Tuesday, June 21, 2011

Close To A Follow Through

I thought IBD would call a follow-through day after today's action based on the Nasdaq composite's rise of 2.19% on higher volume, but they declined to alter the current outlook from "Market In Correction" due to the lack of leadership today as well as the fact that the SP500 only posted a 1.3% gain.

It's notable that the SP500 stalled at the April 18 low as I had suggested would be resistance.  Also, oil failed to join in the party - another tell.

It appears the Dollar may be tracing out a flat correction in wave 2 down to undercut the June 7 low of 73.52 before wave 3 up begins.  This may provide temporary support, but until the SP500 clears 1311.80 we should assume that wave 4 is in progress and another new low will be seen in early July.  Even so, shorting this market is probably not a good idea.  I see very few good short setups at the moment, and the ones I did like were up nicely today for the most part.

We may be looking at another week of wave 4 action, but it could end sooner if the current rally is completing an upward flat correction.  In that case we may see another quick down up swing before the downtrend resumes.

The main thing is that it is just too early to call the correction over.

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