The decline from 2007 into the 2009 lows appears to be complex decline so I am labeling it as a large [W] wave; I am not comfortable labeling it as a 5 wave decline. Currently it’s in wave [X], so we ideally see a simple ABC bounce. As we take a closer look it also looks like its ending wave C of that bounce as both waves A and C have a “5 wave look”.
We currently have a large divergence which is what we would expect to see on a 5th wave, and it’s still under the equality target where wave C = A. So whilst we could label it as waves 1 and 2 of a bull market (where we have labels waves A & B) the fact that we are seeing momentum loss and we can also count 5 waves for wave C of [X], suggests this is part of a large ABC from the March 2009 lows.
Regardless of the time frame, a 3 wave bounce (suspected at this stage) is still a 3 wave move. So by definition it’s a counter trend bounce against the decline from 2007-2009.
We have sentiment that is bullish, I am reasonably sure not many traders or investors think this market can reverse, but many traders thought that at the last peak. Incidentally the same sort of sentiment was seen back then at the May 2013 high, before it crashed 600 points. I was bearish at the May 2013 highs as well just before it topped. As shown in this chart just before the May 2013 top.
I would say it has followed the script nicely.
I am expecting a far stronger reversal than 600 points.
This is just a sample of the report
To view the rest please click on the link, its a free PDF