There was a gap lower which preceded sell-off that lasted into the middle of the day. A choppy rebounded followed.
The two best options at this time are a single zigzag lower that is nearly complete (the count shown above) which is the 4th wave of a larger bull market, or a series of impulse waves lower that are preceding a more pronounced downward move following a significant top. The latter is preferred and is now the primary count.
It was shown in Friday's update that the completing wave [iv] option is preferred. The added simplicity to this count today (a single rather than a double zigzag) makes it a more solid option, but the corrective-looking rally today alone makes the count questionable. An ending diagonal wave v of (c) of [iv] is the best way to keep the count alive, but it is not clear if this will actually play out. Ending diagonal waves are not common patterns and the futures are down about 30 points as this update is being written.
As an additional point, the entire move lower since 3/3 is quite choppy which is a characteristic of a move within a corrective wave, but initial moves within new trends often have the same characteristic.
A move under 1276 tomorrow morning will essentially invalidate the ending diagonal idea. An extended 5th wave will be the next best completing wave [iv] count if this happens, but any noticeable move under the channel in the chart above will put considerable odds against a bullish count. Given the current futures action, a bearish gap lower tomorrow seems likely.
In the longer term, a complete top as described above has been preferred for many weeks. That is a complete zigzag since 8/31/10 which should have concluded the entire rally since March 2009, or at least the move since summer 2010.
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