A C-D follow-through with a pitch as steep as yesterday’s impulsive plunge seems unlikely, given the buy-the-dips mentality that has kept stocks buoyant for the last four years. However, since the cause of the weakness so far is almost surely something bigger than Italy’s election, as the newsmongers would have us believe, we shouldn’t expect the usual snap-back rally. We’ll know more about the mood of sellers when we’ve seen how this vehicle interacts with the p midpoint support of the next down-leg (see chart). An easy breach of the support would suggest the correction is waxing rather than waning.
