The inability to turn higher from around 795-814 on the S&P now makes our short-term wave count of October 4th look clearly incorrect. Many subscribers questioned how we had labeled a B wave down to have 5 waves in the first place. We did so believing that while corrective A-B-C periods are typically marked by many overlapping non-impulsive a-b-c sub-structures, an impulsive-looking 5-wave minor degree count could still exist within any sub-wave -- i.e. as the structure of an "a-wave down" within a larger a-b-c structure within B down.

But alas, at this point, we are ready to sit down and shut up. Even Tuesday's attempt to create an "outside reversal up" has been quickly rebuffed in early Wednesday trading. Fundamentally, rumors swirl that Commerzbank is experiencing liquidity problems and has had its trading lines cut back by other banking institutions, and most assuredly many insurance and pension portfolios are coming under extreme duress with growing real losses that in most instances are not immediately marked to market. This must be scaring the hell out of the treasurers of these companies -- particularly in the current era where overtly working to hide losses is no longer acceptable business practice.

Only a potential rate cut by the ECB on Thursday appears as a last potential fundamental savior on the immediate horizon. If that event comes and goes without any changes, we will be ready for the worst and will more closely embrace the recent views of Bob Prechter who has been calling for more of a collapse into late October.

Could the chart below show a better count than what we had before?

Chart constructed using Advanced GET End-of-Day

Please do not be surprised if we go a bit quiet here for a few days. Once proven wrong on a count, we feel "cold as ice" and see no compunction to further inflict potentially confusing advice on our clients. We advised in the first place that the current situation was a tough call. It remains that way.