SPX Update: Structural Isomorphism

Last update, titled "Still on Guard" ended with a warning:

[B]ears should be modestly cautious for now, because in the event the first leg up was a W and the decline since was X, then the market would be forming a larger WXY and a trip back to that all-time high from here isn't impossible.  That would fit in the sense of explaining why this decline doesn't feel like a proper C wave, so worth keeping in mind. 

And modestly cautious was probably a good stance.  As I noted on Friday, the decline was bothering me and just didn't feel right for a C-wave:

SPX is behaving a bit oddly given that this is supposed to be a C-wave decline -- it's rare that A waves (the last decline) are more relentless than C-waves.  This means that either the C-wave is just warming up and it will rectify itself soon... or that something more annoying is afoot.

At this point, we can probably make a pretty good argument that it's likely it was indeed not yet the actual C-wave.  It's likely either the triangle that I proposed on Friday, or the WXY that I mentioned on Monday.  The trick is that these two options (triangle/WXY) are, at this phase, observationally isomorphic -- essentially, they're identical wave structures (ABCs), with the difference being the final length of the wave, not the structure itself.  Since we can only see the structure at this phase (we obviously can't see the length until it's actually completed), the distinction remains uncertain.

In other words, the reason this is difficult is not because I’m hedging or being vague. It’s because the two viable structures produce the same observable evidence at this stage.  The difference in these two comes LATER in the pattern: The triangle forms a series of contracting ABC structures, while the WXY simply forms two similar ABC rally structures, with a smaller ABC in-between (the X wave).  

Which means, in short, that you simply cannot tell the difference at this phase -- they would and should both look exactly the same right now.  Which, of course, makes it functionally impossible to anticipate which it is.  The second chart following this one will help us make that determination (possibly).

I've added the WXY in black on the chart below:

So, the next thing to watch is the black line that I discussed on June 25:  If SPX sustains trade back above, then we may be looking at the WXY.  If it gets rejected here/at the red line, then we may be looking at the triangle.  This isn't foolproof -- corrections are always less predictable than impulses -- but it's the best we've got at this phase.

In conclusion, I'm going to lean toward the triangle slightly just because it was my first instinct back on Friday, and my first instinct usually has a slight edge -- but that's far from being guaranteed, so take it with a grain of salt. Of course, given that nothing in life is guaranteed, there's also always the possibility that something more bullish than either of these counts is afoot, so we should never forget that the market is probabilistic, not deterministic.  Trade safe.