Monday, July 21, 2008

LT Update

Back in January, i made a case for a bear market

So far the progression of the bear seems in line with the big picture. My LT indicator remains in a deep bear territory, which will take a while before it recovers above zero. As i belong to the confirmation based school of TA, i will wait for that indicator to cross back above zero and a potentially completed wave pattern to call the beginning of the new bull, whenever that happens.

In the LT update i had a projection of SPX 1170+/- 20 points for a bottom. We hit SPX 1200 last week, 10 points above the high end of the projection.

From here the market can take two paths from a wave and internals perspective. If we rally straight up from here to about SPX 1300-1320, without doing a retest, then we are setting up for another failure and i would go with the count in pink. If we were to do a retest of the SPX 1200 area with positive divergences, then we would be making one heck of a bottom and should be good for a multi-month rally (the count in blue).

Blue or Pink Jose ? It's futile to guess. I will let the market speak. Bottomline the bear is far from over, but we are setting up for a major bear market rally here.