"By failing to prepare, you are preparing to fail." This is one of my favorite Ben Franklin quotes. With the market at a serious point of inflection as of the close of business on Friday, it is time to prepare so we do not fail.

The year 2014 has been very good to us thus far. After holding support at 1,864 — on the June S&P 500 Emini futures contract — earlier this year, and rallying to our target just over 1,980ES (September contract), we caught the downside from 1,980ES to the 1,890ES (September contract) region. From there, we expected a rise over 2000, but we did fall short of our ideal target by 25 points. Once we confirmed that the high was in place, we began looking to the market to test lower support, which is exactly what we witnessed this past week.

After striking the middle of our bull/bear pivot on our chart, the market is now at an inflection point, the magnitude of which has not been seen since early this year. Based upon the market action we see this week, one of three possible scenarios should be confirmed.

I know it may seem like I am just saying we will go up, down or sideways, but, truthfully, all three are very possible from where we closed on Friday. So, remember, this is not an analysis of what will absolutely happen, but it is a plan to provide you early warning about which scenario will likely play out.

Last week, I noted to expect a bounce early in the week towards our resistance region of 1992-2003. However, early in the week, when the market re-tested the prior week's support, it evidenced even more weakness than I expected. Yet, at all times, it was clear that moves up were taking the shape of corrective rallies, thus supporting our expectations for lower levels to be seen.

For those in our trading room at Elliottwavetrader.net on Tuesday night, you noted my prediction of a potential 20-plus-pointpoint decline to be seen into Wednesday. On Wednesday morning, as the market developed the potential for that decline while we still in the 1960ES region, I put out a chart which identified our minimum target for that day as the 1943ES region, with the potential to extend down toward the 1933ES level.

When we broke support and got the bounce to the 1957ES level, I noted that day traders should take advantage of that opportunity to short the market with a stop just over 1957ES, with a minimum target of 1943ES, with extension potential taking us to 1933ES. As I noted in the weekend update, that was a high-probability target region for the market on this decline. As we now know, we struck 1933ES to the penny that day, providing daytraders with a 22-point trade.

For several months, I have been preparing you for the fact that we will be testing the bull/bear pivot once wave v of (iii) had completed. Striking our lower target zone was the easy part. The difficult part is determining the next 100-plus point in the market. I don't believe we have enough information to answer this question as of the close on Friday. So, allow me to provide you with the different scenarios for which you should be on the look out this week.

Bullish — Wave I of 5 (green count): In order for this past week's low to be viewed as the bottom of wave 4, with wave 5 taking us to new highs, we must see an impulsive 5 wave rally taking us directly to the 1978-1992ES region, and then pullback in a corrective 3 waves, with an ideal target around the 1955ES region, without breaking down below 1940ES. This would set up a rally which would target the 2063-2100 region right on the money. To see this potential, the market should not be dropping below the 1945/50ES support region early next week, and continue higher. Any drop below 1935ES early next week would completely invalidate the bullish potential.

Neutral — b-wave of Wave 4 (blue count): This pattern has us topping early this coming week, and spending a few days in a downside consolidation, labeled as wave (b). This sets us up for a (c) wave rally, potentially into the October options expiration time frame. In fact, we can even see a slightly higher high in this b-wave before topping out.

The reason I really like this pattern potential is because it provides a much larger and longer time frame for a 4th wave. It would set us up for a decline at the end of October to revisit the low 1900s yet again before we go on our merry way for a Santa rally into the year-end toward 2100, which can even take us into 2015 before it tops.

Bearish – b-WaveTop (red count):: This count has us already having topped, or even seeing a little higher into early next week. We would then see a deep drop next week, followed by another rally over the next week or two, which maintains below the 1977ES region. This pattern is signaled by a deep drop next week toward the lows we struck this week. However, should last week's low break decisively, with a follow through below 1905ES, then we are heading to the low 1800s by Thanksgiving.

The reason I like this pattern is due to the bearish setup on the iShares Russell 2000 ETF IWM, -0.26% in a potential wave iv of 3 to the downside. In the IWM, as long as the market maintains below the 111/112 region, we could see a strong drop below this past week's low, which suggests we head down to the 95-100 region. This is also the setup that takes the ES back down to the 1830s, or even a little lower. Clearly, this is triggered by a strong break down below last week's low in the IWM.

So, this week should provide us with the appropriate path to take on the map I have now laid before you. You now have the same game plan I will be using over the next several months. If something needs to be adjusted, we will do so. But, again, we need to plan for the several possibilities before us, and act upon confirmation, or else we are doomed to fail.

See Avi's charts illustrating the wave counts on the Emini S&P 500, IWM and INX.