I guess we all see what we want to see [RUT]

EWI's short term update on Friday acknowledged that the recent bottom in the Russell 2000 index was likely a 3rd wave.  In their mind that means for sure we run back to the level of the prior 4th and then collapse.

Make no mistake: THEY COULD BE RIGHT.  Many things support this conclusion including the recent economic data which even has Mish saying that we are now in recession.

But I'm just not sold on this as an absolute outcome and in fact we don't need to be sold on it unless we are trading options.  Below is the chart.  Yes, it is 5-3-5 in nature.  But that should be read "1 or A, 2 or B, 3 or C".  I note that the peak looks very much like a rising wedge and I also note that if the fib calculator is placed as if the recent peak were W3 then the pullback bottomed at the 50 fib.

The play here is easy.  You don't buy into either the bull or the bear arguments.  You avoid the emotional battle and stick with the odds based play.  The odds say that after 5 waves down we should get 3 waves back up to the level of the prior 4th.  After the unicorn tail 5th wave we just got it should be completely obvious that if you buy in here and stop out if this goes to a lower low that you will have a shot at upside with a likely limited downside.  And that upside might be a good deal more than a 3 wave move to the level of the prior 4th.

If this begins to go sideways on us then it could be building a 4th and that data would definitely affect my thinking.  But I just don't see how commodities get up off their back if the stock market goes into freefall right now.  Time well tell but we have now take gut feeling out of the equation.



 Per below, it's not 100% clear to me that the C wave is complete.  It could turn into WC per the blue path but we should know this right from the open on Tuesday.  If blue C is done then the red path will likely begin to play out from the open. One more spike down from the blue would result in WC which is why I still count it as possible.