Today's action likely completed wave A of (B) up. We should see a brief pullback in wave B down and then wave C up. The entire process may last the rest of the week. Thereafter, wave (C) down should follow. The alternate view is that the current move is a 4th wave and wave 5 of (A) down will follow. Either way, more downside is expected by late this week or early next week.
The ideal time to add short positions will be near the conclusion of wave C up. For the Qs this may be as high as the 50dema currently at 44.57. If so, then wave (C) would project to 40.56 to 38.08. Both of these levels are near the levels projected by the January range. We will have to see how far this countertrend rally carries before revising the projections.
Oil keeps bouncing off of its 200dema. This is generally quite bullish. As long as the December low is not violated significantly, the trend in oil will remain up, even if it is a slow one. I suspect that once the stock market correction is over, oil will make a big move.
The XHB is showing relative strength. This is another reason to believe that the current downmove in stocks is just a correction and not the beginning of a new leg down in the bear market. At the same time the XHB appears to be forming a large B wave triangle which tells us that after wave C up is complete, the bear market will resume, in the XHB at least.
Semiconductor stocks look ripe for another wave down once the current countertrend rally is over.
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