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SPX, INDU, TLT: Still 'Just a Correction' Until Proven Otherwise


Further near-term weakness would be the norm -- but unless key support is broken, it's still likely this is simply a correction.

MINYANVILLE ORIGINAL Tuesday saw continued downside -- and as I warned in my last article, bulls indeed "dropped the ball" for the near-term. Currently, it's expected that this is only an extension of the correction from the 1474 pivot high, and that it will ultimately resolve higher over the intermediate term. Bears do have a shot to turn the decline into something more meaningful, but will need to force a decisive breakdown of support to begin shifting intermediate prospects to their favor.

The S&P 500 (INDEXSP:.INX) trendline chart below highlights a pivotal confluence zone, which crosses 1425-1430. The chart should also note 1453 as a bear warning level.

Click to enlarge

It appears reasonably likely that the market will test this zone before this wave is complete. Keep in mind, however, that bears do not particularly want to see overlap with the blue wave (1) low (see chart below) in the near term, since this would imply a potential for new swing highs more directly.

We can count a clear five-wave decline, which means the decline has already completed the minimum expectations for a (c ) wave, and as such isn't required to head lower. Lower would be more "normal" though, so on the chart below, I've positioned the (3), (4), and (c ) labels to reflect the roughly-expected path of a typical (c ) wave. A choppy sideways/up mess is the usual for wave (4), which could start quite soon.

Click to enlarge
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