Dow - The magnitude of the current pullback

Dow dropped 2.2% on Friday to close the week at 12,118. For the long-term option as shown below, assuming Dow is forming a mega wave 7.

It is likely that Dow has completed its major wave 1 of mega wave 7.  Since Dow has dropped below 12231 level, the top of sub-wave (i), the current pullback cannot be sub-wave (iv) that I have assumed previously as sub-wave (i) and (iv) cannot overlap, the only logical count is a wedge formation wave v with a failure sub-wave (v) as shown.

If major wave 2 has started, low low can it goes? If it goes for a simple and sharp zigzag A-B-C formation,the maximum drop can be a 100% retracement to 6547 level. 

Another option is as shown below, the 2007 October peak is the end of super cycle wave (III), The 2009 March's low of 6547 is the major wave A and the run-up since the low is the major wave B.

Since major wave B cannot have 5 waves, under this scenario, the current pullback can be wave vi and should be able to stay above the lower trend line (11200 level) and proceed to complete major wave B with the wave vii, the last surge, before the major C starts.

Summary :  The current pullback at best it will stop at 11,200 level to complete the wave vi under Option 2. The worst Dow can have is a 100% retracement to 6547 level under Option 1.

One has to bear in mind that there are other options beside the two that I have mentioned.

For European bourses, Asian bourses and CRB (commodities in general), the downtrend continues.



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