At 6:40 yesterday morning, while the market was maintaining a high level consolidation, many began to fret over shorting the market. I then posted the following to our members about how interesting market sentiment works:

"I have watched people taking short attempts so many times that have made me cringe. Now, the market has a 1-2 downside set up in place with a VERY narrow invalidation range, and people are scared to trade. Sometimes the market amazes me. Right now, we have a downside set up.

Will it follow through? That I cannot tell you. But, I can say that the risk is low even if one is wrong since we are so close to the point of invalidation. A break over 2180 on the S&P 500 would invalidate this 1-2 downside set up."

While the market now has a 1-2, i-ii set up in place to the downside, we are still working within a larger degree correction. For this reason, one should not be aggressively playing downside, especially since we still view this as a larger degree bull market, and looking for the heart of a 3rd wave to take us up strongly into 2017.

Moreover, Bill Albert, host of our "The Scary Guy at EWT" service, has his Razz Wave (a proprietary put/call ratio analysis) pointing higher into early October. This could mean the market wants to provide us with yet another twist before we are able to see the drop to complete this larger degree wave ii of (3), based on Elliott Wave analysis, into the lower box on our 60-minute chart.

So, for now, maintaining below 2166 on the S&P 500 would be what I would want to see to maintain a strong downside perspective. A move through that level, which then follows through over today's high, would invalidate this immediate downside set up.

Lastly, as you can see on the 5-minute chart, I have added a PIVOT BOX. As long as the market breaks below that pivot box, and is unable to bounce back through it, then pressure will remain down to the 2111 region next. However, if we are able to bounce back through it, it also opens the door to a bigger corrective move in a more extended b-wave as noted in yellow on the chart.

Ultimately, I don't think trading this market to the short side should be done aggressively, but rather nimbly, taking profits where you can, while setting up for the bigger move higher in the months to come.

See charts illustrating the wave counts on the S&P 500.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.