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It shows that price is the final arbiter, and the markets do not owe us anything, i.e., they do not have to reach ideal target zones, such a big miss is uncommon and troubling for this potential wave count.
Besides, back in February we were humble enough to recognize that, while
“We prefer to have a Bullish perspective until proven otherwise [, … which is a] break below …. $21008 for starters, but ultimately, the January 13 low at $20538 remains the Bull-Bear line in the sand. If the market decides to move below these levels, our preferred EW count switches to our alternative, which has the more significant red W-iv become protracted and target $19930-20300 before the red W-v starts. But as stated, that’s our alternative, our insurance, in case we are wrong.”
As such, the index is likely completing an irregular expanded flat in EWP terms: W>c>b>a. The ideal target is the 61.80% extension of red W-i, measured from red W-ii, at $19940, which the index is getting close to today, and coincidentally coincides with the black dotted parallel lower trendline. If the index can hold that level, especially the 50% Fib-extension at $19646, we can look forward to ideally the (red) 161.80% Fib-extension at $22434.
Why So Serious?
Lastly, sentiment has become highly bearish even though the index reached an all-time high just two weeks ago and has, so far, only lost 10% top-to-bottom. See Figure 2 below. This week’s AAII’s bearish sentiment remains unusually and historically high, which over its entire 38-year history, only happened during significant bear markets (1990, 2008, 2022).
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