In John Murphy’s book, Technical Analysis of the Financial Markets [an easy read, btw] we see some rules that may still govern the larger players’ decsions.

One of these has to do with three weekly closes above some key point. For example, the fall from HUI 519 to 196; what is that as a percentage of the rise from 35? Let’s look. Let’s keep in mind that a normal bull market retracement can be as much as 62% of the rise. Such a retracement of a rise from 35 to 519 would be expected if we thought that the 519 top was the end of wave ONE.

519 - 35 = 484; the rise was 484 points

519 - 196 = 333; the retracement was 333 points

333/484 = 0.688 ; thus a 68.8% retracement.

If the top was 401, and that which followed was an ABC correction, then we could calculate the possible future bottom by using 401.

401 - 35 = 366; the rise was 366 points

401 - 196 = 205; the retracement was 205 points

205/366 = 0.560; thus a 56.0% retracement. A 62% retracement would bring the HUI to about 153.

As students of the market we wait, study and watch.