What if today's rally (which could potentially creep closer to the 1991 high) completes 5 waves up from SPX 1904 with the 10% correction imminent? I say that for 2 main reasons.
1. I don't think anybody, bull or bear, is calling for it that quickly.
2. The wave structure can be counted that way.
a. Even if you count 1904-->1945-->1928-->1964-->1942 as a 1-2-1-2, we have since then had a couple wave 3-like gap ups separated by some mini consolidations. Sure, the consolidations were only about 5pts, but time-wise they actually exceeded the other pullbacks by far and wave 4s are often more shallow than wave 2s and wave 4s/5s have been getting progressively smaller as this bear market has aged.
b. Some people don't count wave overlap on an intraday basis under certain circumstances. Tony Caldaro has done that on occasion but I don't know his criteria and he is using his own EW variant. If you ignore the slight overlap of 1945/1942, you can count a very obvious wave 2 and 4. The sudden reaction to the Ukraine destroying Russian vehicles could explain it.
c. Nasdaq had no overlap.
d. Russell 2000 not only overlapped but most obviously formed a series of corrective consolidation waves and has not approached its all-time high while meeting 20dSMA resistance. So, tech and small caps certainly open up the possibility for an ending count today-ish.
Having said that, I can't throw out the reasons favoring a rally into Labor Day or further, but I have learned over the years that Mr. Market likes to surprise people even if it ultimately gets to the destination that the majority expect. That could mean the end of the bull market today-ish or it could mean a large wave 4 flat before the final all-time high or I could just be smokin' something. With the end of QE3 now only 2 months away, some Fed minutes/speeches this week, low volume and an historically weak period for the next couple months, one can argue it's a great setup for THE top. If SPX continues rallying into September, it almost seems like too many people will not only jump on the bearish bandwagon but anticipate it thereby muting its impact. What would probably be most confusing to market participants would be a slight failure to reach 1991 followed by holding above key support for a few more days before collapsing hard and fast. Food for thought. Obviously, I am second-guessing making any more long trades on pullbacks for the time being due to the growing risk. Good fortune.
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