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Market Sentiment At Its Lowest In 10 Months

Market Sentiment At Its Lowest In 10 Months

Stocks sold off last week…

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LET'S LOOK AT THE S&P 500 DAILY CHART

S&P500 Index

These are the cycles we've been following and it still looks like the index will top either January or March on a 180 time period from low. There is a possibility of topping at 90 to 99 from low in early December. My forecast calls for a March top at two years from low, 180 calendar days from low with the final thrust 60 or 90 days. In the short term the index showed an exhaustion day on Monday but the move down is two days and 24.4 points which is less than the previous moves down at 3 days and 25 to 26 points. This index matches previous moves or counter trends to an amazing degree and always has. If that is the entire correction here it would indicate support coming in at a high level and the fast move up would still be intact. But if the spike cannot be taken out within the next three days then the index is vulnerable to a much larger correction and the 60 days cycle this weekend represent resistance in time since the index is moving up into it. Short term consensus is at very high levels and could bring a correction but as long as the counter trends are less than 29 points and 3 trading days this trend remains intact. The next correction should be a wave 4 (22 or 30 calendar days) and a final drive (wave 5) to either January or March for top. Price looks like 1247, 1278 to 1288 or 1360 to 1370 and March is now the highest probability.

LET'S LOOK AT THE U.S. 30 YEAR T-BOND

30-Year US Treasury

Last report two weeks ago I said the long bond had topped and we'd look at the situation this week. The highs were a combination of 144, 180 and 90 day cycles. This index is now down to 1/4 of the last range up and is also the previous and "obvious" low. I would expect a small bounce from this zone because of the "obvious" support level but should be very small and only one or two days. This run down should go to the 1/3 to 3/8 level or under 127 and that is where I will exit 80% or all of my shorts. It is possible to run down to the 50% mark at 124 but if the trend is still up and is to remain strong then the 1/3 to 3/8 level will be support. This is a huge market and large markets generally take a lot of time to form a top. So our strategy must take that fact into account and is the reason for the quick exit. The 30 year cycle doesn't finish until mid 2011 but I am assuming a very large move on the side and this move down will find the low for that distribution top.

 

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