Regardless, I tend to think those sideways waves at the top on the Wilshire need to be incorporated into the larger count sooner or later. I do not assume truncation occurred, particularly since it makes a nice 5 waves down initially from its peak. So there may indeed be enough structure to start incorporating.
The whole purpose is to get you to think. Look at the rejection points in red arrows. Interesting.]
Take it as contrarian play and count on a bounce! But really, I am bearish.
Disclosure: I have only covered my BGU so far. I have core positions on QID, TZA and short JNK, QLD, and UPRO. I don't plan on covering anything for quite some time. I did however plan on adding some positions after a Minute [ii] bounce. But I am not sure the market will let us in with such an easy pick spot like a backtest of the 50DMA. 1000 got spanked down 4 times and I question if it will ever get breached again (yes I am bearish).
Allow me to explain.
Looking again at the break of the rising trendline in 1930 I notice that right about here is where the DJIA dropped dramatically outside its BB for 2 days and had a hard landing before it finally bounced. Basically it didn't really have a "wave 4" at a low spot as we typically like to draw. Its wave 4's were at a high spot like the current markets. Very near where we have our "third of a thirds".
In fact the market tumbled badly from 1930-1932. I don't see why P3 would follow form of P1. In P1 things took a while to get warmed up and nice structures built upon one another. In this instance, I think P3 will be different in that it will grind you and surprise you. Sure it will have its oversold bounces but they may come from lower spots than we anticipate. There are simply no one buying the bounces at this level. Its as if everyone is expecting everyone else to buy the bounce. After all, most institutions have already gone "all in" and cash positions are very low.
And let it be known that the squiggles show real selling going on, or lack of buying. There are no contrived gap down openings. Its impulsing down in nice 5 wave structures for the most part. Its trying to rally but selling comes into play. The squiggle waves look quite different than anything corrective in P2.
Again looking at the DJIA at support, it really is no lock that it finds solid support at the levels I have marked. Again, which support layer do you buy? We sliced through a few already with nary much of a bounce. Yet there is no panic. The media shows some concern, but not as much as I thought they might! Thats bearish!
The daily RSI on the 1930 chart got oversold before a hard bounce. Kind of like Japan did last month. I sense a we might just have to also. I sense the 1060 big gap gets closed. I sense a hard bounce may only come from the 200DMA spot which is 9400 DOW and the SPX is at 1011. If everyone is expecting an average 10% "correction", then this market has a ways to go. Why would they buy? What if everyone is thinking 15% average? AT the least the 200DMA should draw buyers.
I guess part of the reason is that the entire wave structure, while nice, needs a rip-roaring day!
Bernanke was reelected and the hubris of men who think they have such meaning to the market would be enough to send it in a tailspin. Bernanke saved us! What better way than to have the market tank 500-700 more points right after he is confirmed. Pundits would be stammering over themselves. Particularly in the midst of a "great" earnings season. Of course if you follow this blog, you know its BS. The market will prove men are not in control of things as much as they think.
We can only count things as they go along, and like trying to find tops, bottoms of waves are not always easy either particularly when things are in the bear of bears. P3 is not to be danced in and out of in my opinion unless the probability of turn is high. And right now, there is nothing in glue that says we must bounce to that 50DMA.
Now like I said, we can count waves the best we can but if we did have a Minute [ii], then things are ready to get rip-roaring and a true "point of recognition" will come into play. And that means the market may not see above 1000 again. After all, they tried 4 times to take it back.
The daily RSI is the one to watch. P3 is the Ponzi wave and downside surprise is back in vogue.
And if we get our perfect Minute [ii] and none of this comes to pass? Well then great! We are ready for it. However we probably are not ready for the speed and surprise of a P3 which is why we must give it credence. There are a lot of smart commenter's on this site that also say the same and I would heed to listen.
Anyways good luck either way. If we get our bounce, great, then I get to enter more shorts. If not, I'm riding what I got.
Each must do is own due diligence of course!