The lack of follow through of the selloff from Monday puts the immediate bearish scenario in jeopardy obviously. It's possible the final downward correction is over in wave B (of Y) and now wave C of Y is now underway to finish off wave 2. A break of the S&P futures 1016 level will bring this bullish scenario to the forefront. But if 1016 is broken, most likely it means that the final rallly leg in wave 2 is underway, and the market will reverse sharply in wave 3 down to new lows for the year.
High risk assets are already lagging behind, which usually happens at major market tops. Silver formed a head and shoulders pattern and is declining 5 waves and no where near new highs like the US indices are, the euro is in the same position as silver as it is having trouble rallying with the US stock indices, and probably most importantly the Chinese index is selling off sharply almost making it into bear market territory in a very short period of time. This risk aversion to risky assets occurs at market tops, not at the beginning of bull markets. The US indices may rally higher taking the S&P cash into the 1100 area (my target has always been 1067) but I expect many assets to lag and not make those highs such as silver, the euro, the Chinese and numerous global indices.
If the market barrels through 1016 in the S&P futures tomorrow, it most likely means wave 3 is coming very soon, like within a couple weeks!
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