7/2 Weekly Commentary

83,000 private jobs added with 110,000 expected.  This expectation was down-graded following the weak ADP report on Wednesday, so we are weaker than the weak forecast.  Double-dip is now becoming the mundane expectation of the mundane economists. 
I1 bottom is 7/5, but since 7/5 is a holiday the typical I1 behavior is to bottom mid-day the following day.  I'll be set to buy anytime when the stock market breaks it's 30-minute M/A to the upside.  I'll act instantly on that and post right away.  Being an old fogey I am content to stand aside until about noon Tuesday and then look for a buy point on weakness.  However the daily technical composite has just reached +29.  Normally +22 is a buy signal, but since it gave a buy signal just a few weeks ago I have been expecting +28 to register my expected buy point.  +32 is a don't-think-about-it-just-do-it buy level.

My count is that either the decline from 4/26 is an ongoing 5-wave and Minute 1 of Minor 3 is complete or that the decline from 4/26 is a zigzag 3-wave.  EWI says we have one more low coming to reach Minute1.  If we get another low I'll be happy to amend my count.   Minute 1 started 6/21 at 10,594 and hit bottom 7/2 at 9614, for a 980 point decline over 10 days and 9.25%.  SPX hit bottom Thursday.  Here is the count assuming Minute1 of Minor3 is the bottom.

I have a problem with this assumption of an ongoing 5-wave.  I1 is going up starting noon 7/6 and going up for at least 11.5 trading sessions peaking 7/21:
1 20100702 22.35137

1 20100705 21.57711
1 20100706 21.9467
1 20100707 22.73956
1 20100708 24.07844
1 20100709 26.13671
1 20100712 28.78697
1 20100713 30.21966
1 20100714 31.80805
1 20100715 33.66239
1 20100716 35.20112
1 20100719 36.13145
1 20100720 36.27178
1 20100721 36.41742
1 20100722 36.30637
1 20100723 34.96335
1 20100726 33.57488
1 20100727 32.35731
1 20100728 31.96437
1 20100729 31.80197
The decline from 6/21 is 10 sessions and if a correction follows it should be shorter than the impulse.  My alternate count is that the decline from 4/26 is an abc. This allows for a larger, longer rally phase and is what I would expect within a head-and-shoulders that has not broken out. 
The entire investment world are now chart-readers.  Everybody knows that a head-and-shoulders breakdown has(?) occurred.  This undoubtably has shifted trading sentiment.  With common knowledge a large number of traders have positioned for the follow-through:

I1 says that follow-through will not occur during this trading cycle.  Thus, the stock market appears poised to take the most money from the most people that it can.  This expectation of a bear trap is what I have voiced several times as the likely outcome of the 7/5 I1 bottom.

The stock market has fallen to weekly support for both the DJI (the green line):

The SPX green line intersects at 1,000.  If we get a new low that's where I'll buy.  Otherwise I'll wait for noon or an upside break.

I will be monitoring the evening session of S&P futures trading looking for 30-minute breakout.  If it does not occur then I will monitor the morning of 7/6 looking for the same phenomenom.  If 30-minute breakout does not occur then I'll look for buying on weakness after 11am 7/6.  If this bottom is only Minute1 then several hundred points are my upside potential for 11.5 trading days.  I will liquidate on 7/21 and stay out looking for a short entry point.  I believe that the stock market will present the shorting opportunity prior to the I1 top in mid-August.  If the stock market continues it's decline Tuesday afternoon and closes below 9650 then the market will be in a waterfall decline and a shorting strategy will be appropriate.