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Why the Market Will Make New Lows

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Techically speaking, we may see a short-lived bounce.

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MINYANVILLE ORIGINAL Friday's light session actually did a bit toward solidifying my doubts that the potential "triangle" was not likely to be a true fourth wave triangle, and as such, I've reversed the preferred and alternate counts of Friday's update to reflect the fact that I feel Friday's alternate is now the more likely interpretation. It's still a bit of a toss-up, though, and the key level to watch remains 1328.49. Below that price point and the triangle stays on the table.


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I also want to briefly discuss another pattern that's been knocking around in my skull for a while. I have always been bothered by the form of the decline that started at the end of March. Readers will recall me mentioning the Russell 2000 (^RUT) in comparison to the S&P 500 (SPY) on numerous occasions and discussing how the RUT didn't quite reconcile as a five-wave decline.

This opened up the possibility of a leading diagonal, and the market action recently has caused me to decide to mention this potential. This pattern shows quite well on RUT. The short-term expectation would be the same in this pattern; a bit more rally, and then a decline to new lows. We'll examine this more closely depending on how things develop in the next few sessions.


Click to enlarge

In conclusion, my expectation is still that the market will make new lows in the near term. What happens over the next few sessions could always cast doubt on that expectation, but at present I see nothing to alter that prognosis. Trade safe.

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No positions in stocks mentioned.
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