Our current view is that we are currently in wave 3 of a corrective 5 wave sequence from 1422.38. Wave 1 completed at 1357.38, and wave 2 at 1415.32. From 1415.32 we have completed at least 3, and quite possibly 4, waves. Wave 1 terminated at 1393.92, wave 2 at 1403.39, wave 3 at 1367.96, and possibly wave 4 at 1373.91. We expect wave 5 of this sequence to drop the market below 1325, and possibly as low as 1260. The wide range suggests that this wave will culminate in a rather sharp spike down. The shorter term wave count is also quite negative in our view, with the decline most likely to come soon, and be quite volatile.
This move down would only complete wave 3 from 1422, meaning we should see a bounce off the low, and then make one more move to the downside. We anticipate a quite substantial bounce, and if one fails to materialize, it could be quite bearish.
Should the market fail to move lower at this point, and rise above 1365.88, we would assume that 1343.13 was the completion of the 5 wave sequence from 1415, and we would most likely move higher.
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