Tuesday, October 5, 2010

A Show Day

Markets put on a real show today spanking the bears good in the process. The flat pattern I posted earlier today was violated so we are still looking for the top of wave B up. Notice how the SP500 remains within its base channel and the declining median line channel is just ahead. Volume was only slightly above average, while the TRIN closed at 0.28, an extremely low reading, and the McClellan Oscillator did not advance above the 10/1 swing high. The Qs failed to best the 9/30 high, so we have numerous divergences in place. All of these factors are pointing to some sort of top in the making. This is what B waves feel like - better than the previous high, even though we are well below it.

The 10 & 20 month cycles are due to bottom on January 6, 2011. The fact that the market is showing this kind of strength 3 months from a cycle low supports my position that we will see rising markets next year after the current correction ends. Sometimes cycles expand as the current one has to 22 months. It is fairly simple to calculate. We have the bottom on March 6, 2009. The 10 month cycle low on February 5, 2010 - 11 months almost to the day. Another 11 months brings us to January 6, 2011 +/- 2-3 days. The reason I am bringing this up now is that we will see some sort of decline, whether it is a powerful wave C down or just a pullback. So even if you are in the bull camp, you would probably do well to lighten up and look for opportunities later in the year.

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