The question is are we in wave 4 of 1, with 5 still to go to complete wave 1 (in black), or did we in fact already complete the entire wave 1 and are now in wave 2 (in blue)? Certainly the black interpretation is the more elegant one, but fortunately it does not matter all that much at this point as wave 3 was the lion’s share of the drop anyway so the proportion of either wave 4 of 1 or wave 2 are not that different. We have already retraced about 40% and are at a wave 4 level, a move to about 62% would not be negligible but certainly not tradeable for most of us. That is why we recommended getting out of longs the other day.
This market is like a casino and roulette is played without the numbers, just black and red and as a result it is a binary proposition, that cannot be controlled too well . This risk-on , risk-off approach does not leave much for error. You should stay short for the next few months as this market has a long way to go. In terms getting short again , or more so, the 62% retracement level is as good a spot as any, but we may not even get there.