During the decline in May and into June my analysis was telling me to expect an intermediate-term low in mid-June and that from that low the "Summer Rally" would begin. As the averages dropped into the June lows the market became very oversold and bearishness rose. However, my analysis continued to point toward an intermediate-term low and now it looks as if that analysis was correct and the "Summer Rally" should now be in progress. The question now is, "How far will it go?"

In the upper window of the chart below I have plotted the Investors Intelligence percentage of bulls. For the week ending June 23rd, the percentage of bulls to bears bottomed out right on the 50/50. This means that there were just as many bulls as there were bears. This past week there was a slight upturn from that level. Since the rally out of the 2003 low, all intermediate-term lows have occurred with much higher bullish sentiment readings in which this indicator would bottom out around 60%. This meant that there were approximately 60% bulls verses 40% bears at these previous lows. With the June lows occurring with a 50% reading this means that bearish sentiment surrounding this low was at levels not seen since late 2002 and early 2003. Readings at this level obviously suggests bullishness of at least short to intermediate-term.

In the next chart below I have a chart of the Industrials and the Transports. Yes, the Primary Dow theory non-confirmation, as is illustrated in red, still stands. The Secondary trend is illustrated in blue and since the decline into the June low held above the previous Secondary low point, the Secondary trend still remains positive. Therefore, from a Dow theory perspective, the averages are now set to challenge the May high and the Industrials are set to challenge there all time high.

At present, I have my doubts about the Industrial's ability to better the May high. Of the two averages I do believe that the Transports could in fact make new highs. If my hunch proves correct this would leave a very important non-confirmation in place upon this retest. In the meantime, it does appear that the intermediate-term advance out of the June low will prove to be our summer rally as the intermediate-term is now in fact positive. The key now is the performance of this rally and I will be covering this in great detail in my newsletter and web-based updates.

Thus far, my 2006 forecast has been right on the mark. I have guided subscribers through each crook and turn with my unique Cycle Turn Indicator. Based on the data that I see, the market is soon going to be facing some great challenges. I have outlined the expectations for the remainder of 2006 in the June issue of Cycles News & Views. The July issue will be available later this weekend, which is also centered around the top scenarios for the remainder of 2006. If you are interested in a statistical and technical based source that also provides turn points for gold, the dollar, bonds and the stock market, then Cycles News & Views may be for you. Please see www.cyclesman.com/testimonials.htm.