Dow dropped 166 points on Friday for a 1.4% drop, the biggest since mid-November, 2010. Since it managed to stay above the lower support line, it still can continue to zig-zag upwards moving within the uptrend channel as shown below.
However, in the next few days if Dow drops below the lower short-term trend-line as shown below, it will definitely mark the end of sub-wave 5.
But to confirm that it is also the end of wave (3), Dow must go below the longer term support line as shown below. Failure to break the 11,700 level will lead to a nine waves formation for wave (3). Under this scenario Dow can go to 12,500 within the next two to three months to complete the wave (3).
However if Dow can proceed to break the next resistance line and drop below the top of sub-wave 3 of 11,500 then it is of high probability that the major wave B has ended and major wave C has started, the target, at this moment, I put it at 5,000 by mid 2012.
Some of my friends said, " Why are you so pessimistic? "
Why? Looking at the two historical charts (1900 to 2010) below, unless my wave counts as shown below are wrong, whether Dow is heading for mega wave 6 as shown,
OR Dow is forming its super cycle wave (IV), the first stop is likely to be around 5,000.
So, be careful if Dow goes below 11,780, follow by 11,700 and finally 11,500.
Gong Xi Fa Cai
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