7/8 Daily Commentary

The Minuette4 correction is not complete.  The consolidation today was not enough in time or price to correct the massive Minuette3.

The DJI exceeded it's Minuette3 high but looks like an irregular top.  The cash SP double-topped. Nasdaq not even close.  Of course if the futures evolve into a 5-wave then the rally goes on.  Looked at the last reported sentiment numbers and Investors Intelligence bullish % was 43, at a buy level.  The real standout was MarketVane at 24.7, the lowest since March, 2009.  So the market came into this week loaded with bears.

It will take more than a couple of sessions to pick their pockets.  I think this is why the market will not retrace normally.  People don't change their conditioned viewpoint on a dime, so expect a steady trickle of short covering on the way up.  There are also a significant number of bearish viewpoints out there, from the gold bugs to the end-of-the-worlders and more increasingly mainstream advisors.  In the old days if you were managing money you spun bullish thread, even if you were worried about where we were going.  Now, there is a lot of that but people tolerate bearish opinion more and so there are more advisors telling how they see it.  There has been a steady drumbeat of negativity, justifiably so. 

Anyway, I am looking for a re-entry point if the short-covering will just get out of the way!  I also want a stock market reaction to sell my TLT bonds at a nice profit.

Looking ahead I am trying to reconcile an extended I1 uptick with my expectations for the market.  Frequently when there is a market structure that is bearish then even a slight downtick in I1 will yield a sharp downturn in price.  I don't short an uptick I1.  Therefore I need to arrange a wave count that squares with an uptrend lasting through the 21st, the peak day.

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
If I1 is not on a buy signal then the market can mark time during a rising I1 and even decline slightly.  One thing that it has never done is decline sharply.  So, I'm looking for a large percentage of the decline from 6/21 to be corrected.  The market may peak early and tread water going into 7/21.