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.