After reviewing the charts, I have come to the conclusion that we may be seeing a Leading Diagonal Wave (1) in the SPX and other major indexes. Note that both Waves 1 and 3 fit the [a]-[b]-[c] pattern better than an impulse because of overlap in Wave 1 and the Triangle [b] in Wave 3. We have already seen Waves [a] and [b] in Wave 5 with a large Wave [c] decline to go.

It would be a fair assumption that the Wave 5 decline may take 30 hours, of which 25 have already passed. If [c] equals [a], then the SPX has another 90 point decline ahead of it to approximately 1858.00. It may go lower, but time is being compressed for Intermediate Wave (1). The most bearish outcome is that it may exceed 1820.66.

Why am I fixated on today? Because today is the 86th anniversary of the peak in the 1929 market. Could the SPX go longer and lower? Yes. We will simply have to be alert to today’s activity and adjust accordingly. The next possible cyclical interval for a low would be 43 hours, which would point to Tuesday at mid-day. Should we have a liquidity event (please read the comments next to USB), the likelihood of reaching the Diamond formation target rises exponentially.

Last night the Nikkei managed a small gain to 18182.39. It appears that the Nikkei is following the SPX lead, so we may not see Leading Diagonal Wave 5 until tomorrow or Monday.

The Shanghai is on holiday for the next two days, so we definitely won’t see the culmination of Wave 5 until Monday, at the earliest.

STOXX rose last night to 3236.30, possibly completing its Wave [b] of Wave 5 retracement. It also may not complete its decline until Monday.

Another piece of the puzzle is USB. I have relabeled the EW structure to better fit the probable ongoing circumstances. It appears that there may be another purge of USB by this weekend. The reason is that USB is due for its Master Cycle low next Tuesday. This would be a liquidity event, since it would take out a lot of cash from our financial system.

TNX opened down this morning, but it seems to be in a consolidation phase. It appears that the rally to 22.07 may be Wave [a], while Wave [b] may decline to mid-Cycle support at 21.16 or lower. However, Wave [c] has the potential of reaching its upper trendline at 24.00 before its most destructive decline yet.

Regards,

Tony

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