Most readers are well aware of the major news events that are scheduled for this week and next, which are likely to set the tone of the equity markets for the next several weeks if not the next several months. It is our contention that the rally from the early June low is either completed or nearly so. This belief is based on watching the way several equities indices are behaving as they approach significant resistance and as they move into periods when the most active long-term cycles lend a downward bias to the markets. (We cover that background more extensively in this week's newsletter, and first-time readers are welcome to request a free copy at our website.)

Here, we detail two possible Elliott Wave counts that could describe the end-game in the S&P 100 Index (OEX). The immediately bearish one is shown in blue, while the red count shows a short-term bullish scenario.

S&P 100 Index (OEX) daily chart: Bearish vs. Short-term Bullish Counts

Two Elliott Wave possibilities for OEX daily: An immediately bearish scenario (red)
and a short-term bullish scenario (blue)

The immediately bearish count (red) works well up into the August 21 high, but it is difficult to treat the downward drift since then as the beginning of a major wave down. Price has not fallen in a clearly impulsive manner. At best, a leading diagonal or a leading diagonal followed by a corrective move higher has formed. The count is a possibility, and if correct, it would imply a downturn ahead. However, we believe the short-term bullish scenario (blue) offers a cleaner count.

The count in in blue would treat the overlapping decline from August 21st as a wave 'iv' correction with a new high expected to form before the rally is finished. OEX holding above the 639 level is conducive to this view and could result in a test higher into weekly and monthly chart resistance at approximately 663.

Caution and vigilance are required of both bulls and bears over the next two weeks as the ranges are likely to open up.