I sent the above chart to a friend of mine whose been asking me what my views are on the market for the coming months. The action over the past week seems to be setting up a retracement to the underside of the trendline for the Qs. This would be the B wave we've been talking about. It would be fortunate for the bulls if it makes it all the way, but not at all out of the question either. The rally today, 3rd best of the year in percentage terms, is typical B wave action.
The meat of the action, if the above chart is correct, should occur over the next 2 to 3 weeks. That would be the ideal time for some short term long positions with smaller size. Going into July would be the ideal time to sell intermediate long positions that were not sold in April and May in preparation for the fall selloff, and to add protection for long term positions. This would also be the time to prepare to get short against a double top with the expectation of a retest of the May low.
Right now it may not feel like this scenario could be possible, but that is almost certainly why it is likely to happen, and why we are not entering primary wave 3 down. According to Investors Intelligence sentiment is now as bearish as it was at the July 2009 low. We should expect a rally to work off this bearish sentiment.