The market reached the 1316 target I mentioned yesterday and found resistance at the 1321 level, which is the 50% retrace of the 5 waves down. And I think this W2 or B wave is now complete (it could go as high as 1343 of course before getting invalidated) and the next wave will give us an idea of whether this is a correction within the larger uptrend or the end of the uptrend. If this is a C wave, the market will find bottom around 1280. However, if this is a W3 wave, I'd expect it to end up near the 1227 support level when all 5 waves are done. It is obviously too early too tell but as long as the market does not close above the Trend Average or establish any uptrend channels outside the downtrend, there is a good chance we are witnessing a correction of a higher degree. Last week I pointed out chaos in the Middle East as a catalyst for a sell of early this week and I was right on it. Today, this risk has essentially escalated so the excuse for a much larger correction is right in front of us. And it's interesting when I see headlines claiming things are not that bad given we're only down 2% from the highs or that the "worst is over", etc. Obviously, these people don't understand how waves develop. The first sell off is never the one that puts people in panic, it is the one after the counter rally that does. I re-shorted my position covered at 1316 on Tuesday at 1317 today.
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