As the equity market continues to slip-slide south, our expectation of a surprise rally by mid-March to 972 on the S&P 500 appears to slowly be turning to mush. It is thus time perhaps to re-examine the charts and search for other potential Fibonacci fractal rhythms. Unfortunately, within a range-oriented market as we have been within since early October, there tend to be multiple Fibonacci rhythms that potentially "fit."

One such potential "fit" depicted on the hourly chart of the March S&P futures is shown above. In this chart we see a clearly impulsive move down in late Septemnber to early October, but hardly anything showing a clean 5-wave impulsive move since. Even the violent October rally that left two gaps on this regular trading session chart is almost impossible to divide into 5-waves. Instead, we continue to see a huge A-B-C corrective period.

But aren't we still missing at least a minor C-Wave up, before a spill to new lows eventually transpires?

How about this for a scenario, as proposed to us by a smart colleague yesterday: March 3rd represents the next New Moon. On that date, under the cover of darkness, the U.S. does something bold and well received. Maybe it's a surprise attack on Osama bin Laden's hidden lair that serves Osama up on a platter. Maybe its a surgical strike on Saddam. Whatever it is, the market has cause to temporarily celebrate. A sharp S&P pop toward 901 transpires.

But early rejoicing soon turns into a longer quagmire of problems. If Osama finally gets taken out, perhaps a pandora's box of Arabic revolts ensue. Temporary euphoria turns once again to disappointment.

For now, the market has come back to the upper edge of the gap it left back on October 10th. If it fully fills this gap, maybe 801.70 is the next level of support to watch. It is possible of course that this chart just develops straight away into a "waterfall" decline, but if that were to be the case, we'd have expected to see some impulsive 5-waves subdivisions of market structure already. We have not. Thus, we can only advise that March 17-18 may not be a sucker high all the way up at 972 as first expected, but maybe just a reaction C-wave high to complete the corrective mess left since late fall.

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