Back in April the Nasdaq had a very clear corrective signature and despite having expected a peak a little earlier this has worked out just fine so far. We now (this chart is a day old due to technical problems) have a fairly clear 5 waves down. Once this 2nd wave countertrend is over we should roll into the third wave of some degree which should be quite dramatic. We will see.

Wave 1  of 5 up is clearly a three wave structure. This is only possible if we are going to have a “diagonal”.  That would imply that the structure is pretty well complete ( as opposed to the idea that just wave 3 of 5 is complete and there is still 4 and 5 to go ). Note that the RSI is right up there in overbought territory. This is it.

Just to complete the parade of indices, here is the Nasdaq. We have a picture here of two vector equal downward legs in a row with an intervening a-b-c . One could be wrong but the conclusion of least resistance is that this is a running flat, 5-3-5, running because it is slightly upward sloping. This alone gives us cause to be very careful in wholeheartedly embracing the bear scenario at this point in time. This is particular so because the moves in the Nasdaq are pretty large and not just marginal increments. Each down leg constitutes roughly 12% so there is still a long way before a new high will be reached, if at all. The bounce from the second low looks to be corrective for now, arguing the opposite!

As usual time will tell.

An example of this structure can be found in RDS.B Royal Dutch to mention just one. This one is downward sloping. MS is another;

See our blog from a month ago. We now have three, more or less equal, legs up. Normally this is about it. As all 5th wave are retraced entirely, regardless of whether or not they are wedges or normal waves, the downside potential is enormous.