Market Insights™

Week Beginning 12/04

The stock market is giving us a very mixed picture here and for that reason I believe cash is the best place to be at least until winter has officially arrived. On the bullish side, the days between Thanksgiving and Christmas are historically not very good for shorting stocks and the Trendright system continues to allocate to stocks. Also, the CBOE put/call ratios were very high this past week suggesting that higher highs in the S&P 500 lie ahead.

On the bearish side, the Dow Industrials are still testing resistance from March of this year while both the NASDAQ 100 and the S&P 500 left bearish hanging man candlestick patterns on the weekly chart this week. My suspicion is that the coming week will see prices back off about 2-3 percent in the S&P 500 followed by a rally to yet new highs right around year end to complete the final wave of the bearish rising wedge pattern that has been developing over the past year (view chart).

While I am mostly in cash, I am still holding the short positions in Toll Brothers that I opened several weeks ago. I am currently slightly under water on those and will cover with a significant close above 36 dollars a share.

Week Beginning 12/11

What I wrote in last week's newsletter applies, for the most part, to the market this week. The Trendright continues to allocate to stocks, and there have been no convincing reversals in either the weekly or daily charts of the NASDAQ to indicate that the uptrend is reversing just yet.

As I have said repeatedly, bear markets in stocks typically rear their heads in either summer or winter and winter is still ten days away. Better still, January 2006 will mark 34 months (a Fibonacci number) from the March 2003 lows. Unlike the other major indices, the Dow Industrials appear to have failed a retest of their March 2005 highs as this average did show a bearish reversal on the weekly chart this past week, setting up a potential bearish divergence with the other indices.

I continue to remain short the Toll Brothers home construction shares because that stock has yet to make a closing high above 36. Meanwhile it finished the week nuzzled once again against the five month long bearish downtrend line ( view chart). I will take this opportunity to add to my shorts with a mental stop above 36 dollars a share on a closing basis.

Week Beginning 12/25

In general, my comments from last week remain in effect this week with the exception that I have redrawn the bearish wedge in the S&P 500 in such a way that it shows that this index has yet to break down out of that formation (view chart). When it does, prices should decline relatively rapidly down to the 1225 level before any kind of significant bounce takes place. Now that winter is officially upon us staking out a short position in the equity markets becomes a far safer bet.

As expected, Toll Brothers is now once again trading below its 50-day moving average. The chart suggests to me that prices should soon move into a solid downtrend. Happy holidays all!

Week Beginning 12/18

There's an old saying on Wall Street that "they don't ring a bell at the top." Well, this year is different. With Christmas just one week away, bells are ringing all around us and some of those may be telling us that the top is in place. All of my models are now in negative mode after the daily model went to SELL on Wednesday and the weekly model gave its third SELL signal since this last bullish leg began back in the middle of October.

On top of that, the Bradley Model is calling for a trend reversal on December 16 (+/- 4 days) at the same time that the S&P 500 is bumping up against the resistance line of that giant bearish wedge (view chart) I have been discussing for a number of weeks. The last time I brought up this formation was in the December 4 newsletter when I suggested that the S&P 500 would probably make one more run at the resistance line before the final top was in (view December 4 chart). Meanwhile, the market-leading NASDAQ 100 is forming a short-term head-and-shoulders top. When this average falls below 1680 and closes below the neckline, the bears will be in control.

Toll Brothers closed the week at 37.35, above the 36.00 resistance level. It is also trading above its 50-day MA for the first time since early August. Normally I would say that a stock that trades above that average is being controlled by the bulls. However, in doing so this stock has now managed to close the gap that was left on the chart in early November. So as long as this stock trades below gap resistance at 38.30, I would give the advantage to the bears.

Week Beginning 11/06

Last week all five stock market models were lined up negative while the Trendright system remained in short status. This week things look quite different as the Trendright is now neutral and the daily model switched back to positive. The weekly model's sell of last week is calling for a top within a month of that signal change so there is potential for a continuation of the rally here.

While I still believe the 4-year cycle top is in for the large-cap indices, the NASDAQ 100 is testing its double top at 1635 made in December 2004 and August 2005. On a weekly basis, the NASDAQ 100 made a higher close this past week than it did in the two prior moves into this price range. So I would not be surprised to see the NDX break out higher. Everything I have presented thus far this week warns us to be cautious about being short the general stock market in the near term.

For those who are itching to take a short position, there are few set-ups better than what I am seeing in the home construction stocks ( view chart). These shares are testing the break-down of their intermediate-term uptrend line at the same time that the weekly CCI has moved up into the neutral zone. On the daily chart, both the 50-day and 200-day MA lines are being tested as is the short-term downtrend line while the daily CCI is overbought. Short these if you are inclined with a stop above the downtrend line.

Week Beginning 11/13

Last week I warned against being short the large cap indices and hopefully you heeded that warning. All the major averages continued to rally and while a short-term pullback seems likely right about now, we are heading into the holiday season which is traditionally a bullish period (between Thanksgiving and New Year's). Most important market tops show up in either the summer or the winter months and winter doesn't begin for another six weeks.

With stocks in a pretty strong uptrend and the holidays right around the corner, I am having serious doubt about the four-year cycle top being in place. As anticipated, the NASDAQ 100 broke above its previous high for the year which means the four-year peak for that index is still out in front of us. This average tends to lead the large caps so I would not be surprised to see the S&P 500 put in yet another new cycle high. In fact, the chart now looks like the S&P is tracing out a five wave diagonal triangle (view chart ). If indeed that is the case, Wave 5 of that formation should take the S&P up near my 1254 target from earlier this year. Look for arrival time somewhere in early January.

If you followed my lead and shorted the homebuilding stocks as they approached the 50-day MA (take a look at last week's chart), then you are sitting on a substantial profit after Toll Brothers warned of lower sales on Tuesday. That stock gapped down 14 percent at the open of trade and then moved sideways the rest of the week. That gap, I believe, was of the continuation rather than the exhaustion variety meaning that lower prices lie ahead once the short-term oversold condition is worked off just a bit.

Week Beginning 11/27

In spite of being unusually overbought and in defiance of all the recent sell signals my models have been spinning off, the stock market continues to move ever higher. This week the Trendright System moved from neutral to bullish, cautioning us to be alert to the possibility, regardless of how improbable it may seem, that the bulls will stay in charge for the forseeable future. The markets will do whatever the markets will do at any point in time and defying history is one of the options.

With stocks this overbought, they are at the same time approaching critical resistance. The Dow Jones Industrials are nearing the same level they topped out at in early March. The Dow on Friday closed at 10932 while the earlier peak was 10984 -- a little over 50 points from here. Meanwhile, Toll Brothers is trading above its 20-day MA and is leaning against the downtrend line that has kept a lid on prices these last five months (view chart). If you are short this home construction stock as I am, cover with any break above that trend line. If that occurs, it will be clear in retrospect that the huge volume day we saw 13 trading days ago was a selling climax.

Week Beginning 11/20

It has been some time since my indicators have been this negative. At the end of October both my weekly and daily models went negative. The daily sell signal turned out to be a false positive when the S&P climbed above 1204. The weekly signal operates in a window that is typically +/- one month wide so that sell signal is still in effect. This week's weekly sell is simply a confirmation of the earlier negative call.

In addition to these two models, I have a daily overbought/oversold indicator that combines S&P 500 price with the CBOE put/call ratio and is now more overbought than I have seen it in three years (view ob/os indicator). The last time it looked this way was in November 2002 just days before the S&P began a 17 percent fall into the March 2003 low. For icing on this cake, the S&P weekly average chart is once again bumping up against intermediate-term resistance (view head and shoulders chart). The only thing keeping me from shorting this bloated pig is the chart I presented last week, indicating that the 1254 target is still on the table.

Perhaps the best short play at this time is Toll Brothers, one of the leading home construction stocks. The following Elliott Wave count is consistent with the above negative indicators (view chart). Notice how in this chart Wave A remained below the 20-day MA while Wave B crossed above the 20-day but was unable to penetrate the 50-day MA. If this count is correct, that is extremely weak action for a Wave B reaction and could be signaling an ugly Wave C has just begun. Cover with any significant close above the 20-day MA.

Week Beginning 10/02

This past week was won by the bulls. Last week I warned that the bearish rising wedge might extend and that last week's down move could be part of the triangle's Wave 4 to be followed up by a final Wave 5. While I thought then that the odds did not favor this scenario, it appears that is precisely what is unfolding (view chart ).

That means that the 1254 target for the S&P 500 index is back on the radar screen and should be achieved in the next two weeks. For the NASDAQ 100, a triple top at 1635 is likely to develop at the same time. If that is what lies ahead, it is likely that one of my weekly or daily market models (if not both) will turn negative at the top.

Week Beginning 10/09

The Trendright system has been spot on these past two months. It moved investors who follow it out of stocks the first week of August -- at the cycle high of 1246 -- and has recommended shorting stocks these past three weeks ahead of last week's sharp decline. My monthly stock market model went negative with the release of the August CPI data and since that model calls buy and sell signals that are within +/- 2 months, the window for the recent sell will close at the end of next week. There simply isn't enough time for a new cycle high to be posted over the next five trading days so this model is telling us that the August peak was the 4-year cycle high. Ignore this model at your own peril.

I have been of the opinion that the homebuilder stocks are in an echo bubble and that when that bubble bursts it will take the rest of the stock market down with it. This index has quietly sold off more than 20 percent from its July top and has just violated a short-term trendline (view chart). Next target is the intermediate uptrend line just below. If that falls I would anticipate a 70-80 percent drop from the all-time bubble high.

Week Beginning 10/23

With my monthly stock market model on a sell signal since August and the home consruction stocks clearly in decline, I believe that the August 3 peak in the S&P 500 index marks the 4-year cycle top. Because of this, I will be treating all rallies as opportunities to short this market. Based on the behavior I am seeing in my weekly market model, I also believe that stocks will make a secondary top over the next two weeks. One of the things I will be looking for to assist in entering a short postion is for the CBOE put/call ratio to move down from the 1.00 level where it currently resides down into the .80 level. If it averages .85 or lower over either of the next two weeks, a sell signal will be triggered in that weekly model.

In this week's chart I would like to draw attention to a pattern in the CBOE volatility index (VXO) that has signaled buys and sells in the stock market for the past three years. Just recently, that relationship moved into buy territory but I believe that this pattern is no longer valid and that what we are witnessing is a change in trend in this index (view chart). In other words, I am of the opinion that the VXO is breaking out of the declining channel and will now post a series of higher highs and higher lows. This type of behavior is what we would expect if stocks were in a cyclical bear market.

The VXO is more reliable when combined with a similar kind of relationship exhibited by the CBOE put/call ratio (CPC). As the above chart indicates, when the VXO and CPC flash the same signal simultaneously, they make for a reliable trend indicator as those red and green arrows in the SPX chart make clear. When the VXO recently moved to a sell, the CPC did not confirm which tells me to disregard the VXO and look for a new trend to develop in both of these indicators.

Week Beginning 10/16

With the release of the September CPI data, there can be no doubt that the inflation rate -- now at an astounding 4.69% -- is squarely in the danger zone for stocks. As history tells us, when inflation moves above 3.60% after residing below 3.00% the stock market takes it on the chin (view chart). In four out of five of those prior instances -- 1972, 1987, 2000, 2002 -- the stock market decline that followed was quite dramatic.

Now that the real estate echo bubble has burst -- at least as evidenced by the homebuilder stocks -- the four-year cycle top for the large cap stock market indices should be in place. That means that the cycle top arrived in March for the Dow Industrials, in early August for the S&P 500, and all the way back in December 2004 for the market leading NASDAQ 100 index which made a double top in early August. I would look for a bounce here into the end of October followed by a sharp decline. First overhead resistance for the NASDAQ is at 1550, 1205 for the S&P 500, and 10400 for the Dow Industrials.

Week Beginning 10/30

All five stock market models are now negative as the weekly and daily models moved in line with the longer term models (a close above 1204 would turn the daily positive once again). In addition, the Trendright system remains on a short recommendation where it has been for six straight weeks. I believe that the month of November will see price action that leaves no doubt that the four-year cycle top is now firmly in place, led by the homebuilder stocks which peaked in mid-July.

My downside target for the Dow Jones Home Construction Index is 711 for the current leg of decline (view chart). As the chart indicates, I believe this index is in Wave 3 of 5 of a larger Wave 1 formation. In other words, this baby has a long way to fall. My downside target for the S&P 500 in November is 1130-1160.

Week Beginning 9/04

Two weeks ago I began closely following the Dow Jones Home Builders Index. I suggested then that there were three possible scenarios going forward with this one being the most likely of the three to unfold. As things stand, that scenario remains a distinct possibility (view chart).

We are now left with but two possibilities going forward. If the August 29 bottom was the Bradley turn that was due on August 30 (+/- 4 days, typically) then this index is on its way to setting a new cycle high. If, on the other hand, the home building stocks roll over and head south by Wednesday of the coming week, then the Bradley turn might be a secondary top that takes prices crashing through trendline support. In that event, the July 20 top would mark the end of the echo real estate bubble and the beginning of the next leg down in the secular bear market in stocks.

With gas prices soaring after the Katrina disaster in the Gulf of Mexico, it is a distinct possibility that CPI inflation for the month of September will exceed 3.60% and trigger an all important sell signal in my monthly stock market model. That sell would coincide (+/- 8 weeks) with the August 2 double top in the market leading NASDAQ 100 and the August 3 top in the S&P 500 index. It would also mean that the 4-year cycle top in the stock market was completed.

Week Beginning 9/11

The Bradley August 30 turn date has come and gone and all the major averages remain in an uptrend. The same can be said of the Dow Jones Home Construction Index. So what happens next? Odds favor that the S&P 500, which is currently challenging its August 3 high of 1246, will likely exceed that level and attain the target level of 1254 I discussed in past newsletters. 1254 is a 62% Fibonacci retracement of the entire decline from the all-time high of 1553 to the October 2002 bottom of 769.

In spite of the passing of the Bradley turn window, I believe that the S&P 500 will make a 4-year cycle high this month. My daily and weekly stock market models are within easy striking distance of sell signals and my monthly model will go negative if the August and September Consumer Price Index increases at an annualized rate of 4.30% or greater. With the recent catastrophe in the Gulf of Mexico, fuel costs are skyrocketing and I would be surprised if we don't see a bump of that magnitude. Furthermore, the monthly chart is bumping up against long-term resistance (view chart).

If the 4-year cycle top in the S&P 500 arrives this month, exactly five years after the last such top in September 2000, the other major averages will be unable to make new cycle highs. That would mean that 4-year tops are already in for the NASDAQ 100 (August 2 at 1629) and the Dow Industrials (March 7 at 10984). I also believe that the Dow Jones Home Construction Index, which closed Friday at 1017, made an important top on July 20 and will be unable to significantly exceed its 50-day moving average (currently at 1026). If stocks are beginning their next big slide this month, the home construction stocks should lead the way down.

Week Beginning 9/25

Another good week for the bears just completed. In this update of the chart I posted last week (view chart), the S&P appears to have broken down out of its seven month bearish rising wedge formation without quite reaching the upper channel line. While it is possible that the S&P 500 is still in Wave 4 of that triangle and that the lower line will have to be redrawn with a less severe slope, I suspect that the way I have drawn it is correct. That's because at the same time the S&P was breaking down, the NASDAQ 100 reversed a five month uptrend line while the Dow Jones Home Construction Index violated a 13 month uptrend line.

Three of five stock market timing models are now in bearish mode: long-term, rpcm2, and monthly. It would be comforting if all five were to go negative at precisely the time the 4-year cycle made its final high but that would be an unrealistic demand. Time-series models, it they are properly constructed, should not be expected to be much more than 75% accurate. So the odds of all five being negative at the top cannot be greater than 25 out of 100. That said, both the weekly and daily models are very close to switching to negative. The only thing holding them back is the CBOE put/call ratio which remains stubbornly too high to signal an overbought condition.

At this juncture, I would take all rallies in the stock market as selling and shorting opportunities. It is quite common for prices to rally up in a retest of the violated uptrend lines so stay alert to that as a particularly inviting opportunity to initiate a short trade. For those of you who are interested in shorting the home contruction stocks, you should research potential candidates Toll Brothers (TOL) and Lennard Corporation (LEN) due to their recent weakness.

Week Beginning 9/18

A very important week in the stock market has just concluded. If you're a bear, it was potentially a very good week as well. For the first time since January 2002 my monthly stock market model has turned negative. The last time it was rising long-term interest rates that tripped a sell signal. What has turned the model negative this time around is the same economic parameter that triggered a sell signal in March 2000, January 2001, and May 2001 -- the inflation rate. With the August CPI data released this past Thursday, the year-over-year inflation rate has exceeded 3.60% once again. And that data DOES NOT include the Katrina disaster in the Gulf. It is very likely that inflation for the month of September will reach 4.00%!

From a technical charting standpoint, the S&P 500 is completing the fifth and final wave of a bearish rising wedge formation (view chart ). This chart pattern makes it very likely that the S&P 500 will top right around 1254 next week, which would be exactly a 61.8% Fibonacci retracement of the March 2000 to October 2002 bear market decline. A negative reading by my monthly stock market model requires confirmation by a chart reversal before an official monthly sell signal can be declared. If the S&P 500 stalls at the 1254 level and then declines down through the wedge support line in the above chart that would qualify as the needed intermediate-term chart reversal.

Week Beginning 8/07

The NASDAQ 100 index broke down this week. It is very likely that the top that formed on Tuesday was the high for the year. The chart looks suspiciously negative for the NASDAQ at this time from a short-term perspective (view chart). That chart was drawn up on Thursday and Friday's close was even lower. What I would anticipate going forward is that price is headed for the 1570 support where a big bounce is likely.

Looking longer term, NASDAQ is the market leader and with a Bradley turn date coming up in three weeks (the Bradley model only applies to the large cap indices, Dow Industrials in particular), this would be an appropriate time for the NASDAQ to put in a 4-year cycle top.

When the 4-year cycle does finally roll over, I fully expect the real estate market to lead it down. The NASDAQ bubble popped in March 2000 just as the echo bubble -- the real estate bubble -- found its legs. So here we are 64 months later and the housing construction stocks have just completed a short-term top. Will it be something larger? Hard to say but the first bubble took exactly 64 months to reach the final peak (view bubble chart)...

Week Beginning 8/14

For this week's letter I will simply reiterate something I said two weeks ago: "With the next major Bradley turn window arriving in four weeks (August 30 +/- 4 days), my best guess is that the NASDAQ will move higher and then stall out at the 1636 peak. From there I would expect to see share prices for all the major averages move in a generally sideways pattern until the end of August." Two days later the NASDAQ ran into overhead resistance at 1629 and then fell back and now appears to be on its way for a test of the 1570 support (view chart). From there a bounce back up toward the closing price resistance of 1627 is likely by the end of the month.

Week Beginning 8/28

So far the Dow Jones Home Construction Index is following the script I laid out last week. Here is the chart from last week and then this week's update. This index is now testing trendline support that goes back about one year. If it continues to follow script, we should see a bounce in the coming week and a secondary top on the Bradley turn date of August 30 (+/- 4 days). Alternatively, the bounce itself -- should it come -- could be a Bradley turn which would take the index to new highs.

The stock market should follow a similar pattern. The NASDAQ 100, which is the market leader, is currently testing trendline support that goes back four months. There are only three possible scenarios. The index could slice through support, it could bounce first and then take out support, or it could move to new highs. The most bearish scenario and the one that would signal that the four-year cycle top has been made, would be the second one where a secondary top would form during the major Bradley turn window.

Week Beginning 8/21

Back in the March 20 newsletter I posted a chart that makes a strong case that U.S. housing stocks are forming an echo bubble to the 64 month technology bubble in the NASDAQ. Since that time the Dow Jones Home Construction Index posted a new record high in mid July . That peak fell within a +/- five day window of the July 13 major Bradley turn date. It also marked the 64th month of the housing mania -- matching exactly the duration of the NASDAQ mania. I believe the July 20 reversal will in retrospect turn out to be the beginning of the end for the housing stocks.

The reason this is important is that the large cap indices like the Dow Jones Industrials and the S&P 500 followed the NASDAQ down when the initial technology bubble popped. These major averages are very likely to do the same when the housing bubble bursts. In other words, the year 2000 four-year cycle top arrived at the peak of Bubble I and the next four-year cycle top in stocks should accompany the peak in Bubble II. If the housing stocks are forming a top here, I would anticipate a bounce off of the uptrend line followed by a short rally into the major Bradley turn date of August 30 (+/- 4 days) leading to a violation of the uptrend line (view chart).

Week Beginning 7/3

Begining this coming Wednesday, we enter the nine day window of a major Bradley turn date. If a 4-year cycle top is forming here -- and it has been more than five years since the last 4-year top was made -- then we should see a final run up in share prices over the next 10 trading days. It is very likely that the S&P 500 will challenge its March high of 1229 and possibly eke out a new cycle high in the process. A mere 3% rally is all that is needed to achieve this.

It is highly unlikely that the Dow Industrials will do the same (it requires a 7% rally) and a virtual lock that the market leading NASDAQ 100 will not get anywhere close to the 1635 high it made back in December 2004. The NASDAQ closed a full 9 percent beneath that mark on Friday. I would keep a close watch on the 50-day moving averages of these three indices. The Dow is currently trading below, the NASDAQ is testing, and the S&P is 8 points above their respective 50-day MAs. When all three have confirmed by breaking below this mark, it is time to accelerate the process of unloading any and all long positions.

From an intermediate-term perspective, any retreat in share prices should be viewed with skepticism until my intermediate stock model turns negative. In order for that to occur, one of two economic variables will have to confirm the move. Either the CPI inflation will have to hurdle 3.60%, or the 30-year treasury yield will have to exceed 5.35%. The treasury bond this past week completed a retest of its recent lows and should begin to accelerate to the upside now. A close above 4.44% would put this indicator in a short-term uptrend (view chart).

Week Beginning 7/10

The S&P 500 tested its 50-day moving average on Thursday and then catapulted 28 points to close the week at 1212. All the major averages are now trading above their 50-day MA. Next week is shaping up to be the final leg up in the cyclical bull market, the 4-year cycle top, and the beginning of the next nasty leg down in the secular bear market that began five years ago. We shall see. If these averages turn down any time soon and make a strong close below their 50-day MA, I will begin easing into short positions.

The S&P 500 is now a mere 17 points away from testing the March high at 1229 which is a natural resistance point. The 1230 area is also long-term resistance on the monthly chart (view chart). Add to this the fact that a major Bradley turn is due on July 13 and my bet is that stocks will form a peak in the coming week.

My daily model will move to negative this week if the VXO volatility indicator drops below 10.6 (it closed at 10.82 on Friday). Likewise if the CBOE put/call ratio averages below .75 for the week, my weekly model will turn negative. In order for the monthly model to turn negative, either the inflation rate or the long bond yield will have to begin to accelrate higher.

Week Beginning 7/24

The July 13 major Bradley turn date has come and gone. So far the turn could have been a bullish one on July 7, or a bearish one on July 20. We won't know for certain until one of these is taken out. In other words, if 1237 is exceeded on a closing basis then it was bullish and you would be wise to open up some longs. If 1184 is taken out on the down side then shorting is in order.

When I look at the chart, it is awfully difficult to imagine that the July 7 low falls in the "major turn" category. Looks to me like the S&P 500 has been in an uptrend since mid-April which would make the July 7 spike bottom simply a retest of the channel support rather than a significant change in trend (view chart). But I also don't see enough in the charts and in my models to support a top here (the daily model is back to positive). If 1237 is taken out then the August 30 major turn date comes into play. In that event, my target for the end of August would be the 1242-1254 range.

Week Beginning 7/17

Stocks continued to trend higher this week into and past the major Bradley turn date of July 13. The window for Bradley turns is usually +/- 4 days so that gives us until Tuesday to look for a price reversal. If we see that happen and the 4-year cycle top is in place, look for the NASDAQ 100 to lead the way down. That average gapped higher on Thursday and moved sideways on Friday. If the sideways price motion continues followed by a gap down, the NASDAQ will have left a powerful island top reversal on the chart.

My daily model went negative on Friday which means (if the model is to be believed) that a short-term top is at hand. The weekly model needed to see an average CBOE put/call ratio of just under .75 for the week to move into negative territory. What we got was .76 which in government work and market analysis is close enough but only if a weekly chart reversal occurs in the two weeks following. If that scenario unfolds it will give us confirmation that a more serious decline is in the offing.

In a perfect world, all my models would be negative just as the stock market was rolling to the down side of a 4-year cycle. The monthly model looks like it could be the odd man out after next week but that model flashes signals within +/- 2 months of an intermediate top so there is still plenty of time. While my shorter-term daily and weekly models are based entirely on price and sentiment, my monthly relies on economic variables. A spike in long-term interest rates or inflation would be needed to turn this model negative.

Week Beginning 7/31

The S&P 500 exceeded the July 23 high of 1237, leaving me to conclude that the major Bradley turn was the July 7 bottom at 1184. On Thursday the S&P settled into my target range of 1242-1254, closing at 1245. Meanwhile the market leading NASDAQ 100 is now just 2 percentage points from testing its December 2004 high of 1636. With the next major Bradley turn window arriving in four weeks, my best guess is that the NASDAQ will move higher and then stall out at the 1636 peak. From there I would expect to see share prices for all the major averages move in a generally sideways pattern until the end of August.

While my shorter range stock market models are all positive at this time, one important component of the daily and weekly models has just turned negative. The original CBOE Volaitility Index has just finished tagging the lower support of its recent trading channel and then crossed above the 8-week moving average this week. Whenever this has occurred over the past two years, we have seen the S&P 500 begin a sell-off within five weeks that took the average down 4-9% (view chart).

Week Beginning 6/5

The Bradley siderograph model was calling for a turn on June 2 (+/- 4 days) and the closing high posted by the Dow Industrials and the S&P 500 on Thursday June 2 was met with a strong price reversal on Friday. The next turn is due on Friday June 10 so expect to see a sideways to down market in the coming week. I would suspect that the 50-day MA down around 1175 for the S&P 500 will be tested here (Friday's close was 1196).

Following that, look for a pretty solid rally into mid-July when the 1254 price level is likely to be achieved. At that time, I will be watching my indicators closely for a solid sign that a four year cycle top is in place that should lead to a second, more vicious, bear market decline with a price target for the S&P 500 down below 500!

The 30-year T-Bond yield bounced hard off of the June 2003 support level at 4.15%. Let's watch this action closely to see if a double bottom is forming here that could take long-term rates high enough to trigger a SELL signal in my monthly stock market model.

Week Beginning 6/12

Since the June 2 closing high, the S&P 500 index has been trading in a sideways pattern. Sideways corrections tend to extend out longer in time than the downward slanting variety. The last downward retracement took five days (+/- one day) to complete -- a Fibonacci number. The next Fibonnaci number is eight, so I would anticipate that the current consolidation will end on the 8th day (+/- one day) which is Tuesday June 14. That also puts it in a Bradley turn window. A minor Bradley was expected on June 2 (+/- 4 days) which corresponds with the short-term top in equities. A second turn was due on Friday June 10 (+/- 4 days). After that there is no turn until mid July.

Putting it all together, I anticipate a pretty good buying opportunity arising by mid week that should see the S&P 500 retesting the March high at 1229 and possibly pushing to new highs around the 1250 level. But -- don't get too complacent here. The Investors Intelligence survey is currently showing excessive optimism by newsletter writers. I use this as one variable in my weekly stock market model and when the bullish minus bearish count exceeds 29 (29.7 last week) it sets the model up for a possible SELL signal over the following six week period. That takes us out to July 21 and includes the July 13 Bradley.

THe XAU is moving back toward the bottom support line of its 3 1/2 year bull channel. Because this index violated that channel to the downside on April 12, that line now represents resistance and the XAU may attempt to touch it from below before heading south again. To do that, though, it must first overcome resistance at the $90 level and contend with an overhead downtrend line (view chart).

Week Beginning 6/26

The stock market sold off rather violently the latter part of last week just as the S&P 500 was approaching the March 7 high of 1229. While stocks were somewhat overbought, I believe there is still room to the up side and there are still 12 trading days left before the major Bradley turn date of July 13. At this juncture, I would anticipate another run at 1229 before we see any serious moves to the down side. Nevertheless, I began the process of phasing out of my long positions on Thursday.

The 50-day moving average for the S&P 500 currently resides at the 1181 level, about 1.0 percent beneath Friday's close. If the 50-day MA is penetrated in the next few days, I would treat all rallies as selling opportunities.

The XAU Gold & Silver Index has pushed up against what once was a bullish support line at the same time that it is testing its 50-week MA. I don't believe the correction is over for the gold shares and this double resistance zone should provide more supply than the bulls can handle (view chart).

Week Beginning 6/19

In hindsight, the Bradley low I was looking for arrived a day early, on June 9. Since then the S&P 500 has rallied 2.4%, taking out the June 2 closing high of 1205 and is just one good up day away from testing the March 7 high of 1229. Meanwhile, the NASDAQ 100 index has yet to hurdle its June 2 closing high of 1569. In fact it is trading 2.0% below that level, setting up a bearish divergence with the large cap index. As long as the market leading NASDAQ remains below 1569, the S&P 500 is not likely to break above the March peak. Regardless, I expect that the 4-year cycle top will be in place by mid-July.

One potential bull market killer is long-term interest rates. The 30-year T-bond yield tested major support at 6.15% two weeks ago. Since then it has formed a bullish MACD divergence and has traced out an island bottom reversal on the daily candlestick chart (view chart). It has not yet moved into a bullish uptrend but a close above 4.65% would be an important first step in that direction. It would take a close above 5.35% to set up a SELL signal in my monthly stock market model. Alternatively, a CPI reading above 196.3 in July (May reading was 195.0) would accomplish the same thing.

Week Beginning 5/1

It was another choppy week in the stock market, one that saw the S&P 500 climb back up for a failed test of the head-and-shoulders neckline at 1164 (see last week's chart) on Monday and Tuesday . By late Tuesday the market sold off with a bearish reversal and some follow-through selling on Wednesday and Thursday. But Friday answered with a bullish reversal on reasonably good volume. I remain short equities with a target of 1100 for the S&P 500. If the index can hurdle the 1164 resistance, though, I will move back into cash and consider going long.

The bearish position in stocks saw some confirmation by the gold shares this past week. The stock market has been synchronized with the gold market since October 2002. While the metal itself remains in a bullish uptrend, the gold mining shares have broken down badly. Typically the gold shares lead the gold metal price so I see this as bearish for gold in the short to intermediate term. The XAU index completed a double top at around $110 per share (first top was in December 2003, second top was in November 2004). Just recently it broke down through its 4 1/2 year uptrend line and then on Wednesday of last week it gapped down beneath a declining head-and-shoulders neckline (view chart). As technical charts go, this one is as negative as they get!

Adjusted money supply has been in a decline for more than three years now (click on the RPCM2 link to the right to view a chart). The breakdown in gold shares and equities in general is a sign of deflation in the markets. When this deflation reaches the home construction industry, the Fed will open up the spigot once again. When that occurs, I believe gold and gold shares will resume their bullish uptrend but inflation fears will drive stocks lower -- much lower -- as the traditional relationship between gold and the stock market reasserts itself.

Week Beginning 5/8

Stocks rallied this week, pushing the S&P 500 above the important 1164 overhead resistance and increasing the likelihood that the March highs will soon be tested. The way I am playing this market is to hold cash as long as the S&P is above 1164 but below its 50-day moving average (as it is now), buy stocks if the index closes above both benchmarks, and go short if it falls below both its 50-day MA and the 1164 support (view chart).

Week Beginning 5/22

Stocks exploded higher this week. Although the major averages have moved into overbought territory, the short-term trend remains up. Look for a pullback in the first week of June before a final top is reached in mid-July at the next major Bradley turn date. As things are shaping up right now, that top for the S&P 500 index is likely to be at the March high of 1229 as a minimum. The maximum target would be in the neighborhood of 1250.

Week Beginning 5/15

The markets gave us some very mixed signals this week. It was about a month ago that the XAU Gold & Silver Index broke down out of its three year uptrend and I wrote "The metal itself remains in a bullish uptrend but the gold shares usually lead the metal so I anticipate falling gold prices in the not too distant future." This week gold finally broke down out of its four year bullish uptrend as the upper chart illustrates here. That chart suggests to me that gold is headed down to the $350-380 price range.

Gold and the stock market have been trending together since October 2002 so this breakdown could be interpreted as a negative event for share prices and so we saw the Dow Industrials and the S&P 500 break support this week. The problem is that the market leader is the NASDAQ and that index actually violated its six month long downtrend line as the lower chart above indicates.

With my daily, weekly, and monthly models all still positive at the same time the NASDAQ is forming a bullish divergence with the large cap indices, I would have to say the weight of the evidence suggests that the bulls are in charge here. We will know for certain if the S&P and Dow can hurdle their 50-day moving averages. The NASDAQ was able to do that on Friday and looks like it is poised for a rally. A close by this technology laden index below its 20-day MA would suggest that the bears have taken back control. Meanwhile, I plan to follow the TrendRight's lead and sit this one out until the divergences are rectified.

Week Beginning 5/29

The Trendright system moved back into equities this week, confirming the positive short- and intermediate-term stock market models. Stocks are now poised to make a run at the March highs. Whether or not prices are able to make new cycle highs, I believe stocks are in the process of forming a major 4-year top .

While it's possible that March was the end of the bull market, I believe the top will coincide with the next major Bradley turn due on July 13. If that is the case, the peak price in the S&P 500 index should come at around 1254, which is a 61.8% Fibonnaci retracement of the entire bear market decline from 1553 in March 2000 to 769 in October 2002. If the S&P reaches 1254 in mid July, it will likely terminate at the lower support of the bull market channel that it broke down through in early April (view chart).

Minor Bradley turns are coming up next week (June 2) and the week after (June 10). I would look for a short-term top on June 2 (+/- 4 days) followed by a bottom one week later and a resumption of the uptrend into July.

Week Beginning 4/3

Right on cue, the stock market bottomed at the Tuesday March 29 Bradley turn. A second one is due this coming Tuesday which appears will be a double bottom and an excellent buying opportunity (view chart). The market is oversold but is showing signs of forming a bullish divergence.

Gold remains in the strong intermediate-term uptrend it has been in for over three years. On a short-term basis, it is in a pullback. Since October 2002, stocks and gold have been trending in the same direction so if stocks bottom early this week, look for gold to follow suit within a week. Those inclined to invest in gold should consider the exchage traded fund known as StreetTracks Gold Trust Shares (ticker symbol GLD). They track the gold price in the same way as the SPX tracks the S&P 500 index.

Week Beginning 4/10

Those who were looking to go long the stock market and missed buying the bottom on Monday were handed a gift on Friday when the market sold off quite strongly. That sell-off was a reversal day on the chart but it came on light volume and with a very bullish background. For one thing, the Dow Industrials made a successful retest of the January 24 low at 10370 (view chart). The S&P 500 did the same a week earlier.

Notice also in that chart how the Monday bottom in the Dow was accompanied by a bullish divergence in the MACD histogram. To top it all off, the two recent Bradley turn dates appear to have formed a double bottom, as anticipated. Now it is certainly a possibility that the March 29 Bradley was a bottom while the April 5 turn was the top on Thursday. So be prepared to exit any longs should the Dow break down below the 10370 support.

I am long gold here as well, with a mental stop below $420 in the metal itself or $90 in the XAU Gold & Silver Index.

Week Beginning 4/24

It was a volatile week in the stock market -- one where the S&P 500 declined to 1136 and then lurched higher on Thursday in a bounce that took the major averages up about 2% in a single day. From here, I would anticipate that price on the S&P will fall to 1100, a target established by the completion of a head-and-shoulders formation (view chart).

The head of that chart pattern peaked out at 1229 on March 7 -- the high for the year thus far. The neckline is a support at 1164 that has been in the making since November of last year. Now that prices have closed beneath 1164, that support becomes resistance and the 1100 target should be the next stop. Once that goal is achieved, look for the S&P 500 to rally back up to the 50-day moving average. If, on the other hand, the Wednesday low of 1136 can hold and the S&P is able to break back above the 1164 resistance line, I would expect the March high to be challenged and perhaps eclipsed.

Week Beginning 4/17

This was a VERY important week for the stock market. When I cautioned last week that the April 5 turn in stocks may have been a significant top in the market, I fully expected that such would not be the case. I felt the odds were building that stocks would rally into July as the S&P 500 approached the 1250 area. Not to be. Every major stock average has now broken down out of 30 month long bull market channels as this week's chart illustrates (view chart).

The chart is actually a collage containing four separate charts. In the upper left corner is the S&P 500 which broke down this week. The charts of the Russell 2000 small caps and the Dow Industrials look almost exactly the same (not shown). In the lower left corner is the Dow Transports which also broke down this week. The upper right shows the NASDAQ 100 index which is the market leader and broke down three weeks ago. It now looks very likely that the March highs for the S&P, Dow Industrials, and Dow Transports and the December 2004 peaks in the NASDAQ and Russell 2000 were the official end for these respective bull markets. If so, look for the S&P 500 to reach 1060 by mid July before bouncing back perhaps all the way to the 1164 level.

Markets never go down in a straight line so I don't expect the bulls to give up easily -- particulary while my monthly stock market model remains positive. For this model to turn negative, inflation and/or long-term interest rates would have to perk up soon. Meanwhile, just based on the technicals, I would look for a decent bounce off of the 1130 area for the S&P 500 in the coming week.

The fourth and final chart in the collage shows that gold shares, which have trended with the stock market in general for the last 2 1/2 years, have broken down out of their multi-year bullish trend. My gold model remains positive so I expect that what is occuring here is simply a correction, albeit a substantial one, and that gold shares will continue their bull run later in the year. The metal itself remains in a bullish uptrend but the gold shares usually lead the metal so I anticipate falling gold prices in the not too distant future.

Week Beginning 3/6

The Trendright System flipped from cash to stocks this week, indicating that the short-term trend is up. That could very well mean that my target of 1250 will be the next stop. Last week I pointed out that a minor Bradley turn was due on Friday March 4 (+/- 4 days) and that I expected it to be a low. If the market hits 1240-1250 by next Thursday, then the Bradley turn will be a top rather than a bottom. If not, then I would anticipate a mild sell-off this week and a good buying opportunity.

Meanwhile, the BullBear Model is now solidly in the SELL zone, suggesting that an important top is near. Another indicator I track is the NASDAQ 100 index divided by the Dow Industials which serves as a greed-fear metric -- when it trends higher greed dominates, lower and fear is in charge. Buy and sell signals are triggered whenever this indicator crosses its 30-week moving average (+/- 6 weeks). At the end of January this indicator moved to sell mode (view chart) and next week the six week window closes -- suggesting an important top is at hand.

If my Elliott Wave count in that chart is correct, the next top should be the beginning of a very significant move down. My E-Wave analysis shows a very large 5-wave impulse formation since the October 2002 lows. That marks either the beginning of something big (a major bull market that will take stocks to new record highs) or the end of something big (the secular bull market that began in 1982). I believe it is the latter because new bull markets launch when price-earnings ratios are under 10 but the P/E ratio was around 30 in October 2002. Even in the unlikely event the stock market has launched into a new bull market, a completed 5-wave impulse would need to be corrected before prices could march higher.

Week Beginning 3/13

A quick comment on the stock market followed by a discussion of the new Market Insights format. The minor Bradley turn due on Friday March 4 showed up as a short-term top on Monday March 7. Although the stock market is getting oversold here, I think we will see the stock market trade in a range for the next two weeks before moving toward my 1250 target for the S&P 500.

I changed the format this week in an attempt to collect every proprietary indicator and trend following tool that is used throughout this web site into a single location. As before, the Trendright chart is at the top of the page. It currently says the short-term trend is up. The link to the RPCM2 page used to be just above that chart. It now is in the box to the right under the heading "Stock Market Timing Indicators" since it is one of my longer term proprietary stock market indicators. Also under that heading is a link to the Long-term Outlook page and the current signals from my monthly, weekly, and daily stock market timing models. The longer indicators are currently negative while the short to intermediate indicators are all positive -- warning us that although stocks should push higher here, any intermediate level top is likely to be ominous.

Beneath these and still within the box are "Other Timing Indicators" which include proprietary models for the economy and gold. Both are currently positive. Finally, at the bottom of the box is a link to the web site where I get my information on the Bradley Model. The next important turn date is July 13. Hope you find this new format more helpful.

Week Beginning 3/27

With the S&P 500 index closing at 1171 on Thursday, the stock market is about as oversold as it was back in late January when the S&P bottomed out at 1164. That is not to say that an oversold market can't get even more oversold, but I am looking for a buying opportunity in the near term. April is quite frequently a good month to purchase stocks and with two minor Bradley turns coming up (March 29 and April 5) I anticipate an 8-10% rally beginning either next week or the first week of April.

Week Beginning 3/20

The Trendright system moved from stocks to cash this week, confirming my expectation that the stock market will trade in a range until the end of the month. For the S&P 500 index that range should be 1160 on the low end to 1230 on the high end. A minor Bradley turn is due on March 29 (+/- 4 days) which I expect will be a low and a good buying opportunity -- one that should see the S&P embark on a run to 1250.

Is there a housing bubble? Most people say no. But most people didn't believe the NASDAQ was in a bubble back in 2000, either. In the 2 1/2 years from March 2000 to September 2002, however, the NASDAQ Composite collapsed 78% -- that was a bubble, folks. Interestingly, March 2000 is the same month that real estate stocks launched into a powerful bull run that continues today. History tells us that stock market bubbles are always followed by an "echo" real estate bubble (Japan is a recent example). I'll leave it to you to decide if the U.S. is following the script (view chart).

Week Beginning 2/6

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

The price action in the NASDAQ 100 Index this past week tells me that the major Bradley turn date of January 27 (+/- 4 days) is a bottom and stocks should continue to push higher from the market lows made on January 24 view chart . The next major Bradley turn date is July 13 and with my intermediate-term stock market model still in BUY mode (since August 2002), a fairly significant move higher is a distinct possibility.

My next target for the S&P 500 index is 1254, which could arrive fairly soon since it is only a 4.2% rally from Friday's closing price of 1203. 1254 is a 61.8% Fibonnaci retracement of the bear market decline from 1553 in March 2000 to 769 in October 2002. I am still of the opinion that the current bull market is a rally within a larger secular bear market. Since the initial decline within that secular bear market began in March 2000 and lasted 31 months, one intriguing possibility is that the bull market will elapse over the same 31 month period. February is month 28 so an importatant window for a final top will arrive in May.

I will commit 75% of my portfolio to long the stock market on Monday with a stop at 1183 (S&P 500).

Week Beginning 2/13

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

Last week I stated that stocks appeared to be ready to continue their advance and cited 1254 as my next target for the S&P 500. The NASDAQ 100 chart confirms this notion in that it broke out of its recent decline on Friday 4 followed by a retest of the breakout and a very bullish bounce on Friday 11 (view chart).

Both the S&P 500 and NASDAQ have been in a secular bear market since March 2000. Secular bear markets last about fourteen years on average and begin and end with cyclical bear markets. The opening bear market began in March 2000 and ended with the lows made in October 2002. That date also marked the beginning of the current cyclical bull market. Cyclical bull and bear markets last an average of two years so the current bull at 28 months is getting a bit long in the tooth.

Two important turn windows where we should be looking for stocks to put in an important top is May and July of this year. May marks the 31st month of the bull market which would make it equal in length to the cyclical bear market in both the S&P 500 and the NASDAQ 100 averages. The Dow Industrials, on the other hand, began its bear market decline in January 2000 so its bear lasted a total of 33 months. An equivalent 33-month bull market in the Dow would suggest July as a probable end to the current bull market. Since July 13 is also the next major Bradley turn window, and because historically bear markets tend to begin in either summer or winter months, I would place greater weight on the July window.

Week Beginning 2/27

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

The BullBear Model moved from overbought to sell this week while the Trendright System is still allocated in cash. Add to this the fact that the stock market is finely synchronized with the Bradley chart so far this year (view chart) and it could be a good time to consider moving any sell stops you may have on long positions to just below last Friday's low. The next minor Bradley turn is due on March 4 which is this coming Friday. If the pattern continues, it will be a low and a good buying opportunity.

Long-term bond rates held steady this past week after forming an island bottom the week prior. Yields appear to be consolidating just below their 50-day MA at 4.69% to build up strength for the next push higher.

Week Beginning 2/20

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

Every single stock market decline worthy of mention over the past 40 years is accompanied by a SELL signal in my current intermediate-term model. While it is true that many of those signals correlate as back-tested data points, a 100% positive correlation is nevertheless still quite impressive and should not be ignored. The model relies heavily on three economic parameters: short-term interest rates, long-term interest rates, and CPI inflation.

Of the three, long-term interest rates are the most likely to trigger a sell signal over the next several months with CPI inflation in second place. Short-term interest rates, currently around 2.50%, would need to jump to nearly 6.00% to spook shareholders -- not bloody likely. Long-term rates, on the other hand, would only have to rise 100 basis points from their current 4.60% to around 5.60% in order to bring the current cyclical bull market to a halt. CPI inflation could accomplish the same task by crossing the 3.70% level. With December's year-over-year increase at 3.54%, that too is a distinct possibility.

Considering that today's core PPI (producer price index) rose at a higher than anticipated .8% in just a single month, inflation is a concern to stock investors. It is even a bigger worry to bond holders and the PPI report jacked up long-term interest rates and rocked bond prices (view chart). That chart displays an important technical formation known as an island bottom. Islands are formed when prices gap lower, trade a number of sessions below the gap, and then gap higher. It is a fairly reliable reversal pattern and indicates to me that bond yields will eventually trade well above the 50-day MA.

Week Beginning 1/2

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

Upon reviewing the performance of the Trendright System over the past year I decided to make a modification to its algorithm. 2004 was a very choppy and trendless year for the stock market. There were several times within that choppiness that the Trendright System moved to a short postion only to be whip-sawed into a significant loss when the market changed directions. I have added a bit more conservatism for just such situations so that the model switches more quickly to a cash position, minimizing the potential risk. The downside of this change is that it takes a little longer before Trendright recognizes that a trend is actually in place -- but I believe the net effect is benefial to you trend followers out there.

That choppiness over the past year is indicative of a Wave 4 correction in Elliott Wave terms. Wave 4 corrections are followed by Wave 5 impulse waves which is where the market is today. If the stock market is going to resume its secular bearish ways sometime in January and eventually move below the October 2002 low as I believe it will, this current five wave affair has to do one of two things. It must either cap off an A-B-C correction that would have started at the October 2002 low, or it must terminate the entire bull market run from the 1982 low. According to the interpretation in this chart, the latter appears to be the case.

In other words, the anticipated top later this month would have to be the orthodox top of the 20+ year long bull market that began in 1982! Because it is unlikely that a new high can be achieved in the Dow this month (and an impossibility for the S&P 500 index which shares the same count), the secular bull market would terminate in a 5th wave failure where Wave 5 is unable to exceed the Wave 3 high.

Week Beginning 1/9

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

Stocks moved into a short term correction this week. Although the long term Elliott Wave count I presented last week suggests that a major top is at hand, I do not believe that the rally high has been made yet. A short term Elliott Wave count that dovetails with last week's analysis suggests that we are still about three weeks away from a terminal point, somewhere around 11000 view chart. That corresponds with the next major Bradley turn date on January 26.

Week Beginning 1/23

BullBear Stock Market Model: buy / OVERSOLD / neutral / overbought / sell

Two bearish events took place this past week. First, the NASDAQ 100 broke below its 80-day moving average for the first time in five months, closing the week at 1504 and 130 points off of the high it set last month. Second, the S&P 500 completed a head and shoulders top that has as a minimum target the 1138 level view chart . A short-term correction is in progress and may be about halfway over.

The lone bullish event his week was the CPI data release for December. It showed a pullback in the inflation rate to 3.3% from 3.5% in November. It is very unlikely that my intermediate-term model will move from BUY to SELL before summer. With a major Bradley turn due on January 27 (+/- 4 days), stocks are shaping up to put in a bottom and present an important buying opportunity.

Week Beginning 1/16

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

The Elliott Wave count of the Dow Industrials I presented last week was shown to be incorrect when the Dow fell below the November 15 high this week. By Elliott Wave rules, that means that the November 15 could not have been a Wave 1 top. It may well be that it was a Wave 3 top which means that the late December peak was the end of the Wave 5 advance and the final high for the rally that began back in October.

When faced with a confusing situation like this, it is best to lay Elliott Wave aside and rely on other means for determining a change in trend. One of my favorites is the 80-day MA of the NASDAQ 100 view chart. NASDAQ is the market leader and as long as it remains above the 80-day average stocks are still in an uptrend. A break below the 80-day combined with the Trendright system moving to a short position would indicate that stocks are in a significant correction.

How significant will depend on whether the intermediate-term stock market indicator moves to a SELL or remains on BUY. If the CPI data in the coming week show inflation above 3.60%, the intermediate-term model could very well switch to a SELL which would likely mean that the cyclical bull market that began in October 2002 is coming to a close.

On January 27 (+/- 4 days) a major Bradley turn is due. If stocks sell off into that date then another powerful rally should follow. If, on the other hand, stocks rally this week then we should be on the alert for an important top at the end of the month.

Week Beginning 1/30

BullBear Stock Market Model: buy / oversold / NEUTRAL / overbought / sell

The BullBear Model moved into overbought territory this week at the same time that the Trendright system turned negative. Meanwhile, the January 27 (+/- 4 days) Bradley turn window is upon us through Tuesday of the coming week. If this turn is to be a bottom, that means that either Monday of last week was the low or we have two days of decline coming up to start the new week.

If, on the other hand, it turns out to be a top then the high made on Thursday on precisely the anticipated turn date of January 27 was the beginning of a serious slide in share prices. We'll just have to see how things play out over the next week.

If you are inclined to go short here (as I am) keep your commitment to no more than 1/8 of your total portfolio value. And watch the 20-day MA closely. If the S&P and NASDAQ 100 make a solid close above it , I will move back into cash. A good place to place a mental stop whould be back where these two indices left gaps on the chart on January 20. That would be an 1185 or higher close on the S&P and 1546 or higher on NASDAQ. Since NASDAQ is the leader, I would place greater emphasis on it in determining when this correction is over.