SPX, TRAN, INDU: Downside Targets Captured -- What Next?

Last update expected lower prices (likely after a fourth wave bounce), and the downside target zone was easily captured and exceeded during Tuesday's furious decline.

We're now into territory where the wave counts become open to a great deal of interpretation, and with nothing in the way of a basing pattern yet, it's difficult to map out the market's exact next move.  The preferred count has kept us on the right side of the trade for several weeks, and netted us roughly 50 points in SPX profits for the decline (to date) -- and sometimes it's tough to ask for much more than that.  The SPX chart below thus shows a few different options.  By all rights, the bear counts still look more probable than the bull counts.

Bigger picture, the expanded flat B-wave count that we followed throughout January is still alive and well, and for reference, I've annotated it on the chart below.  I stopped discussing this count primarily for ease of communication, because B-waves that make new highs (R.N. Elliott referred to these as "irregular tops") can get quite confusing.  Thus I made the command decision to quit talking about it, and instead focused on the other reasons I suspected we were topping.

 
For INDU, instead of updating and reprinting Monday's chart, I drew up a new one, to get a slightly different and fresh look at things:

In TRAN, we now seem to have confirmation that its rally was a corrective wave.  There are two obvious ways this can fit into the picture, both of which have been previously discussed in this index:

In conclusion, there's nothing in the pattern yet to indicate a significant bottom -- especially since we closed on the lows -- but there is potential for wave (3) to complete at any time.  At the same time, third wave declines can run farther than expected, as evidenced yesterday.  Thus, when the wave counts get into territory like this, sometimes it's best to pay careful attention to the trend lines and support/resistance, and not do too much front-running in either direction.   When we begin to see some small impulsive rallies, that will begin to more strongly suggest basing patterns and potential upside bounce targets.  Trade safe.