The markets are currently set up in a very precarious state. While we have now dropped to the level of the 4th wave of one lesser degree,which is a common target for a larger degree 4th wave, we do not have indications that the market has yet bottomed. In fact, we may be setting up an extended 5 wave move to the downside if the market cannot move over the 1345ES level at this time. Our lower targets still remain the 1328ES level, and then down to the 1318ES level, and as low as the 1306ES level.
While we see positive divergences set up in many of the risk asset charts at this time, along with negative divergences on the dollar chart at this time, the market has to prove to us it wants to rally, or it will extend its downside pressure to one of the above cited levels.
While we still do not have confirmation of a top being in for 2012, we are getting closer and closer the deeper we move. Again, we must see a rally over the 1345ES and then the 1352ES levels to make me feel more comfortable about another high to be seen for 2012.