Yesterday was no longer a sloppy, low volume pullback. The S&P fell as much as 26 points before bouncing into the close. A/Ds were -3.8:1 at their worst, and the 50dma was pierced. So yes, caution was advised.
It could have been worse, however. The market closed above the 50dma with A/Ds at -2.43:1. There is bounce potential up to 1878-1880 for starters. Higher is possible, but caution is still advised, simply because the wave structure looks incomplete. Additional subdivisions could take it still lower.
The Nikkei was down hard again overnight but closed at the top of its range. Europe is mixed, but trying to bounce. Much is the same here with S&P futures still bravely hovering above yesterday's lows.
It's the 10-year note (TYM14) that looks like it may have higher prices in store after a pause, thus lower yields. Thus additional pressure on equities.
Sticking with the wedge scenario, a larger bounce could be expected before another sharp decline possibly below 1850 before a final three-wave rally to new all-time highs.
A shallow bounce would be cause for immediate concern. However, it could mean a few more subdivisions down to 1850 before an even larger bounce. The point is that this scenario projects a larger bounce soon.
A decline below 1814.36 would immediately negate this scenario.
Overall, the backdrop is still conducive to a major top. Uber Said to Be in Funding Talks for More Than $10B Value.
In my opinion, no matter how cool it is, Uber is a potential regulatory nightmare. At a value of $10B, it would also equal AirBnB's valuation, which is another regulatory mess. These companies are targets for thousands of unions both here and abroad, as well as near-broke state and local governments, possibly even the Federal government too, which could regulate them out of existence, just by making the process of using them to be a major pain in the ass.
The Bloomberg article above also noted that "at more than $10 billion, Uber would exceed the valuations of technology companies including Red Hat Inc. and Akamai Technologies Inc., as well as retailers Best Buy Co. and Staples Inc."
This is classic late-cycle stuff. And there is no mention of revenues in the article, only how much the company has raised.
Caution is still advised.