or some time now, I have been observing bearish “cracks” appearing within the stock markets. The speed of the market’s drop, during the month of August, came as no surprise to me.

The bear market rally ended last week, after it had a 50% retracement of its initial decline. By Friday, September 4th, 2015, the index was trying to hold on, so as to support that which was created by a critical short- term trend line that had already been violated. The DJIA weekly chart gives a good argument by expressing the view that a bear market may already have begun.

The signs should be very obvious. The prolonged uptrend that ended in a large congestion pattern, and which was followed by a sharp decline, which sliced through three important moving averages (30 week moving average, 90-week moving average and 120-week moving average), simultaneously, violated a 6-year trend line. The momentum indicators are also in a steep downtrend with no apparent sign of deceleration or divergence.

I believe that we should be prepared for an imminent resumption of the decline. Cycles are not due to bottom out until the end of this month, as I have further elaborated in this analysis.

After a long period of distribution selling, which capped a 6-year uptrend, the stock market has entered a corrective phase, which, at a minimum, should result in a significant decline. If the total amount of BEARISHNESS, which has been stored up during the distribution process, is released, it will manifest itself as a lengthy downtrend and reach a price level which is most likely inconceivable to most investors.

We are currently in wave 5 down on the Dow. Then, although wave 5 may not exceed the wave 3 low, due to the fact that they were quite steep (the wave 3 lows), there is a possibility that wave 5 may be truncated. After the wave 5 down is completed, and there is a corrective bounce, to the upside, I expect much lower prices, as explained further, in this analysis. Therefore, we shall remain on the sidelines and hold our current positions, for now.