Bulls Quickly Regain Control

Well, once again the bulls wasted know time showing the market who's boss as they quickly came in and regained control of the market after a selloff.  This has been the trend the past several weeks, and it continues today.  The break above the key levels I cited yesterday make the drop from Monday's highs look like a 3 wave move, which is a correction. Now the market can fall from here to new lows, but it would probably just mean the correction downard is subdividing lower.  So that would have the markets pointed higher in the coming days/weeks, and probably a test and break above the highs on the year.  With new highs perhaps on the way, the market's failure to follow through with the April decline makes the entire move more like a correction and puts the bullish alternates I've been mentioning on the front page.  If there is not a sharp reversal downward sometime today, we need to consider the longer term bullish potential of the market while at the same time being aware and prepared for a top and collapse at any time.

All is not full blown bullish so I'm not getting long by any means.  The financials are again lagging this rally and the euro is still far off from its highs.  In addition, there is a slight chance that the decline in equities from Monday is a leading diagonal.  This would explain the sharp rise today, but obviously it must stay below Monday's highs to remain intact.  This is a much more unlikely scenario at this point though, that's why I didn't mention it before, and the key level of 1177 in the S&P marked the highest probability "kill point" for the bearish case.

So in summary, the market looks like it's probably resumed its uptrend since the wave structure suggests it.  Doing so means that the correction after the April top and reversal is extremely stretched in price and time and those highs will eventually be tested soon.  But I'm waiting for the close before I make any moves.  A sharp reversal downward would still keep the short term bearish case on track.  But holding these gains, or accelerating them, into the close will put me neutral for sure.

In addition, the currency majors I follow have not exceeded their key levels that would confirm a 3 wave drop from the highs.  The euro is awefully close, but if the aussie and the pound fail to do so, we can put them in the same column as the financials with their lagging behavior compared to the rest of the market.

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.