See also a previous blog on the S&P (SPX). Though we never ever expected the S&P 500 to rebound to these lofty levels, and take almost 4 years to do so , we do find this pattern very intriguing now that we are here. Over the past two years this index seems to have traced out a pretty classic diagonal, that is a wedge. The wedge is moreover of approximately the same height as the move in the first nine months of the rebound. This makes for a very symmetric A-B-C pattern forming a B-wave.. It travels fairly precisely to the level of the B in the preceding large down drop (the great recession). What it tells us is that the S&P may be in for a big disappointment soon. As always if this does occur a minimum expectation would be for the index to fall at least halfway down this chart.

We would sell all stocks that do not have a clear positive outlook !

Here is a chart of the S&P, the broadest , and for that reason perhaps the most applicable index to use. Everything else has failed in various degrees by charging straight through the 61.8% retracement level, as we have seen, but the question is does that negate the plausibility of another leg down. No, if you use the S&P. (by the way, the 61.8% is not absolute, just a common occurrence.) In his latest Theorist, B Prechter makes a point of noting that the last 6 months have added 7 points- no wonder nobody, bull or bear is enjoying this market – , but however you slice it, closing, intraday or whatever, we are dead on 61.8%. No good counts are available and I have no idea how you would count the move from the May lows, for that matter I am not even sure that the initial drop into those lows was actually 5-waves (to me in a lot of instances the count works better as an a-b-c. What does often work is symmetry and as it happens the A-B-C as drawn above is perfectly symmetric. If that were to continue we would get another leg down (perhaps more than one) into the vicinity of 350. The whole thing might become a flat, perhaps a little distorted but still a flat. As always, time will tell.