We experienced the biggest opening week drop of a New Year in stock market history for the Dow Jones and S&P500.
This past week was good, but Ah, I’m kicking myself for not holding onto the puts from yesterday. Instead of yesterday’s close as the 5th wave –it was actually a b-wave low of the 4th wave–which I should’ve guessed since it was only marginally lower than the 3rd wave — which is not typical of a 5th wave.
What we experienced was a 4th wave A-B-C flat — just like what we experienced earlier with a 2nd wave A-B-C flat — though slightly different look.
5th waves are tricky to guess how they go. It did not look like what I expected today. I have to be open to the possibility of a 5th wave extension that goes beyond traditional expectations.
From a microperspective, it looks like Sunday night could go just a little bit more down towards 1905 from 1913 here. We should be targeting the A-wave lows from last August 2015 — but I don’t think we will get there in the next few days. I’m expecting some kind of bounce that retests the 1950-1980 region. The drop that follows after that, perhaps end of January – may be the one that gets to 1850 — not this one, at least my best guess based on the pattern formation. Or it’s possible we go straight to 1850 from here. Will have to look at clues in the coming days to get a better sense.
The Russell looks like it will target the October 2014 lows of 1100. So a slight bounce in coming days, followed by a drop towards 1100 is what I would expect.
If Nasdaq retests the 4480 again, I will likely be reshorting the Russell at that point.