Dow gave up 96 points on Tuesday and moved into wave 2 which is expected to last a few more days unless Dow can put on more than 120 points at the close today. Anything more than 120 points, say 140 or 150 points will practically mean the wave 2 is very short and has come and gone and wave 3 has started. This coming wave 3 is expected to be more dynamic and with a higher volume of at least 8 to 10 billions.
Wave 2's drop is expected to be about 5% to 6%, that will bring Dow to a low of 8900 before the starting of wave 3. However, if Dow started to move lower and goes beyond 6%, the possibility that wave B has ended as shown below will have to be taken seriously. Looking at the current world economy, this option looks unlikely at this moment.
Looking at the 5-year chart above, it is hard to think of a reason for Dow to go below March's low of 6457.
For wave B to complete within the next two months and the Dow to move lower as shown above, there has to be a new form of crisis taking place. Hard to imagine at this moment.
From the Wall Street, there are more and more people believe that March's low marks the end of the 2007/2008 bear market and it is the beginning of a new bull cycle.
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