This week’s action has “busted” a couple of chart patterns, so the SPX needed a bit of cleaning up. The major one is that the Bearish Wedge pattern is now a triple zigzag Ending Diagonal tracing the boundaries of Primary Cycle Wave [C]. This suggests that Wave [C] may go higher on Monday. The minimum target appears to be 1475.00. Cycle Top resistance is at 1481.05 and that also corresponds with the upper trendline of the Orthodox Broadening Top shown in the chart.

You may recall the last time I used this fractal analysis to determine a potential top. On Wednesday the SPX had made a 60-hour fractal, which may have been a potential top, but the pattern was not complete. As of Friday’s close, the pattern was near completion, but the fractal hours didn’t appear to be sufficient. The next hourly turn may be 77.4, leaving the SPX 3-4 hours to complete its mission. My best estimate would be at or near 1:00 pm on Monday afternoon. You can see that the upper trendline of the Orthodox Broadening Top will be near 1475.00 or possibly a couple points higher by then.

I had originally thought that this high might be similar to the 2011 top leading to the decline into the August 9 low. Now it appears that this top will be more like the April 26, 2010 high, leading into the first memorable flash crash. The main reason is the time and volatility compression that we have in this cycle. This may simply happen a lot more quickly.

Regards,

Tony

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