US Market - 2% drop on Tuesday

Dow, Nasdaq and S&P dropped about 2% to 2.4% at the close of Tuesday trading session. In my previous post I was expecting the sub-waves to continue with vii, viii and ix as shown below.

However, with such a sharp drop due mainly to the downgrading of Greece's debts to junk status and Portugal's debt from A-Plus to A-minus by Standard & Poor. The concern is whether these two countries will default their debts, that will affect all the other countries that hold their bonds.

The question now is whether this sharp drop marks the end of major wave (V) or wave 1 of (V) as shown below. What has happened to my sub-wave vii, viii, and ix.

S&P chart gives a clearer wave count. Since after the so called sub-wave vi, there are only 3 mini waves up as shown below, these 3 mini waves cannot be vii, as vii should have 5 mini waves. 3 waves up follows by a sharp drop can only be wave B. So the so called sub-wave vi is actually wave A followed by 3 mini wave that formed B and the sharp down is part of the wave C of wave 2 a s shown below. An expanding A-B-C. As mentioned previously wave 2 pullback is expected to be about 3%, that should bring Dow to around 10,860, another 130 points to go.

However I wouldn't be surprised if the wave 2 ends around this level because my earlier 3% correction was based on the assumption of a zigzag A-B-C for wave 2 instead of the current expanding A-B-C.

At this stage it is too early to say that major wave (V) has ended, the magnitude and technical indicator have yet to confirm that. I prefer to assume that the Dow is currently at wave 2 of major wave (V) until further wave development has proved otherwise.