Neckline Restest?

A retest of the broken head and shoulders top neckline and perhaps the 50dema in the SP500 seems probable, but it certainly isn't required. The equivalent move in the Qs would be to around 35.50, the May high and the 25dema.

I was happy today to see some of my recent analysis confirmed by other market technicians. Steve Hochberg in the Elliott Wave International Short Term Update identified 845 to 850 as probable downside targets in the SP500 confirming my calculations by other means, and Carl Swenlin of Decisionpoint noted in his weekly chart analysis that gold has broken down and he expects gold to correct to below 700. Mr. Swenlin indicated that it may take the rest of the year for gold to get there. I do disagree with him on that point, but that is a small matter.

Next Friday is options expiration, so there may a somewhat bullish bias to the first part of the week.

One reason that I believe, quite strongly, that the current correction is a B or X wave that will be followed by higher prices is that so many stocks are developing nice basing patterns and remain in uptrends, or are in fact breaking out. This past week AMGN broke out, VOLC made a new 3 month high, FDO is trying to break back above its downsloping trendline, and many more. This is why I am also selectively buying stocks even as I hold the QID and TWM. I did sell ORCL this week as it broke below the trendline from the March low and basically did not follow-through after its otherwise better than expected earnings report in June. (I see now that GS has just upgraded the software sector after hours tonight. Interesting.)

One thing that we would want to see to confirm a completion of the correction is for volatility to breakout above the June high. It is not required, but it would demonstrate some return of fear.

Oil looks like it has reached a point of near term exhaustion. It may be a good time to take profits in the DTO. I originally was going to add to the position on pullbacks but it ran away from me. I think I will lock in a quick 25% gain rather than risk a new uptrend in oil even though my target has not been met. Oil may rally strongly as the dollar appears ready to break down in a 5th wave. The completion of that 5th wave in the dollar may be a good re-entry point for the DTO. We need to wait and see how oil behaves on any rally.