Distribution is back in the Dow

The market is once again displaying some signs of internal weakness, and I think we are nearing the end of this bear-market rally. If my analysis is correct, we should see a new trend low under 7449. I last posted about the overall market here and here.

You can see my wave count on the daily chart above. I believe we are in Wave4, which is either half-way or fully complete. I am favoring the "complete" bias because there have been 5 distribution days in the past month. I've posted multiple times about distribution days, and in most instances, the distribution led to new lows.

Another factor is that Wave2 was an ellongated sideways (11% retracement) correction that lasted 9 weeks, while this Wave4 rally has been fast and sharp (21% retracement), lasting 4 weeks. This is a normal alternation of corrective waves, so it makes sense that Wave4 spans a much shorter period.

However, the market will always do the opposite of what most people think, and I'm seeing some similar analyses on the web. Because of this, I would not be surprised if we drop a bit, and then rally to a marginal new Wave4 high before starting Wave5 in earnest.


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