I have lost confidence in the impulsive option (From the February 29 top) that I posted on May 20.
We have to respect the statement that the daily momentum indicators are suggesting since we have a 2 months old positive divergence on both the RSI and the MACD.
A positive divergence usually occurs when price is involved in a bottoming process.
We don´t have any buy signal yet but the Stochastic is extremely oversold.
From the EW context without going into too many details I have always considered that structure of the down leg from the May 2011 top is not impulsive, for this reason I have been assuming that price is unfolding either a Double Zig Zag or a Zig Zag.
The issue to be solved in both options is that the final wave (C) has to be impulsive or it has to unfold an Ending Diagonal. In my opinion, if price is involved in tracing a wave (C) the internal structure looks more corrective than impulsive.
Below I show 2 potential Ending Diagonal projects for the Zig Zag and the Double Zig Zag options. The final target for both projects could be located in the area of 1.2000
The main difference is that if price is shaping the larger Ending Diagonal (Zig Zag option) then price has to overlap above 1.2622 for the assumed wave (IV), while in the case of the smaller Ending Diagonal (Double Zig Zag option) the pending wave (IV) rebound will be shallower.
Regarding the location within the long term EWP (From the 2008 top), the potential bottom could be either the second wave (A) of the Double Zig Zag option or the wave (D) of the Triangle option. (I posted both scenarios on June 25)
Clearly a catalyst will be needed in order to expect a "major" bottom; probably the FED and BCE will have to act.
1. Zig Zag Option:
2. Double Zig Zag Option: