The bearish C wave I had been expecting is finally here and although the market came close today at testing the 1217 level in the cash market (the market is testing in afterhours), I think what we saw today was W1 so I think this wave should exhaust afterhours and bounce on a W2 to test the TA currently at 1252, which should fail and resume the bearish trend in an equally strong W3 to test 1200. So ultimately, I think the waves look like it has the potential to end in the upper 1100's area. This is assuming we get the W2 bounce tomorrow, if not then this wave an carry the market lower. I cover some shorts today and went long on China's FXI to play the bounce. I think after the 5 waves are completed we will have an end of the year rally, so I will be loading up when that bottom comes.
The market used Italy as the excuse for the sell off today (as I speculated in the past), as if Italy's problem wasn't apparent in the last month or so. But once the situation becomes "resolved" and we rally, we'll be dealing with Spain and Portugal. It doesn't take a rocket scientist to see what's going on.
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