U.K. FTSE and German DAX reveal signatures of a corrective decline. If the correlation between U.S. and European benchmark indexes continues, odds favor the recent market gyration being a correction of a similar degree to the November 2010 pullback.
At the same time, given the heightened geopolitical and the associated economic risks, it is prudent to keep an eye on the potential for a larger correction or the end of the hope rally.
Likely a short-lived correction ...
Odds appear to favor the recent stock market gyration being another minor or minute degree correction of the hope rally, based on
 the wave structure of U.K. FTSE and German DAX - both have traced out a "clear" zigzag over the initial decline from their nominal highs (Chart 1 and Chart 2)- and the likely continued correlation between $SPX and these European benchmark indexes.
 the fact that rising crude oil prices have been a key driver of and outlet for investor sentiment recently, and that Europe is close to the oil shock as reflected by the record level of Brent/WTI spread and the pronounced spike in Brent crude prices.
 the stock-market-bullish potential that WTI crude prices could retrace back towards $100 or below in the near future based on its wave count (Chart 3).
Chart 4 shows the sideways consolidation in the FTSE 100 index year to date and the potential wave count. In terms of the wave structure, the sideways consolidation is likely a triangle or a complex double three, nearing completion .
 If benchmark U.S. stock indexes mirror the structure of U.K. FTSE, from a wave labeling perspective, the current correction potentially could have started in mid-January instead of mid-February (Chart 5 and Chart 6).
In this case, the correction likely should end early next week, with perhaps one more small-degree decline to complete.
 Alternatively, since the recent high is as a good starting point of the correction as the mid-January point, the correction is either over at the March 2nd low (Chart 7, blue) or have one more decline to go (Chart 7, red).
 In terms of wave labeling, this pullback is either minute wave [iv] of minor wave 3 (blue count, more eventual upside potential) OR minor wave 4 (green count, less eventual upside potential). Where wave (B) ends determines whether wave [iv] or wave 4 is in progress, as discussed in detail in Decision Point (2/25/11).
 Furthermore, since wave [iii] or 3 is shorter than wave [i] or 1, the next leg of advance (wave [v] or 5) is capped by the magnitude of wave [iii] or 3.
 If both FTSE and SPX are tracing out some kind of triangle, don't be surprised to learn a newsworthy event - likely lybia resolution, relief of the perceived oil supply stress, etc - in the near future that triggers the next leg of advance. Why? Because the final leg of a triangle has a tendency to be accompanied by notable news event.
... but don't discount the bearish possibility (that the top is in)
With the presence of a logical ending point to the hope rally based on wave structures and the arrival of the first Fibonacci time turning point (see Bull market, B-wave and Beyond (2/18/11) ), its prudent to keep track of the bearish possibility (or the alternative count) that a major top (if not the top) is in (Chart 8). Furthermore, there's no guarantee that SPX should be in sync with European benchmark indexes.
In this case, expect at least a multi-month pullback if not worse.
The bearish count is straightforward. The recent nominal high is the top - P or [W] of x or x itself. The February 24th low is wave [i]-down and the March 3rd high is wave [ii]-up. A supposedly forceful wave [iii]-down started this Friday.
Appendix - oil and dollar squiggles