[Update Sat 7:15PM: This chart belows shows why a Minor wave 1 of (1) of P would "look" better at a lower level if we are to assume that Intermediate (1) will finish near or under the 666SPX low.
[SIDE NOTE: Why do I think its important that Intermediate (1) of P finish near or below 666SPX? Simple. Look at any 5 wave structure with a powerful third wave and you'll see that typically the 1st subwave of wave three carries prices further than the previous wave 1 of next higher degree. Primary wave 3, or "P" as we call it, is no different! In theory, its first subwave, which is of Intermediate size, should carry prices lower than P's price low which was 666 SPX. Additionally, since my bear market low years from now is nearer 1000 DOW or lower than not, this would "look right". ]
Now an Intermediate wave (1) shouldn't take too long and P being a more powerful wave than P should be much swifter at certain points. However being that its also supposed to be a longer wave it has more ground to cover so the "time factor" is a real wildcard. Throw in a few flash crashes and things could go quickly indeed. Yet even Intermediate wave (1) in P took a full Fibonacci 5 months to complete. Will Intermediate (1) of P take longer? We just don't know.
This chart belows uses a Fibonacci 8 month time frame for Intermediate (1) of P. Will the new market circuit breaker rules truly slow things down? We don't know maybe they will. But in keeping with the general guideline that everything in P[3} will be "grander and bigger and more extreme" (thats my thinking anyways!) then lets assume it takes 8 months for the market to chew through what P gained in 13 months. Afterall, there may be a lot of eager buyers on the way.
This timescale fits Robert Prechter's brilliant timeline and cycle work he did in recent EW Theorist newsletters that a bear market low won't be found until many years down the road. We won't get to Dow 1000 by next August!
Can you imagine by Christmas we'll be looking at SPX sub 700 again? You cannot? Well did you imagine when we were at SPX 675 in March 2009 that the market would soar relentlessly to SPX 1100 within the same calendar year?
Will this all come to pass? I dunno, but its truly an amazing time the world is in isn't it? Think way outside the box here people!
So take the time predictions with a grain of salt. The main objective of this chart is to show a potential "form" and that Intermediate wave (1) of Primary wave  should end near new market lows or, ideally lower.
[Update Sat 8:16AM: The cumulative advancer chart also seems to be supporting, at least at the moment, the alternate count that is posted at the beginning of this post. However, just like the market, this chart requires a new low to form at least a 5 wave move down.
As a side note, this chart also supports the idea of a major trend change as the advance has dropped out of the channel up.]
Although the primary count of Minor 1-2, then Minute [i] - [ii] http://3.bp.blogspot.com/_TwUS3GyHKsQ/TAlfZyGotgI/AAAAAAAAFmE/RImynB1n4yE/s1600/spx60.png has kept us on the correct side of things for the most part, the count is really starting to bug me:
1.) Its EWI's primary count (hey I had it first! - they had Intermediate (1) as the 1065 flash crash low and changed it).
2.) If this is Primary  and the market is supposed to crash to less than 400 - 1000 DOW by the end of the bear market many years down the road (and I do think that is possible!), then having Minor 1 of (1) of P at 1065 does not seem to be enough of a low considering just looking at P in 2007.
3.) Sentiment and TA points toward a bounce and now there are 2 huge gaps down on the SPX which sucks for bears.
4.) Intermediate (1) of P should in theory, advance prices lower than the P low of 666. Under this guideline, having Minor 1 at 1065 after only a few days from the top just seems a bit out of place. This would require 3 of (1) to crash an enormous amount (which it could of course) to cut through a lot of potential support layers in order for 5 of (1) to be near the 666 SPX lows. Having Minor 1 finish at say, 1020 SPX or a bit lower "looks better".
5) Today's decliners versus advancers at only 9.5:1 despite a 119:1 down volume was odd to say the least. It was not extreme as the 20:1 and 17:1 decliner days we had in May. The squiggles are almost uncountable as they were constantly overlapping.
Bottom line is my gut is starting to tell me that perhaps its time to consider my top alternate. I usually have better success when I deviate from EWI. It keeps things fresh particularly for the readers that subscribe to EWI and also follow this humble blog.
I also sense that EWI was and is looking upwards. They still are. However, a new low under 1040 is required first. Then we'll see. If this new low comes with a count and a sentiment and lesser internals than what we should expect, and other factors (like the dollar's wave count) that support a rally back to challenge the 1107-1115 gap, I'll be the first to suggest it.
So those are my concerns and there are others to be sure. I do however feel fairly confident that in any case, the market is headed to lower than 1040 next week as a minimum either in the primary count of [iii] of 3 of (1) lower or just [v] of 1 of (1) lower. How it does that is the key and we'll watch that decliner/advancer ratio.
The weekly candle certainly supports more selling next week. The previous week's hammer did indeed hold true for one week's time, but now the red candle supports more selling.
No matter what happens, I ain't buying this market overnight. Surely some calls for limited risk from time to time, but thats about it.
Now onto some weekend charts. The top alternate count requires a new low under 1040. I have carefully considered this top alternate and it actually is grounded in very good reasoning. In fact, as bearish as I am on the markets, it has good merit to become a primary count depending on how things progress early next week.
I'll only mention EWI's top alternate count once here in that they have the "flash crash" to 1065 as wave [iii], the massive rally to 1173 as [iv] and the 1040 low as Minor 1. First, I think that count sucks because it just violates so many guidelines that no matter what happens I would arguably always find a differing count than that. So in my estimation 1040 cannot be Minor 1 low.
However, a new low under 1040 CAN be Minor 1 low. This is particularly true since there is good precedent in that Minor 1 of Intermediate wave (1) of Primary  in 2007 has very similar characteristics. That wave took about 11% off the market and took about 6+ weeks.
So its seems more than appropriate that this is what may well be happening here. There are a myriad of reasons for why this may come to pass. Sentiment and TA certainly supports a rally in many many ways. At the very least, there are 2 mega gaps stacked above each other that the MM's would would much like to challenge I am sure.
TOP ALTERNATE COUNT:
Here is the 2007 Minor 1. Notice the similarities in structure, the overlapping wave [iv] price and the falling wedge shape.
My first concern is that the dollar and Euro broke out of triangle moves which could indicate a final wave action for each and then a turn for each soon enough. Sentiment on the Euro is very very low. The DAX is also a curious chart.
The best clue I suppose is that NYSE advancers:decliners would dissipate lower on wave [v] rather than [iii] or [i]. http://2.bp.blogspot.com/_TwUS3GyHKsQ/TAles_vzwOI/AAAAAAAAFl8/PGYAvy2UV40/s1600/spxdaily.png
Today decliners finished near its high of day at less than 10:1 down. Now down volume ratio was a record but that may not be the best internal to use. But 10:1 decliners down is still less than the 20:1 down experienced on 20 May and less than 17:1 down on May 6th. So from that aspect, things would fit. This might be indicating that selling is beginning to exhaust for the near term.
However if decliners pick up the pace and expand even greater to the downside, then we must be careful that a flash crash is in teh works and indeed [iii] of 3 is here.
Why is this not the primary count if it makes such sense? A few quick reasons off the top of my head why I am still uber bearish and have the markets entering a [iii] of 3 perhaps soon:
1. Technically, The H&S pattern I have been showing has a much much lower target which means it can only be Minute [iii] of 3 if that target is hit. I am curious how the market reacts when 1065 is lost. Lets see what happens next week.
2. The flash crash of May 6th is a potent and ominous warning I believe.
3. Liquidity lockup dangers are ongoing, hence more flash crashes.
4. P is a cut above P1. Why should the market, after more than 2 months, rally back to 1150 for a mere minor loss from the "top" after all this going on?
But the bottom line is probably the decliners versus advacners. If this does not increase more than what happened today, then we must consider the altenrate count.
But remember, the alternate count still requires a new low under 1040! This is a rule of leading diagonals: they cannot truncate (or else we'd label the whole thing something else.)
So there seems to be more selling either way for the near term.