As Cobra has said many times before in similar situations: Nothing bearish works. The VIX setup described last week is invalidated. And despite being an overlapping mess, the market continues to make higher highs and higher lows and is now a handful of points away from a new recovery high.
I have been quite wrong in my thinking of how the market was going to play out the past few months.
It boils down to the volatility of the wave since June and the signals on my Daily System. The volatility has been great enough to issue multiple sell signals on the 60-min System. But as soon as one would get issued, the market would stage a terrific rally and invalidate the setup. These sell signals made me think this market was forming a bear flag. The reason I was predisposed to think this was my Daily System. As I was saying back in June, the Daily system issued a sell signal not on normal topping signals but an emergency sell based on the Cycle Signals. But since we were in a Daily Down cycle, I was expecting it to a) last longer and b) make a new low. Based on the stats from my system, those were the clear odds. Neither happened. Just today, we got a new Cycle Buy signal without even getting a normal buy signal. This makes an emergency buy/cover just like the June signal was an emergency sell/short. So we have an abnormally short Daily Down Cycle duration, no normal buy signal, and the worst fakeout my Daily System has ever endured.
Needless to say, I am not happy about this.
But the market doesn't give a shit if I am happy or not. So I just have to accept the fakeout, take my lumps, and move on.
So with the benefit of hindsight, I now believe that while sharp and bordering on severe, the May 2012 correction was not 'significant'. I think it was just a Minor degree wave down in an Intermediate wave up.
I think we make new recovery highs before the next significant correction (yes, Johnny-come-lately, I know, I know) so that we establish divergences on my Daily and Weekly charts below.