...that is certainly the question we bears ask ourselves every time one of these tops are put in with a decent reversal. Well, this first chart has a few different targets on it depending on the size of this pullback (if it turns out to not be impulsive).
Our first target is a wave b pullback from the recent high. Price should close the previous wave 3 gap and not much more. I put this as a med probability because if we go much lower than this I think the market will just fall apart based on a number of divergences that are showing up in the market (i.e. adv/dec, index non confirmations, new highs, etc.). The target for this pullback is in the 1092/1095 area. Likely price action would see an exhaustion gap down tomorrow in this area that immediately fills.
Our second target would make this a larger degree wave b, and while I strongly believe that if we make this far the market will be falling apart, it does have "A" probability of occuring without the benefit of future price action to see how price is unfolding. This would be yet another break the trendline psyche-out by the market as we gain support somewhere in the 1050 area.
Our third target, which I give the highest probability is a wave 1 target in the 995/1000 area. I can tell you that if we have indeed topped out, then we could be hitting this target by option expiration (just 11 trading days from now). I absolutely believe it will happen VERY fast if we are going to go. Likely price action tomorrow would see an acceleration wave 3 gap down that does not close and a close near the lows of the day.
Looking at the big picture we are seeing the winding of the spring. Volatility has been contracting and we are getting ready for a very big move and that has a very high probability of occuring to the downside since it has yet to occur to the upside.
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