Friday, April 1, 2011

4/1 Daily Commentary

The stock index ETFs closed the day lower than their open with Nasdaq relatively weak.
We are in a period of high I1 values.  According to the rule set as originally established it is OK to sell I1 values less than 8, which would have allowed stepped-up shorts Tuesday of this week. 
Looking at +7 peaks in I1 history shows there is little fear of missing a top by waiting until the I1 peak prior to a sustained move below +7 and the date that I1 declines below +7. Intro and Concepts contains the I1 charts to verify this trading rule. The next I1 peak that precedes a sustained move below +7 is 4/18-4/19 and the date I1 declines back below 7 is 4/26. I think that waiting for the mid-May I1 peak would be past the stock market high.  Trading rules have been modified for the above.

The wave count appears pretty clear as (iii) or c complete from the 1250 low on the 16th.  Monday should see an extension of the post-report letdown to below 1320.  EWI assumes that we are in a 5th up to a new high (since Wednesday's update).  A wave (iv) bottom Monday or Tuesday would sync up with an I1 low.  Holding 4% SDS during the jobs report discounting rally was tough but should allow me to exit gracefully.
The ability of the DJI to retrace all the way to a nominal new high indicates that we are indeed in a 5th up to the mid-April I1 high.

The Euro ran up to it's old highs where I bought the short ETF, EUO.
The technical position of the stock market is getting to an extreme juncture.  I'll be posting a Weekly tomorrow with the monetary and technical backdrop.

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