Critical Error in my Long Term Outlook

I must admit I am a little embarrassed. I made a critical error in my long term outlook. As you may have known I have been reading a book on EW theory. Anyway I got to the section regarding corrective periods like we are currently in. The critcal idea is that market corrections of ALL magnitudes contain three wave structures. So the expected wave pattern for the current bear rally is a THREE wave NOT FIVE wave structure. This will significantly lower my IT target from over 1000SPX to most likely under 1000SPX.

In the short term nothing is changed. I am still expecting the second wave of this rally (which is now called B and not 2) to retrace to 750 or lower. The change is now the next wave up will be the end of the bear rally. Corrections are very difficult to play and to predict with much confidence where they will end. This C wave up could go higher than the top of the A wave, or it could not reach that high. It should take a five wave structure though which will help tremendously in setting a target for the top. The problem is we will not have much warning for this. We'll have to set the targets as the wave C moves up.

If I had to guess, which of course I will, I would say that the C wave traces to at least the top of A (currently is about 845). It will probably go beyond A to the 900-950 area.

Corrections in general can be messy complicated structures that tend to stay in a trading range. The reason for this is that these periods are when most investors take profits. Once the profits have all been taken then the larger trend (down in this case) can continue. They can take much more time to complete than impulsive waves. I have referenced the period between December and early February as an example.

I expect this correction to last throughout the earnings period. This is the rest of April. I also expect prices to remain mostly in the 800-850 area. I may take a more active trading approach during this period going long near 800 and short near 850. I will use trading stops as a safety net to avoid becoming trapped in a position. I probably won't make much money doing this, but I'll probably learn alot and use this period to become acquainted with my new broker.