The recent “plunge” in stocks confirmed a correction against the 2014 low and raised the likelihood of a larger-degree correction (particularly with respect to the late 2011 low). As of Friday’s low, SP500 is down 7.59% from its all-time high and the Dow is 10.31% off its May high.
Based on the price structure of the Dow transports (Chart 1), recent weakness in stocks is likely a wave (4) correction with respect to the 2011 low (Chart 4 gray or blue) and price is at initial support. Under this interpretation, the next upswing completes wave (5) of .
Furthermore, this 2015 pullback in SP500 so far resembles its 2011 pullback where a potential bullish triangle had failed. Price is at potential support according to this similarity. See Chart 2 and Chart 3.
As we have discussed in recent weeks, a meaningful pullback likely sets a better footing for the next upswing.
Chart 4 considers the current decline in SP500. Since the initial decline from its all-time high is a visual three waves (see Chart 6), the sell-off (which has ample potential) is likely corrective, despite the technical damage it has already inflicted.
purple wave* - with respect to the 2009 bottom is an asymmetric triangle dating back to the green wave  at the end of 2013. The lower boundary line is currently at 1925 and rising.
gray wave (4) - with respect to the 2011 low. The gray count is similar to the green count, except for an extended wave (3) of , which terminated in 2015. Under this interpretation, the next upswing completes wave (5) of .