Looking at the first chart, we can compare the current wave structure to that of the decline from the 2007 top. In the far left hand box, notice how prices were able to push up in one final surge before resuming the downtrend. Looking at the box on the right, the same fractal is present suggesting that once this countrend rally has completed, the market will trade significantly lower consistent with the longer term trend analysis and wave interpretation.
The second fractal is the ending diagonal pattern. From the 120 minute chart, notice the larger diagonal that terminated at wave 2. Now compare it to it's brethren depicted in the right hand box. Should the market push up as expected to complete wave v of the diagonal, the stage would be set to resume the larger downtrend which is consistent with the weekly chart shown. What is unclear is whether the market has enough umph to close the gap at 1119.75. I have to think that larger market participants are not going to let the market decline before this gap is closed. So near term, that's my target even though a new high is the only requirement to fulfill the completion of the pattern!Finally, there is one other interpretation of the wave structure that I need to bring to your attention. It is possible that a iv wave triangle ( not shown) is forming that would have greater near term upward potential... one that might hunt stops above 1126.75. Should this play out, this would not negate the weekly fractal pattern but it would alter the overall daily wave count from wave 1 (1038.50). In this case, a combination wave 2 (blue) would most likely be in order, follwed by the wave 3 decline.
The early part of next week should tell us the information that we need to position ourselves for the next market turn.
Best of Trading
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