Wednesday’s Rally Is Kaput? – 06/22/11 © ™

The rally over the last few days peaked and began another decline.  This is inline with yesterday when I said a 5th step down is necessary for a perfect wave count.  In the first chart it seems that we have completed step 1 down and are in a steeper step 2.  The expectation is that we are in a bottoming process and this step should end in the neighborhood of the 4th step bottom.

Occasionally I will refer to the SP 500 futures, which is exactly like the SP 500 index only it trades 24 hours per day.  Because it trades constantly there are no large gaps up or down.  The regular SP index often has large gaps with the opening trades of the day.  The futures have a smoother looking chart and usually have more accurate wave counts.

In the second chart there are purple lines that make up the decline since May 2.  Also shown are two paths the market may take.  One is down ending at the 5th step termination.  The other is a trend breaking rally shown with green lines.

CLICK ON CHART TO ENLARGE

06-22-11, SP 500 FUTURES, 10 MIN BARS, SINCE JUNE 16, WAVE COUNT & FAN

06-22-11, NASDAQ COMPOSITE, 20 MIN BARS, SINCE MAY 2, TREND LINES & COUNT

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