It is an important week for stocks. A Bear Market officially begins when a 20% or greater correction takes place. The line in the sand becomes the S&P 1096 or the DOW 10320.
As far as Elliott Wave theory goes, third waves are recognition waves. They are found at locations when people start believing differently about their current situation. I think it is very possible that "recognition" shows up this week. The theory points to a situation when sentiment immediately changes. In markets, it usually occurs over night and is blamed on some global issue. The "real money" trades futures all night. When a six sigma event (or Black Swan) shows up, all high frequency traders hit a no bid situation. The futures are driven down all night, and the panic spreads at the market open. They are found at large gaps in the market that usually arent filled for very extended periods of time.
European and Asian markets have officially entered their Bear Markets. Monday or Tuesday could be our catch up morning. The dollar looks like it is about to surge. If we breach the lines in the sand, I would expect a flight out of securities and into the dollar and treasuries. Imagine a strong US dollar? Without a strong dollar there is significant problems with our treasury and bond sales, which means are borrowing/debt game is over. Our Federal Reserve mistakingly continues to keep interest rates artificially low.
Look for these locations to be breached. If so, they are a DOW theory SELL signal.
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