Counting wave patterns is like building a puzzle. It based on logic. Wave structures build and form bigger wave structures.
In review of what has happened since the 666 low, it appears the market traced a double zigzag from 666 to 956. That "qualifies" as a valid corrective for P2, yet since P1 was such a long (17 months) decline and in points, P2 logically should rally a certain percentage. Simply put, if 956 was not enough of a point retrace (or June 11th high was not enough time) the market will trace higher at some point.
Logic also states that since this is a wave 2 correction of large magnitude, if 2 zigzags cannot achieve an acceptable price retrace high than the theory allows for a triple zigzag. That would be the limit.
The connecting waves between each zigzag is an (X) wave of intermediate size (red letters on my charts). So if 956 was the high of a double zigzag, and we assume that the market needs to trace a triple zigzag, logic tells us that the second (X) wave low should not fall too heavily in price. Afterall, why would the last zigzag start its move from the same place or even lower than where the second zigzag started its move? That would defeat the logic of a triple zigzag (to achieve a high price). A low starting point for the final zigzag would force the last zigzag to be a powerful one which normally the first zigzag would be (as it was here). That's asking for a lot.
The start point of the second zigzag was either 835 or 847 depending on where one places the first orthodox (X). So using logic, if we take 847 as the start of the second zigzag to 956 peak, 888 is exactly a .62% retrace back toward that 847 mark. Should we expect more of a retrace back toward 847 before the launch of a third and final zigzag to P2 peak?
I suppose it could trace more backwards however, remember the logic: If one expects P2 is not over, than one must expect a triple zigzag to peak. And one must expect that the last zigzag will not start from a low spot as compared to where the second zigzag started.
Based on that logic, 888.86, being an exact retrace of .62 back toward 847, makes a good spot for an (X) wave price low.
Once again building on logic, the move down from 956 to 888 was a nice 5-3-5 zigzag which qualifies as a corrective pattern for an (X) wave. The question is: was this enough retrace in time? Are the bulls ready to stomp on the gas pedal yet again so soon? That is something the waves will reveal soon enough.
The (X) wave could carry on for a few more weeks or longer, yet not move below 888.86 (or perhaps just a little dip). For instance an (X) wave flat could carry prices back toward at least 950 and then a bearish C wave take them back toward 888 before ending. Or perhaps the market will start to triangulate and go sideways in yet another triangle move for a few weeks until a breakout move comes later.
Today's waves broke up and over the down channel and was a 5 wave move up. Is this the start of a new move to P2 peak? I honestly do not know just yet. The 10day $tick average had dropped to a very low spot and as Kenny showed, was at a spot that could be a market turning point. In addition, the VIX shows no fear. It appears to have triangulated recently itself as I showed a few days ago and now may be breaking lower.
Like I said, either P2 has peaked or it hasn't. Simple logic. And if it hasn't peaked, at some time the market must turn back up. And that last move up should be a zigzag up (probably about 100 points in size or more I suppose). And the start point of that last zigzag should occur from a decent price point that is not at the same level or near where the second zigzag started.
I never favored the end of P2 at only 956. I favored a move higher toward 1000. It didn't happen when I thought it might, but it may be happening now or will happen in few weeks or so after a sideways consolidation. I suppose the market, in addition to needing more price retrace, needs more time for P2.
The bearish count of some kind of giant 5 wave move down, which of course implied that P2 had peaked at 956, has almost been totally eliminated by today's move up. If 927 gets taken out to the high side, it will be confirmed. So again we wait for some final clues.
So that's the logic. P2 ended at 956 or not. There is no "in between" option. EW theory favors a higher price retrace and/or time for P2. There is no hard rule of course.
My logic and today's wave moves, (including all the TA and bearish sentiment) steers me toward another zigzag to peak will occur. When? When the (X) wave ends. Did the (X) wave end? Not sure just yet.
Is there still a chance for a giant 5 wave move down and that P2 topped at 956? Yes but only if 927 does not get taken out to the high side and the market moves down in one more 90% down day in the next few trading days.
The market is now well above the golden cross of the 50/200 DMA. A 90% up day from this configuration, will turn traders and fund managers and technicians and market letters bullish. And that's the way a P2 should end, on a very high bullish state of things.