Wait And See

The Dow turned back after just surpassing the 50% retracement of the October 2007 to March 2009 decline at 10334. (I had incorrectly stated that level as being 10350 earlier.) We will need to see a continuation of the downtrend with a sustained move below the October high to confirm that the correction has resumed. I say resumed because I suspect that the recent runup from the 11/2 low is wave (B) of a flat correction, and we should see a retest of that low by 12/2 but more likely before Thanksgiving.

It has been observed by seasonal market timers that the period from the Wednesday before Thanksgiving through the first of December is generally quite bullish. If we get a retest of the low by that date, I will be looking for an opportunity to exit short positions to reverse and go long for an expected year end rally. The year end rally may or may not be the beginning of the next leg of the cyclical bull market. It could be just another part of an extended correction. We will just have to wait and see how it unfolds.