At the start of the day the market found support at the 1178 level as predicted. From there it rallied really hard - in 3 waves...Then we had a nice 3 wave correction and then a c wave failure on the retest of the daily highs (in the SPX) and the sellers took over the ship dropping the index down to 1070 at the close. Here is where the market put us:
Bearish Case (Primary count):
We are in a 1-2, 1-2 count with a massive 3rd of 3rd of 3rd coming tomorrow. Confirmation is a gap down and an impulsing day to close below 1040. I would expect massively oversold conditions on the hourly charts with all kinds of divergence over the next several days as we make our way to the low 900s. All the bears waiting for higher prices never get it and are forced to chase the market, but most of them won't as they will watch in disbelief as the market finally crashes. Bulls of course will run for the hills with whatever capital they were able to salvage (assuming of course they sell and do not stay on the titanic).
Bullish Case (Alternate count):
We likely gap up at the open and possibly retest the gap, but find support at 1070 once again. Once the daily highs are taken out the shorts will be squeezed hard as we enter the next leg of this zigzag. We should have buying the rest of the week up until we find mega resistance in the 1120-1130 range. Bears get their wish and the bulls get suckered some more.
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