Not a market to get comfortable in

There is near universal agreement that the sharp rally from the marginal new low has been breathtaking. And that it marks the beginning of a correction. The first phase down of the bear market is over. 

Many are convinced that they expect this phase to retrace 50% or 62% of the first phase of the bear market - drawing parallels with the first phase of the declines in 2000 and in 2008. 

Elliott Wave Counts are rarely decisive - except in retrospect. In times of market volatility such as now it is common for us to latch on to one count and trade with a bias. 

This short squeeze has caught many flat-footed. Doubtless, several were convinced that we were breaking decisively below the summer range. A volatile 1100-1230 range has been in force since I called for an end to the summer panic here in August.  

Back then I had labelled the August low as a wave (ii). I would now move wave (ii) to the marginal low at 1075 as below.

Do I really think we just saw a wave (ii) low? Maybe. I know of hardly anyone who expects a major bull market to unfold right now. That in itself is a strong contrarian argument in its favour. We could be climbing the proverbial wall of worry in a powerful wave 3. It may sound unbelievable, but it is possible. In fact I can count a bull market at least 3 different ways from here. The question is not whether it will happen, rather if the market keeps rallying, are you prepared?

So am I ruling out a continuation of the bear market? Of course not.

To most people the B wave began on October 4th. Yes, I agree. It most likely did. 

But it could have begun on crash low on August 9th. Or on August 22nd with a truncated minor wave 'v'. In either case of the two cases we could now be almost done with (c) of B. That means a devastating C wave is just around the corner, ready to surprise those hoping to play a  multi-week countertrend rally. If the market suddenly turns on a dime and craters here, are you prepared?

Or maybe the wave that completed on October 4th was W, and not A. That means we are in a short, sharp X wave that threatens to end anytime now. How many people mentally expect a languid multi-week rebound of the sorts we saw in December 2000 and March 2008? Are you mentally prepared for a Y wave to unfold here?

Let us be clear - this market does NOT have a favoured Elliott Wave count right now. All above possibilities are still on the table. A sharp reversal breaking below 1075 means a multi-week wave B or wave 2 is not likely. Breaking below 1000 will negate the bullish wave 3 count. Let the market decide. Be prepared. 

Arvind

PS: I urge you to read a really good post on the similarities with previous bear market rallies here.