SPX Update: Still a Mixed Bag

This is a tricky market.  Most indicators I watch rolled bearish a while back, but are now on the cusp of rolling back to bullish -- yet they're not quite there yet.  At times like this, I can often find the answer, or at least a good hint, in the wave counts.  But right now, we're stuck in the middle of a wave that's vague at multiple degrees of trend.  Which means: I'm not certain what type of waveform to anticipate next.  As an example of what I'm talking about: the impulsive decline off the all-time-high, during the third week of May, suggested we should expect at least one more similar wave.  Sometimes things are clear that way.

But other times the pattern is vague -- and still other times it's downright indecipherable.  In my opinion, these are the times where it can be dangerous for a technician to overstep his or her bounds.  With any type of analysis, it's easy to let subjectivity creep in and pollute your work.  And all of us are sometimes prone to "seeing what we want to see."  

I try to be as honest as I can when I feel things are uncertain.  One has to remember that the market will always "be here tomorrow" -- but if one loses one's capital chasing long-shots and random speculation, there will be no way to take advantage of the good opportunities which will most certainly arise again in the future.

The reality is, the rally has extended into territory where things become fuzzy again, and there is no clear-cut answer right now.  The market is well within its rights to do just about whatever it wants from here without violating any of the technical rules of the wave structure.  I believe anyone who's stating that "a long term top is definitely in place" or that an intermediate low is "definitely" in place is stating that from conviction and bias, not from the technical perspective.  Technically, either could be true.  

So I think we have to keep an open mind to both the bullish and the bearish potentials right now.  In this update, I'll try to outline some signals to watch going forward.

Let's start off with a ratio chart which helps illustrate the bull/bear conundrum.  The chart below is a ratio of HDGE to the S&P 500 (SPX).  HDGE is an actively managed short fund ETF, so it's popular as a "risk off" trade.  A falling ratio is thus bullish for stocks, while a rising ratio is bearish.  For example, we can see how near the 2012 peak, this ratio broke out of a falling wedge pattern, thus signalling a correction in equities.  The current market has similar falling wedge potential, but the ratio broke out just enough to leave everything vague.  We can see the breakout stopped right where it needed to if the falling wedge pattern is a fake.  The chart notes explain what to watch.

Next, one of the indicators I watch is an exponential moving average trend system developed by Gerald Appel (who also developed the ubiquitous MACD indicator).  This system remains on a sell signal, but is often a bit late to the party.  We probably have to give bears the edge on this one, but it's a very slight edge, because the moving averages are presently turning back up.  Bears will need to put together some down days fairly soon to keep this indicator on a sell signal.

On a long-term level, SPX is trading back above the breakout of long-term resistance.  One of the key concepts in technical analysis is observing whether prior resistance becomes support, and vice-versa.  The first test has held so far -- so unless the market reverses back through support, we have to respect this breakout.  We probably have to give this one to the bulls as long as 1560 support holds.

Is Liquidity Drying Up for World Markets?

There's an interesting fundamental change that's been taking shape in the financial landscape recently.  In the U.S., QE-Infinity is still flowing strong, despite talk of tapering.  The Bank of Japan is also still fueling the liquidity picture.  However, there are some other major players working at cross-currents to the Fed and BoJ's liquidity.

Many investors are probably convinced that the recent market shake-up was simply the result of Bernanke's talk of "tapering" the QE program -- after all, that's what the media largely reported.  But the reality runs far deeper than that, and is an order of magnitude more serious.  For better or for worse, the U.S. financial system no longer exists in a vacuum, and world markets have reached the point where virtually everything is interconnected.  And what's going on overseas is starting to shake things up here.

The world's four largest central banks are: (of course, our very own, let's have a big Las Vegas welcome for) the Federal Reserve, the European Central Bank (ECB), the Bank of Japan (BoJ), and the People's Bank of China (PBoC).  The first three (Fed, ECB, and BoJ), as well as the BoE (Bank of England), are all deeply intertwined in the sense of liquidity, since they all deal with the same institutions and dealers, if not always directly, then through counterparty.  In fact, fourteen of the Fed's twenty-one primary dealers are located in other countries, with only seven being US-based.  It's become one great big happy Universal Liquidity Pool party, and the actions of one nation's central bank no longer simply impact that particular nation. 

The PBoC isn't fully integrated into the world financial machine yet, but their actions still impact the world financial system because many of the institutions they service are big players on the world stage.  So while they're not quite swimming in this pool and playing "Marco Polo" with Bernanke, the way Western central banks are, they're still very much a presence at the pool party.

And they're not following the script. 

While Bernanke keeps dumping fresh water into the pool, and the BoJ is doing the same, the PBoC has tightened policy and aims to force institutions to deleverage, thereby draining the pool.  And while the Fed and ECB bail/bailed out every bank they can get their hands on, the PBoC has decided it's had enough.  This means the institutions it services are faced with trillions in bad debt, which requires them to sell whatever liquid assets they can in order to raise cash.  Much of these liquid assets are in the form of U.S. Treasuries, equities, precious metals, etc..  

Many have speculated, myself included, that the final endgame to the massive bubble unwind would be forced liquidation, and it seems we're now beginning to see some cracks appearing in the foundation.  The problem in a massively leveraged financial system, such as ours, is that when enough selling occurs and drives down prices, that action creates margin calls for other leveraged players, which then requires them to sell assets as well.  This creates more margin calls for still other players, which then requires more selling -- etc. ad infinitum.  It can snowball and feed on itself rapidly, ultimately becoming an unruly beast which consumes everything in its path, not unlike John Goodman.

A week ago, the PBoC flat out refused to do reverse repos, thus stopping the flow of cash.  Traders and institutions in China panicked, and we saw the results of that action almost immediately, as forced deleveraging hit the marketplace and spread to US stocks and treasuries.  Below is quoted from a piece published by Reuters on June 19:

 

  "The central bank appears to be determined to force banks and other financial institutions, such as funds, brokerages and asset managers, to de-leverage," said a trader at a major Chinese state-owned bank in Shanghai. "That hardline stance suits the recent government policy of clamping down on non-essential businesses by financial institutions, such as shadow banking, wealth management, trust
operations and even arbitrage."

Panic prevails in some parts of the money markets, in particular among some small financial institutions, which have conducted lots of leverage businesses, traders said.

According to some reports, the PBoC later relented somewhat and began providing targeted liquidity.  Markets stabilized. 

Compounding the liquidity situation is what's going in Europe.  When the ECB gave out loans via LTRO, it also forced loans on institutions which didn't need or want those loans.  The theory was that forcing everyone to take LTRO loans created a "cover up" so that no one could figure out which banks were in truly bad shape, and which banks were just in bad shape.  Many of those institutions put a portion of the LTRO money into US Treasuries, which drove yields to record lows in the summer of 2012. 

While LTRO was a three-year loan plan, it provided an option for banks to repay those loans after a year, and many of the banks who didn't originally want those loans are now paying them back -- by selling the Treasuries they purchased a year ago.  And as that carry trade unwinds, the Treasury market is coming under pressure. 

Below is a chart of the 30 year bond, which looks to be in bad shape:

The LTRO situation is deflationary, since that money is now being pulled away the market and vanishing back into the ether from whence it came.  And of course, falling treasury prices also have the potential to create further margin calls and leveraging issues. 

Precious metals are continuing to come under pressure as well -- in fact, in the overnight Comex session last night, gold reached the upper edge of my long-standing target from April 17 (1080-1180).  This may also lead to further forced liquidations.

So now we have a situation where the Fed and BoJ are furiously pumping liquidity, and the PBoC and ECB (as well as the BoE) are effectively draining it.  The machine is complicated and there are a lot of moving parts these days, and the impact is global.  As the old saying goes:  This is not your father's market.

Unless the ECB and PBoC loosen up again, the easy money bull leg is almost certainly over.  What's always amazing to me is how this move was (yet again) telegraphed by the charts in advance, and it became instantly apparent that there was some type of trouble on the horizon.  I'm still not certain if the entire bull market is over, though.  I've been long-term bullish since the first trading day of the year, but recently I've moved the odds of a long-term top up to 50%, and I'm now equally split on the idea of one more leg up, or the top being in.  Given the indicator readings at the peak, we'd normally expect to see another leg up.  But both the long-term charts and the current decline are fuzzy enough to allow either option.  That question is simply going to have to be worked out heading forward.

On the hourly chart, I'm inclined to believe that the current rally either peaked in yesterday's session, or will do so after a marginal new high.  I also believe the market will feel obligated to test the noted rising trend line, which currently crosses the 1565-70 zone (and rising). 

The hourly trend line chart may help provide clues.  It would seem a shame for the market to have come this far without filling the gap in the mid 1620's.

SPX Update: An Ambiguous Market

The market has moved into something of a no-man's-land for the moment. Because there’s ambiguity at multiple degrees of trend, it becomes extremely challenging to interpret exactly what the market's next move is -- and there isn't much in the way of key levels to tell us what's coming next.

The S&P 500 (SPX) has reclaimed 1598, which really isn't what the bears wanted to see.  The fact that it failed to act as any kind of resistance this time around indicates sellers may be exhausted, and bears need to reclaim it directly.  Next resistance is 1608 +/-.  Above that, and probably the next key informational level is the rising intermediate uptrend line.  If bears can't mount a defense there, they may be in trouble; but first things first. 

There's a really off-the-wall wave count which has us forming the bottom of wave C (or iii) at the recent 1560 low.  So as we examine the potentials, keep in mind that it's entirely possible that wave iv is over and the market will rally to new highs directly.  I'm not favoring that view, however, for reasons I'll cover in a moment.

Strangely, the index which has kept me from becoming super-bearish previously is now the same index that suggests to me that there's more selling ahead.  The Philadelphia Bank Index (BKX) appears to be forming an expanded flat, which is one of the potential patterns I've noted over the past few updates.  An expanded flat is a waveform that's brutal on traders, because it whipsaws buyers out at the bottom, then whipsaws sellers out at the top.  I've suspected this waveform for a while, because the decline lacked any clear structure or acceleration, but there was no way to really verify it.  As I have it labeled, the expanded flat could even exceed 62 before reversing.  I'm uncertain if it will do so (though I suspect it will) and BKX is in the potential topping zone now. 

If this pattern is correct, then the decline should resume fairly soon.  Of course, the bullish possibility is that the decline to this point was a double zigzag correction, which has found a bottom at 58.73.  Above 62.92, and the market is cleared to rally toward the mid-65's.  I think the pattern fits better as an expanded flat, but I've been wrong before.

On June 24, I noted that the Dow Jones Industrials was approaching a support zone, and it found support after a near-perfect tag of the noted trend line.  Bears are going to need to break that support level to get anything going.

There are two main potentials I'm watching on SPX, and the one I'm favoring is a bit unorthodox.  In fact, I suspect most Elliotticians would take issue with my preferred wave count, but then they often do.  Nevertheless, the count I'm favoring is that wave iii or C has bottomed with a massive fifth wave extension -- which also opens up the possibility that there is no fourth wave up and fifth wave down coming, and wave C of red iv may be complete.  It all depends on whether the market is going to form an impulsive decline or not, and since we have no downward impulse waves on the chart at this degree yet, we genuinely can't know which outcome to expect. 

Based on my read of BKX, I think there's probably another wave down still in store for SPX.  What would be most interesting here is if we see another fifth wave extension -- but this time for blue v.  That would place the target well below my blue box -- but I simply can't predict that in advance.  If my BKX count is correct, then it's a good possibility, since BKX would need to move considerably to "get 'er done."  Of course, there's no law that says my BKX count is correct at all -- so I have to at least stay open to the option that all of wave C is complete and the bottom of wave iv may be in place, especially given the fake-out breakdown of the red base channel.  That's often what you see at the end of a C-wave.

One Technical Argument for a Long-Term Top in Equities

In this article, as promised, I'm going to talk about the potential that 1687 was a long-term top.  Over the past few months, I've occasionally alluded to the fact that I was tracking the current rally as a potential extended fifth wave.  In layman's terms, extended fifth waves are generally called "blow-off tops."  I've felt a number of markets have shown the characteristics of such a wave. 

On and off for several months, I've toyed around with extended fifth wave counts for the S&P 500 (SPX), though I haven't published any of them, since I didn't feel they were near completion previously -- and thus a moot point.  In this update, we're going to look at the long-term wave count for SPX which details an extended fifth.

One thing I've always enjoyed about Elliott Wave Theory is the psychological component which underpins each wave.  Extended fifth waves serve a purpose in mass sentiment, and they function to pull the last of the disbelievers into a move -- just before reversing.  When extended fifths reverse, they often do so quite dramatically, and this serves to trap unwary traders on the wrong side of the trade, which gives the subsequent decline steam.  Extended fifths can be extremely difficult to spot in real-time, because they don't die off slowly, the way a normal rally does.  They die at near-peak readings, which lulls bulls into a complacent sense that there's still more upside left, due to the momentum of the move. 

The current rally fits these characteristics, though it also fits the characteristics of a third wave, which would in fact have more upside left -- and this is what makes it so difficult to sort out the two options.  Let's discuss some of the merits of this count.

The chart below shows that SPX actually counts quite well as a fifth wave extension.  I haven't seen this wave count anywhere else (though that really isn't saying much, since I generally entirely avoid looking at other people's technical work.  I find I do my best work "in a vacuum" so to speak, and other people's work tends to bias me).

This count has several features which I find quite appealing, and which actually fit the structure better than most of the wave counts for SPX (including my own long-term count); we'll discuss the appeal in a moment.  First the chart:

(Note the typo: "blue v" should read "red v.")

Here's what I like about the extended fifth wave count:

1.  The October rally in 2011 was almost certainly a three-wave rally.  Every Elliottician on the planet knew it at the time, and we all expected it was a corrective wave.  After the October peak was exceeded, we all scratched our heads and tried to figure out where we went wrong.  The count shown above explains this quite well:  We didn't go wrong in counting that wave; it was indeed three waves.  We went wrong in not realizing it was part of a triangle.  (I actually hypothesized this via NYA back in late 2011, but the expectations of that count got a bit fuzzy as the rally continued, and I eventually put it on the back burner).

2.  The same is true of the rally in the middle of 2012.  Also note how well this count explains the rest of the move throughout that same time frame.  This is the only count I've ever seen that fits that entire wave this well.

3.  This count eliminates the need for endlessly nested first and second waves at the beginning of the move, because all the waves are sub-waves of the extended fifth, and thus there is no technical issue created from the price overlap at the beginning of the structure.

4.  This makes the rally from 2009 a simple, common ABC rally, without reaching into extremely rare triple zigzags and such.  Personally, I don't feel the triple zigzag counts fit very well anyway, since, in my opinion, the waves are too disproportionate to each other.

5.  The RSI readings are perfect for the count.  In fact, RSI fits this count better than it fits any other count I've developed or seen.  Peak RSI during the third wave, second highest during (3) of v, third highest during the blow-off fifth.

Given the signs we're seeing in the credit markets, bonds, et al; and the strength of the sell-off so far, I'm going to give the extended fifth wave even long-term odds with the fourth wave corrective count I've previously detailed -- for the time being.  The market of course reserves the right to cause me to adjust these odds going forward (it's foolish not to adjust to the market's future input).

For the near-term, the count below details the least bearish potential.  The wave may be considerably more bearish than shown, but I'm still not seeing the strength of the sell-off echoed in certain key markets, which is making me hesitant about the mega-bear counts.  Play it safe for the time being though, because there is definite waterfall potential here.

One market which has continued to refuse to commit to the bear case is the Philadelphia Bank Index (BKX).  BKX finally broke key support yesterday, but it did nothing afterwards.  This leaves a few possibilities, and I've detailed one bullish option, as well as the more bearish option, on the chart below.  Both options suggest lower prices still to come, but the ending diagonal is a bear trap.

In conclusion, the decline has been playing out strongly, and that necessitates consideration that things may be more long-term bearish than I originally anticipated.  BKX is still hesitating to commit, however, and we'll simply have to see how this plays out over the next few sessions to begin connecting the long-term dots more decisively.  Trade safe.

How Bearish Should We Get?

The market's job is to get you looking the wrong way, and to try to get you to do the exact wrong thing at the exact wrong time.  It wants you to short when you should go long, and it wants you to go long when you should be shorting.  Back in November, I began leaning bullish, but hesitated to commit to a long-term bull outlook until January, when I became exceptionally bullish -- probability the most intermediate bullish I've ever been publicly.  My updates were all about the rally continuing to new highs -- and the signs of strength I was seeing.  Nobody read the darn things. 

I started trying to throw in some bearish stuff so as not to lose readers completely, since most everyone thought I was nuts talking about the S&P 500 rocketing upwards in a "nested third wave rally" to the 1500's and 1600's, and possibly even the 1700's. "What are ya, stupid?  The world is a mess, dontchaknow."  Believe me, I know.  I've been fundamentally bearish for years.  But I don't trade my fundamental bias -- my fundamental bias underpins my understanding, but it doesn't help me time the market.

Near the end of May, after the SPX had rallied more than 200 points from January's prices, the mass psychology has reversed.  Everyone "knew" it was stupid to ever take on a short position, just like everyone "knew" it was stupid to go long back in January.  I assume most thought I was nuts when, on May 28, I suggested it might be Time to Sell the Bounce.  I myself thought I might be nuts (and I said as much), especially after the SPX had reversed directly in the middle of May's target zone of 1680-1690.  Unlike most people who become more confident after a string of good calls, I become more cautious and start challenging my assumptions all the more rigorously. 

I take this approach because the market will eventually rip your face off if you start assuming you are way smarter than it is.  I learned that the hard way -- in fact, I'm not ashamed to admit that a bit more than a decade ago, I all but completely wiped out my trading account by going "max leverage short" at exactly the wrong time, after a string of good calls.  I started thinking I had it all figured out, and decided (since I could do no wrong!) that it was time to knock one out of the park with a massive put options trade.  When the trade started going against me, I stubbornly held to my previous views in the face of evidence to the contrary... and I clung to the trade until it was too late.  It was an incredibly painful experience.  This taught me that we always have to see both sides of the trade -- at least, if we want to survive.

This is why I offer my preferred interpretation, but also try to see the other possibilities and provide levels which hopefully act as waypoints to indicate when the market is breaking from my projections and onto one of the alternate routes.  I probably tend to caveat too much sometimes, but I feel this is a better approach than the alternative.  People who've read me for a while eventually learn my language and grasp where I feel we're headed through all my "but watch out for this and that" warnings.  I don't present alternate counts so that the outlook is "always right" -- in my mind when an alternate plays out over the preferred count, then that means I assigned my probabilities wrong -- I present alternate counts so readers can adjust on the fly and protect themselves where appropriate. 

A few times over the past couple months, I've talked in brief about the fact that the recent rally has shown some of the characteristics of an extended fifth wave.  I haven't focused on that option however, because up until May 23, the larger wave structure had (in my opinion) remained pointed upwards for the most part.  Sometimes it's hard to sort out the options too far in advance, which is one reason I'm a firm believer in staying nimble, and recognizing when the environment may be changing.  For reasons discussed above, getting married to a long-term outlook can be an account killer.  Everyone can see how the "let's marry our convictions" approach has killed the bears this year, as many kept shorting all the way up, convinced that the rally was "just about to end!"

In tomorrow's article, I'll talk a little bit about extended fifth waves, since they can be big money-makers for traders and we may be unraveling one now. 

One approach I take is to build a thesis in stages.  I look at the near-term, and try to determine what's likely, then I project that out to the intermediate-term.  From there, I envision how the charts will look if both projections play out, and I begin building a long-term thesis.  Sometimes I can see how things will play directionally to a point, but there's an inflection zone at that point and I can't see in advance how the market will react to it.  The high 1590's marked one such zone.  Other times, the market begins to form patterns which suggest that the move will be stronger or weaker than I originally projected, and I have to adjust on the fly to what I'm seeing.  This is what's happening now, which is one of the reasons I wrote, on May 23 (See:  The End of the Road for Bulls, or Just a Healthy Correction?):

In conclusion, the long term presently remains pointed higher, but that may be irrelevant at the moment. We can't see around every bend in the market, but most times we don't need to: The near term appears to be pointed downwards, and the intermediate term, while too early to confirm, also looks likely for further downside. This is not a bad time to behave defensively.

Let's start off with the near-term and build from there.  I completed this chart after the close on Friday and posted it in the forums, and the futures action this morning has left both options still on the table.

The biggest question in my mind is whether we're seeing the smaller wave (2) of the larger black (3) (on the hourly chart) or if this is a fourth wave correction with wave (5) of black (3) underway.  I'm leaning toward the latter.
 

With that thesis in mind, here's the hourly chart.  Not shown on this chart is what happens if the more bearish count is underway.

If the rally we just witnessed was actually blue wave (2) of black (3), then the next black (3) target zone is 1470-1480, with a final target in the low 1400's.  I'm holding off judgment until I see how some other markets begin to shape up, specifically the Philadelphia Bank Index (BKX) and the Russell 2000 (RUT).  I'll firm up my opinion on the above matter over the next few sessions.

Be aware that markets often become very whippy around important levels, and the intermediate uptrend line on the chart below is one such level.  That trend line has held every decline since November, so the market may not be ready to let it go so easily, and may return to test it before moving much lower -- not shown on the chart below is what happens if wave (5) simply makes a marginal new low and then retraces 38-62% of the prior decline, perhaps to back-test the aforementioned trend line. 

The long-term chart of the Dow Jones (INDU) shows support in the 14,400-14,600 zone.  If the market is unraveling the most bearish count imaginable (the deeply nested third wave discussed above), then forget about support.  There's just no way to know for certain yet -- as I said, I want to see how some other markets react to the pattern in the next session or two.

SPX Update: A Dangerous Market for Dip Buyers

The market finally broke the 1598 low, which I've been slightly favoring would be the intermediate outcome for this wave.  In fact, while the last wave felt very whippy, it appears I had the preferred count dead right all along.  Below is the "best guess" market path I published on June 12, and this is one of the reasons I love Elliott Wave theory.  When properly applied, there is simply no other system that matches it. 

We can see on the current chart that the market couldn't have followed this projection much better than it did.  Now we hold our collective breath and see if T3 is reached.  Again, please keep in mind that if this count is correct at intermediate degree, this is a nested third wave decline.  Third waves can be tricky, because the smaller waves are usually compressed, which means bounces should be muted.  

During third waves, I usually stay short (or long) until I start seeing impulsive moves to the upside (or downside) -- I've found that otherwise I often cover way too soon and the market runs away from me.  Draw your trend lines and use those as guides.   Keep in mind that the idea of a third wave decline is to punish the dip buyers. It punishes them by not letting them out and not giving them any bounces to allow them to get back to even on. It will keep punishing them until they stop and go curl up in a corner... or until they decide to go short -- then it bounces.  This doesn't mean bears should get complacent, and there is an alternate count which could find a bottom directly -- but I wouldn't suggest front running anything during a third wave.  Until there are signs of a turn, this is a dangerous market for dip buying.

If my preferred intermediate wave count continues to track, we now have to give a bit more credence to the idea that 1687 may mark a long-term top.  I last published the count shown below back in May, and I'm still considering it a marginal underdog -- however, if the current decline continues to play out as expected, then this more bearish count may gain additional traction.  The long-term expectations for this wave count would be new lows beneath the 2009 low.

New Lows on Deck?

Yesterday, Bernanke let the market know that good news is bad, as continued economic improvement would mean the Fed is likely to start tapering asset purchases later this year, and could end purchases entirely by the middle of next year.  This is exactly what the equities market did not want to hear, since without the Fed's inflationary money printing, the actual cash value of the S&P 500 (SPX) is approximately twelve dollars and fifty-eight cents.

The dollar, on the other hand, was quite excited by this news, and rallied straight up in a rocket launch.

Interestingly, I suspect this scare will be the push needed to drive equities to the lower low I've felt the charts were suggesting was more likely to mark the wave iv bottom.  I think this press conference will embolden bears to step out of their caves for a bit, but the bottom line with Bullnanke's statements is that the QE money will still be flowing (for the time being), and that means continued liquidity for equities. 

Greed is a powerful emotion though, and I think it's more likely that the dip will still be bought, as there is yet no definite end in sight for the QE program.  There are hints it "may" end "if and when" the economy improves.  Of course, anything's possible, and maybe just the thought of QE ending will cause a rush for the exit, since no one wants to be the last one holding the bag.  But in my opinion, the charts still suggest the final long-term high isn't in yet.

But they do suggest that the much anticipated wave (2) high is.  I've seen a lot of confusion over how to label the recent rally, and I believe it represents another extended fifth wave, with a compressed (iv) and (v).  (When you trade Forex as much as I do, you learn to look for and recognize extended fifths.)

This wave looks like a textbook expanded flat with an ending diagonal c-wave in NQ (Nasdaq Futures).  In fact, in the private forums, I alerted everyone to this likelihood all the way back on Thursday, with the following statement:  "I think the new Globex lows in NQ in particular mark our ticket for a VERY high probability short after the market completely retraces the prior decline. Should make a marginal new high and then reverse to new lows."

The hourly chart continues to track well: