Bears are not taking the opportunity that the internal structure of the down leg from last Friday's high is suggesting a downward correction with a potential target in the range SPX 1443-1437 (Rising 20 dma), instead so far price is setting out a sideways pattern that without breaking last Tuesday's lod at 1461.64 it could evolve in a bullish Triangle wave (B).
If this is the correct pattern then once it is complete the thrust out of the contracting pattern will establish the top of the Double Zig Zag off the November lows.
The pending wave (Y) could reach the range 1500 - 1525
Below I show the SPX Triangle option:
If instead of forming the Triangle, today, price breaks to the upside (I don't expect this scenario) then price would be still involved in extending higher the wave (A) off the December 31 low.
The other short-term option is the one I have been suggesting during this week updates which calls for a Zig Zag or a Double Zig Zag down (Downward correction).
As we can see in the SPY 15 min chart below, since yesterday's down leg off the hod is once again corrective then downward EWP would be a Double Zig Zag hence a ZZ down would have to be unfolded (Now in the wave B).
SPYs' 2 gaps will dictate the most likely short-term outcome:
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Above: Monday's gap down at 146.37 if it is closed will seriously jeopardize short-term bearish ideas.
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Below: Yesterday's gap up at 145.54 must be closed today in order to allow the potential Double Zig Zag down.
Given the doubtful short-term outcome, probably VIX with yesterday's intraday reversal after dipping briefly below the lower band of the Envelope (20.20) could be the initial stage of an oversold bounce with a potential target at least at the resistance located at 14.77.
If this is the case then bulls should struggle in achieving an immediate higher high.
