Thursday

With the big banks all reporting already lets us see if the technology firms will blow out and send us higher. I am just following the trend of the last 3 quarters but it is anyone guess. Folks we have started the year in the same narrow range as the end of last year so technicals it is difficult to ascertain where we will go next.
I won't guess but I can surely say with confidence their is a 5 wave pattern completed on the upside since the March 2009 lows.

We will see soon enough.

Notice what was yesterday's lows 1125, dead on!
Next level lower if we don't break the highs would be 1110.

Low of day

Interesting we stopped at the 1125 number and bounced. Nothing like technicals. That area could provide a significant bounce possibly to the 1132 area.

Opps

1130 broken- 1125 was the last area on this upside that had difficulty breaking through. I guess 1110 is ultimately on the way.

Action

Action is very interesting here - A lot of distribution going on, also remember we have around one week left in the month and if I can recall we started the year around 10580 area. Why am I mentioning this? well because most traders will say January performance is usually a barometer of how the year will go.

1130

Got to hold 1130 as said before- Critical level that must be held.

Below we have 1110 not that we will hit that today but 1130 should provide a puase or some support

What I am seeing

Ok after taking a day of rest to recover from my trip I looked at some charts last night.
Even with the Bank of America this morning I still think we can go to that 1178 are, which was an area I spelled out awhile back. Currently 1134 must hold and most importantly 1130 or we will more than likely test those averages down by 1108/1110 area.
We will see soon enough but it is very interesting trading here but also mish match as we are up one day and down the next and volume is still light.

Lets see what develops here.

Thoughts

Since I am back I think it is time for a review of the broader market indices and possible implications for traders and investors: As usual my analysis may prove controversial, but I tend to make big picture calls at critical junctures. This analysis is more bearish and I realize, that many have gone from the bearish camp. I simply look at all the evidence, and instead of burying my head in the sand, I take it all in and plan accordingly. Being a perma-bull or perma-bear is a quick way to under-perform the markets. I try to be nimble and trade/invest accordingly. The next few weeks/months are likely to be volatile,since we have been trading in a narrow range for a couple of months now. I don't believe the market has peaked yet for this phase but I do think we are more likely in the 8-9th inning of the upside here.


It appears we have the qualifications to have a potential top in since the March 2009 lows. This is due to the rebound of the Dow to above my 10500 target I spoke about in early 2009. We have had a 61% Fibonacci retracement of the 2007 highs to the 2009 lows. In addition, we have had about a 61% time period duration with an 11 month rally which followed a 17 odd month decline. Based on all my work: This means we have technically fulfilled intermediate objectives for a top.
The caveat in my analysis, is the equity markets could still work their way higher. Just because we have met certain typical patterns in Time and Price projections, elliott wave patterns and the like, doesn't mean we have peaked for sure. The markets could continue in a higher % retracement of the 17 month decline and the indices work their way higher. What I am pointing out today is that the requirements for a top have been met, and we need to be on guard.

One important thing I also watch is the bullish sentiment of investors, which is presently running at extreme highs.We have the VIX running at extreme lows and the last time we had this many bulls in surveys vs bears was July 2007 and we all knew what happened then.
The markets are at a critical juncture here and we can move either way but I am being extremely cautious. It does not mean you can't play equities on the long side but a 5 way Elliott wave structure is a very compelling case for a change in direction.