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The Fall Bearish Scenario

Posted on the 18 September 2014 by Souljester @souljester618
This is a follow up to my post today about the next level of interest. Level of Interest. Today, all the stops laid out in that post held easily and the bullish move off the cycle low continued.

The DOW held particularly well and locked in an end to the correction by putting in a higher low above all previous lows. This likely locks in the uptrend. Now, the question becomes is this a 5th and terminal wave off the recent August low? This would be the count and today and the prior level of interest would both be likely top candidates for a 5th wave (5=1) depending upon how one counted the first wave up off the low. Here is the DOW chart:
The Fall Bearish Scenario
Today we put in a new closing high on the DOW and also hit the first 5=1 potential top. I am continuing to use price action and track this as bullish until the market tells me it is not bullish. The Bearish setup would occur if we had no follow through and closed below today's candle low. Until that happens, the market has not reversed and I continue to assume that the wave 5 (if that is what it is) is continuing to unfold.  IF the market does close below today's low, I believe that will mark both the end of the wave up off the August low, and also the longer term wave up as described in today's earlier post. Level of Interest. I need to see price action reverse, or a hit on the fib confluence. I am not going to guess that this is a wave 5 completion today. I will wait for the market to say.

The reason price action has to be respected is these wave patterns can fail, no US index has broken down (Belgium and the DAX have), so this could still be very bullish and continue to run absent a break of support.  When this completes, I have the next significant cycle low on November 25-27, 2014. Under the bearish scenario the market would conservatively be trading at least as low as 1900 by that cycle low date. Conservatively.  Until the market reverses, there is no need to think the market has been reversed. However, I wanted to lay out this scenario ahead of time in the event the market breaks bearish at these levels in the next few trading days. If we do top here, it would be bearish from my cycle analysis standpoint, which significantly increases the likelihood of the 125 SMA on the daily SPX chart breaking. If that breaks, as I have mentioned, then we can likely call an end to the entire move up off the 2012 lows.  There is always a bear path and a bull path. We cannot know which path our future will choose. As always, do your own due diligence, read the disclaimer, and make your own investment decisions. Peace, Om, SoulJester

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