Pause Day

Today produced a narrow range bar in several indexes. Whether this leads to a sharp correction or a strong advance remains to be seen, but we can probably expect one or the other. The Qs could be expected to retest the 200dema without any damage to the trend. Overall, leading stocks closed well, volume was light, and bank stocks were down on light volume.

To me, the most important clues to the true sentiment about this rally are the statements made in the general media. I was almost shocked to see this morning on CNN a financial commentator state (paraphrased) that most people believe this is a bear market rally and are hesitant to buy in until there is more improvement in the economy. While other measures seem to indicate a swing to more bullish sentiment, I think these types of statements tell the real story. I don't think the average investor or, apparently, the large speculators believe in this rally. This is a classic case of a market climbing a wall of worry. A couple of nice shakeouts along the way will be just fine as far as I am concerned as it will feed the doubt. At some point, we will see a climax run beginning to develop, but we are not there yet.

The two indexes with the cleanest patterns that I am following are the BKX and the London FTSE. The BKX appears to be in the early stages of wave Y of a double zigzag, while the FTSE is in wave iii of of 1 or A. When we see these two indexes approaching there termina, regardless of how long it takes, we will have strong evidence that the end of the rally is near. The BKX looks to be at least 5 weeks from completion, which would be mid-June and it could run longer.

The Qs are quickly approaching my first target of 35.86. The next target is 37.63. I do not expect to take profits at the first target. I am using it more as a milestone, but I will definitely be looking to take partial profits at the higher target. The exception will be if we see a true blow-off top in the making, in which case, I will ride it out as long as possible.

I'll admit that keeping my finger off the (sell) trigger at the present time is a true test of my patience and discipline, but this is one of those times that requires both of these qualities to realize the full benefit of the opportunity.