The market seems to have completed an ABC move of a W4. So my expectation if for a W5 to start tomorrow or Monday that will take us above the 1290 level. Many EW counters are calling for the final W5 of the rally and given all the technical indicators, it does seem like the end of the rally is coming soon. However, as long as the markets keeps closing above the level (I need to come up with a name for this), the expectation is higher highs. I covered my short again today at 1283 to position trade it since it seems to be that we'll get to 1290 at the very least if not 1300. And I am keeping my long position intact.
I wonder what will be the catalyst for the next sell off will be. As of now it seems like the European debt problem might be a good excuse but it could also be lackluster earnings or concerns about the job market. Whatever it is, sentiment should dive as there have been too many buyers (too much optimism) for too long at this point.
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