There is quite a good chance that a medium to longer term top is in!
Just take a look at the DJIA. It turned just 5 points below the 2011 high. So for an elliott wave 2 up it has to stay below the 2011 high and that is what i am looking for.
In addition to that the VIX just bounced of its lower trendline of the wedge it formed since August 2011. A move above its upper wedge-trendline would indicate a further sell off in my opinion!
Especially the risk reward on such a trade is compelling if you think this move up since October is an elliott wave 2 or b. At least the October lows should be tested in this case and therefore the stop of approximately 50 points for a 2,400 point move is tremendous. If this the correct scenario is another question but at least worth considering.
The German DAX is underperforming since summer 2011, so in general not a great sign in the bigger picture. In a bearish scenario the 7,000 mark should provide resistance. On the other hand I do not see an adequate stop for a bullish trade, at least none with a nice risk reward ratio.
All in all I think the chances on the short side are much better at the moment, but I am not calling a bigger bear market (yet)! In addition I would rethink this bearish scenario if the DJIA could get above 12,876.
