We’ve been expecting this correction in the markets for some time and we had also noted that it would most probably be a lower degree one as the entire move is not over yet. In the following chart you will see both wave counts that are dominating. The decline from January highs at 1530 has unfolded in 3 waves until now. This is either the entire correction (although we wanted 1470-80) or the start of an move lower.
The entire move from 1350 is still inside the upward sloping black channel and the recent correction from 1530 has touched the lower trendline of the channel. This could very well be a wave 4 complete. This implies that a wave 5 should be expected with targets for the end of the move towards the all time highs or even higher. For this wave count to be invalidated wave 4 should first break below the channel and overlap wave 1. Secondly it should break the middle high point at 1525 and the downward sloping line connecting 1530-1525 highs. Resistance is strong at 1525 and prices could reverse downwards. Important test zone for bulls will be the current low at 1485. Selling near resistance is favored, because even if the bullish scenario is the correct one to follow, prices will most probably return to 1500-1505 as part of wave 2 of 5(black).
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