Wednesday, July 14, 2010
Market Severely Overbought; Structure and Strength of Decline Important for Determining the Larger trend
Just a quick note. It appears the market's severe overbought condition has gotten the best of it, for now anyway. With 1131 still intact it leaves the larger term bearish case still very much possible. However a lot of damage has already been done, so the bears have a lot of work to do. The biggest piece of damage in my view is the impulsive-looking rally from the July 1st lows. This is quite a large, long, sharp and deep correction for what should be a wave 3 of  or C. Not really characteristic in my view. But the bears can still erase this bullish look with a strong and sharp impulsive decline of their own here. The structure, strength and volume on the decline will help us determine if this setback is wave (iii) of 3 of  or C, or if it's just correcting a 5 wave rally that started July 1st.