The market dipped at the open today but was immediately bought up and is now trading in the positive. The Nasdaqs seem to be leading the way up now (contrary to yesterday), and have made new highs on the week. The Dow and S&P have not though which is very short term bearish until they do. NYSE breadth is still fairly strong telling me there's still buying demand in the market. Watching financial TV and reading financial articles there appears to be no shortage of analysts who have an indicator calling a bottom in the stock market. Many seem to be rushing in to buy so that they don't miss the "deals of the century". But after Friday and Monday's massive surge, the market has had no follow through and has struggled to maintain any gains. This accompanied with the weakening momentum, tell me the rally is severely weakening and at least a good solid correction is warranted. The key is recognizing the turning point.
Above I made a chart with an alternate view of what will unfold in the coming week or so compared to my primary most favored count in the prior post. If this week's highs are broken in the Dow and S&P, then the chart above will become my primary choice. The reason I'm opening the door to some more short term bullish movement is due to the following:
1) due to the holiday there is light volume so a small amount of buyers can shoot his market higher, and with NYSE breadth bullish, it shows that the bulls are in control right now.
2) the structure in the chart above looks extremely similar to the last big rally we had earlier in the month. The market shot up to one more new high before selling off again to new lows. So new highs on the week are possible.
3) NYSE breadth is still strong and until sellers come back in the market, it will probably continue to drift higher.
4) So many people think a bottom is in it's ridiculous. There is so much hope that this is finally "it" and it's time to buy in preparation for Dow 30,000 in the coming years. This hope is lifting the market..........for now.
But regardless if the above scenario is unfolding or the one below in the prior post is unfolding, the end result is the same; a big selloff to at least the S&P 800 area in the coming week or so. So new highs and rallies should be sold into in preparation for that.
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