The S+P since moved right up to the 61.8 fib. This could still be EWI's 4th of 1 but it has now become such a big wave that I think it is more likely a B wave or even wave 2 up. The implication is that I am looking for a much more powerful wave down than the EWI model would suggest.
Of course, if this really is wave 2 up then it could rally even higher to form a deep vee 2nd. But so far this does not appear to have that kind of energy and so I am currently not looking for that to happen.
As for immediate next step, the herd has to decide if it will fill the gap marked by the red parallel lines or whether it will fool market watchers by not filling it before reversing downward. This is a critical moment for the markets in general and so we have to watch the nature of the next retracement to understand the mind of the herd on this. Do we gently and calmly move back down to blue 4 in 3 waves? If, beware all shorts. Likewise, do we get a stronger 3 wave move down that terminates at the level of the prior 4th around 1990? If so, take profits, shorts. But my primary view is that we have a lot more to fall here as many big name stocks are still very near their 52 wk highs. The rapidity of the crash and subsequent bounce has not resulted in any real change in market sentiment. AMZN, a very overpriced ticker, remains near 52 week highs after a quick dip. Defense stocks are very new 52 week highs as well. All of this is happening as the actual economic numbers pointed to by Mish get worse each week. At some point that is going to matter. Until then, drive for show and putt for dough. Don't get too affixed on longer term models because even the mightiest of rivers has been known to change course. Also, don't lose focus on the M+M. It is generally a better bet to be long a bottoming chart than to be short a topping one.
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