All of the major indexes are clearly in the midst of a counter-trend bounce as evidenced by the choppy overlapping waves off the June 4, 2012 low. Here is a chart of the DJIA showing the advance from the June 4, 2012 low:
The rally off the June 4, 2012 low, identified as Minute wave [ii] of Minor wave C down, is nearing completion. The rally appears to be unfolding as a double zigzag with minuette degree sub-waves (w) and (x) complete and the second zigzag in the process of unfolding. With Minuette wave (y) = 0.618 times the length of Minuette wave (w) in the DJIA, an upside target of 13085 is projected based on the fibonacci relationship between the first and second zigzags within Minute wave [ii]. The rally is also losing momentum as the RSI and MACD are no longer confirming the move higher.
Minute wave [ii] of Minor wave C down is projected to reach completion in early August 2012. A massive waterfall decline, Minute wave [iii] down, will follow and last roughly 3 months. Here is a longer term chart of the DJIA, showing an updated road map for Intermediate wave (W) down (Feb 2011 - June 2013) of Primary wave [X] down (Feb 2011 - June 2016) within Cycle wave x up (2009 - 2021):
First the longer term perspective. Since Minor wave B up (Oct 2011 - May 2012) is almost 1.618 times the length of Minor wave A down (Feb 2011 - Oct 2011), then it is very likely that Minor wave C down (May 2012 - June 2013) will have 2.618 times the length of Minor wave A. This projects a downside target near 8500 for the end of Intermediate wave (W) down in the DJIA. Now we consider Minor wave C down in terms of its smaller sub-waves. Minute wave [i] down has 27% of the projected length of Minor wave C down with most of it retraced by Minute wave [ii] up. With 93% of the distance to the projected downside target of Minor wave C at the end of the second wave yet to be traversed, there is a strong case for Minute wave [iii] down to have 2.618 times the length of Minute wave [i] down, which projects a downside target of 9750 by October 2012.
Minute wave [iii] down should unfold during August, September, and October with the center of the downward impulse occurring around September 19, 2012. The "point of recognition" is important as evidence of the declining part of the business cycle should be abundantly clear by then, resulting in the Federal Reserve making a move to launch QE3 in an effort to prop up the economy and the stock market. After a multi-month sideways period, Minute wave [v] down should last 3 months with the center of the downward impulse occurring around May 20, 2013. The center of Minute wave [v] should be significant as well. Recall that Occupy Wall Street appeared in September 2011 as the fifth wave of the expanded flat (Minor wave A down)) unfolded. The center of Minute wave [v] down is expected to be associated with the advent of "Occupy Wall Street Phase 2" in which a much larger number of people take to the streets than before.
The same type of scenario also applies to broader markets as well, as the chart of the S&P 500 shows with the Intermediate degree expanded flat unfolding in the index:
The target for Minute wave [ii] of Minor wave C down in the S&P 500 is 1405. Minute wave [iii] down is expected to take the S&P 500 down to 1000 with the relationship Minute wave [iii] = 2.618 * Minute wave [i] expected to unfold. The downside target for Intermediate wave (W) down in the S&P 500 is 814, to be reached in June 2013.
The second half of 2012 and the first half of 2013 will go to the bears as the rest of Intermediate wave (W) down unfolds, after which the markets are projected to rally from June 2013 to June 2014. By the end of Intermediate wave (X) up, there should be a consensus that QE3 was successful in propping up the stock market. The upside targets for the end of Intermediate wave (X) is 1100 in the S&P 500 and 11700 in the DJIA. Intermediate wave (Y) will then follow, unfolding as a zigzag, completing Primary wave [X] down in June 2016 with a downside target of 5500 in the DJIA and around 550 in the S&P 500.