Last night Dow punched through the low of 8419 (23/12/08) and smashed my hypothesis of a major ABCDE 5 years sideway consolidation partially. Judging from Major Asian Bourses to the Dow (Hang Seng -4.36%, Singapore -3.1%, Nikkei -3.98%, Taiwan -3.89%, Soul -4.54%), there must be a lot of technicians looking at the figure of 8419 support.

So, what's now? Look at the charts from Yahoo, I have added in some alphabets and numbers. After the peak (P) in October 07, the first major wave down (Wave A) can take the form of either 3 or 5 waves. It appears now that the probability of 5 waves formation is higher. Look at the second chart (Dow 30 days), the height 9034 one week ago is not my subwave 1 of (iii), the height is (iii) and it has completed the wave 4 rebound. If we are indeed in Wave A with 5 waves formation, we must be in Wave 5 of A now. As wave 5 of A has 5 subwaves (i), (ii), (iii), (iv) and (v), we are now in (i) of 5, if tonight we can have a rebound to form (ii) of 5, this Wave 5 may not be so damaging, it may stop at the Wave 3 low of 7552 to form a double bottom (Wave A). However if wave (ii) of 5 never come until Dow reaches near 7552, it is going to be very damaging, Dow may be heading for 5,000.

But, thing can not be so straight forward right? If so, everybody will be selling with no buyer. There are transactions mean there are buyers. Look at the third and fourth charts, Major Wave A ended at 7552 on November 2008 still can not be ruled out, it is still possible that Dow is in Major Wave B. Refer to Chart 4, from the low of 7552, we can count wave (i) as a diagonal 5 triangle, which is very rare. Diagonal Triangle usually occurs in wave 5 or wave B. With this count, the one week ago 9034 peak becomes a small b as shown, Dow can be in wave c as shown, then the expanding a-b-c wave (ii) correction is about to finish. Hopefully the Dow's direction can be confirmed within the next 2 to 3 days.