information on the Bradley model in the free newsletter Manfred Zimmel makes available at amanita.net, and I agree. I won't just post the newsletter because they deserve to have their email list relationship with people who want to sign up for it (free is a reasonable price in any event). But it's worth checking out, and you can locate the links for amanita.net in prior posts that I've made on the Bradley model here (just use the labels list at right). One of the several points is, that the Bradley model seems to be working better for oil nowadays. Well, if that is true, then candidly I vew that as bearish for equities too, at least for now, because it seems that the energy-related sector has helped the markets stay up in this time cycle. If oil and the energy sector weaken off, I don't see the other sectors as preventing the broad indices from moving into the bearish prospects that I described at length in my posts last weekend.

Which we'll be reviewing again this weekend. So - be sure to put yourself into position where you can enjoy your holiday weekend!! and meantime, happy market navigating the rest of this afternoon!