Stocks Still Struggle to Mount Rally; Euro Completed 5 Waves Down from High

The S&P has completed a 3 wave rally to a new high, and has so far only completed 3 waves down from that high.  Volume and intensity on the decline are a bit tepid so I'm still concluding that this current weakness is just a correction of a larger bull move higher.  That could change though with some sustained sharp declines with increasing volume and bearish internals.  But right now, the market is in a temporary downtrend that doesn't appear over quite yet. 

The best guess here is that the market is unfolding in a "flat correction", which is derived from the 3 wave rally to a new high.  According to EWP, this type of behavior lends itself to flat corrections.  So that means a 5 wave decline for wave C within that flat correction is underway now.  So the market should hit, and perhaps slightly exceed, the 1250 level before bottoming.  The action surrounding 1250 will be important to the bigger picture.  A sharp reversal and rally near that level will make it probable a bottom is in and that the market is on its way to new highs on the year.  But if the market accelerates the downtrend and drops significantly through 1250, it may mean a bigger decline is underway than expected.  So I'm watching the action around 1250 closely.

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The evidence of a major euro top is strong.  Normally when I say that though, I'm proven wrong shortly afterward.  But the evidence speaks for itself.  Momentum diverged on the final push to a new high, then a head and shoulders pattern formed, followed by a 5 wave impulsive decline.  So the evidence is strong a major euro top is in, and any sharp rally that occurs I'd see as an opportunity to get short, or add to existing short positions.

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.