A little over a week ago I issued a warning to the bears because there were signs in place a bullish reversal was in the works. With several trading days printed since then, we can see what I was talking about more clearly. You can see that the downtrend from the high on the year was not impulsive looking, so we had to look to another method of determining the trend and short/long term outlooks of that trend. The best I could come up with without the help of EWP, was looking at the set of lower swing highs and lower swing lows defining the trend. And that's what we've had. But since the reversal took place a week or so ago, you can see that the market failed to make a new low, and then made a new high recently. This spells out even more danger for the bears right now since this is the first solid sign that at least the short term downtrend has broken.
Since we don't have an impulsive decline yet, and so far there's only a choppy 3 waves down from the high on the year, this recent development in swing highs/lows makes bearish positions very risky here. A break above 1311.80 would solidify the entire decline from the highs on the year was a 3 wave move, which is corrective, and that new highs were right around the corner. Staying below 1311.80 keeps the bears hopes alive, but it would take a new low to rejuvenate the bears' chances and create what could be interpreted as an impulsive decline.
How to Set Protective Stops Using the Wave Principle
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