The market behaved as expected today; there was a rally then a pullback that appears to still be underway. The overall structure can still be interpreted in many ways so some alternatives are shown. Note that the marked wave [i] was almost fully retraced. If 1039.47 is exceeded, primary wave [2] is not yet complete and there was no wave [i] down. Dan suggests an ending diagonal that may be playing out if the rally continues. A new high was set on the NASDAQ today but some work is left before a new high is seen on the Dow 30.
From the high today, an impulsive wave down followed by a zigzag is apparent. The impulse was retraced by a large margin, 78.6%, but prices did slide in an impulsive fashion near the close. 4th waves typically do not retrace heavily so it appears wave iii or c is underway to complete the next leg down. Furthermore the market is getting overbought as the MACD divergence on a 15 minute chart after 9/3/09 shows.
It is possible the market has traced out two upward impulse waves implying a 3rd of a 3rd gap up tomorrow, but considering the overall structure since the peak today, this is not as likely. An expanding flat starting around 11:45 today and ending at today's sell-off low may have formed, but this is a stretch. It would set up for a rally tomorrow but are no nice Fibonacci relationships in that flat's waves and it is out of proportion.
Expect some sort of sell-off to continue with at least a zigzag down that may end tomorrow.
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