Week Beginning 12/07

We will enter the Bradley turn window on Tuesday of this week. I had expected the market would have already tested the 50-day MA and would now be declining toward the recent lows. The market, however, had other ideas and now we will have to wait and see whether the Bradley turn will be a top or a bottom. I am completely in cash so that I can easily swing one way or the other, depending on what message the market relays. My short-term indicators lean toward a top forming in this window. My intermediate indicators suggest a bottom. We shall see...

Week Beginning 12/14

The Bradley window is December 14 +/- four trading days, which means we should see a top or bottom between 12/9 and 12/18. The market peaked on Monday 12/8, one day before the window opened. No technical indicator is perfect so it may turn out that this peak is the turn we have been looking for. If so, I would add to shorts with a close by the S&P 500 below the 850 support. If the S&P runs up for a final kiss of the 50-day MA, that would be a great opportunity to sell short. According to my Elliott wave count, wave [5] down will begin within this Bradley window with a downside target around 710 (view chart). If the S&P breaks out above the upper resistance line of the channel shown in the above chart, that would be a signal to cover all shorts.

Week Beginning 12/28

The holiday week was positive for share prices, in line with the historical averages -- but just barely. Most indices were up less than one percent on typical low holiday volume. Now we wait to see which way prices will break out of the trading range that stretches in the S&P 500 from 850 to 919.

Week Beginning 12/21

The Bradley window closed on Thursday without giving us a clear indication as to which turn was the Bradley turn. Was it the Friday December 12 pivot low or was it the Wednesday December 17 double top? We should know soon enough. A close by the S&P 500 below 850 will mean that the 919 double top was the beginning of a new leg down. If, on the other hand the 919 high is breached it will mean that a pretty solid rally is underway, one that could carry the S&P to the 1050 neighborhood. If my Elliott wave count is correct (view chart), the former scenario should prevail. With Christmas right around the corner, a down market in the coming week would be an unusual gift to the bears.

Week Beginning 11/02

The Elliott wave count I laid out last week still appears to be the correct one. Wave v of secondary wave 3 (of primary wave III) completed on Tuesday as a double bottom against the low set on October 10 and the markets are now trading in secondary wave 4 (view chart). Look for backing and filling between 840 and 1060 over the next six weeks. In mid-December secondary wave 4 will likely terminate and secondary wave 5 should take us to marginally new lows in January.

Week Beginning 11/9

If the S&P 500 runs up to the 50-day MA in the coming week (target around 1070), I would anticipate that Elliott wave 5 of wave III would take the major averages to new lows by the next Bradley turn window of December 12. If, on the other hand, the S&P falls back down to retest the recent lows around 840, I would expect to see the averages move sideways (below 1020) until mid-December and then fall to new lows in January of next year.

Week Beginning 11/23

Traders who committed 50 percent of their trading portfolio to a long position last week were treated with a 3-4% reduction in portfolio value. Such is the volatility of the markets these days. Those still holding those long positions will likely see losses turn to profit by Wednesday if my read is correct. The stock market looks poised to rally 15-20 percent from the 741 S&P 500 bottom over the next two weeks. After that a trip down to retest the recent lows should be the theme into mid-December.

Week Beginning 11/16

The Dow Industrials and the S&P 500 both fell to new intraday lows but failed to make new closing lows. That will come later. For now the major averages are rallying up to test their 50-day moving averages. I would anticipate that this overhead resistance will not be significantly penetrated and that a wave 5 decline will begin on or near November 25. From there I expect to see stocks fall to new lows by mid-December.

Week Beginning 11/30

The S&P 500 has already rallied 21 percent from the recent low of 741, exceeding my expectation for a 15-20 percent rally. If my analysis is on target, there is another 50 points or so of upside in the coming week as the S&P 500 (along with a number of major averages) should approach its 50-day MA view chart. After that, I expect the averages to move lower in a retest of the November lows.

Week Beginning 10/05

What a week. As I said last week, if stocks rapidly move to new cycle lows that would confirm my Elliott Wave analysis of the S&P 500 which was telling me that the market may be in the early stages of a major wave 3 within a primary wave 3. With the Dow Industrials falling 7.3 percent, the S&P 9.4 percent, and the NASDAQ 100 12.0 percent this past week, that count was clearly correct. My expectation is that this major wave 3 will terminate within two weeks followed by a tradeable rally that should last about eight weeks. My next downside target on the S&P 500 is 1060. If that fails to hold, and I believe it will, 1008 is the support below.

Because the market took out the mid-September lows on both the daily and weekly charts, my daily and weekly buy signals were negated. That leaves my Composite Cyclical Indicator looking like so (view chart). That blue arrow is the monthly model buy signal that was registered for September which usually means a bottom is due September 15 +/- six weeks (taking it out to October 24). Both my daily and weekly models are very near buy signals, the market is getting oversold, and a Bradley turn window opens up in mid-October. Everything points to a tradeable bottom at mid month.

Week Beginning 10/12

Simply stunning. The S&P 500 fell exactly 200 points this week, an eighteen percent decline from last Friday. The Dow Industrials also collapsed eighteen percent while the NASDAQ 100 dropped only fourteen percent. All that bulltwa about how the markets would crash if Congress did not pass the 700 billion dollar bailout (i.e., corporate welfare) package turned out to be just that -- bulltwa! We have seen four market bubbles turn into panics since 2000: the technology bubble from 2000-2002, the housing bubble beginning in 2006, the credit bubble beginning a year ago, and the commodity bubble beginning in early 2008 (just look at the $XOI oil index, $DJUSPT precious metals index, $DJUSIM industrial metals index). These last two spell deflation for the economy and likely a four year depression. That's why the stock market is tanking.

That said, bear markets do not tumble in a straight line and I expect a bounce of 20-25 percent to begin in the coming week. My monthly model is calling for a bottom September 15 +/- six weeks, my weekly model is now on buy +/- four weeks, one of the Bradley charts is calling for a turn in mid-October. The one model that has yet to give a buy is the daily model which is composed of sentiment indicators. Maybe it will kick in this coming week. One of those sentiment indicators, by the way, is in record territory. The VXO is an indicator that is indicative of fear levels. In the first leg down in this secular bear market (2000-2002), the market always rallied after fear pushed the VXO up near the 50 neighborhood. As the chart shows (view chart), the VXO closed Friday at an astounding 86! A bottom can't be far off.

Week Beginning 10/26

Major wave v of secondary wave 3 is currently in progress (view chart). In the above chart the upper frame is hourly and the lower one is daily which together show that primary wave iii began mid-May, as did secondary wave 1. Secondary wave 3 of primary wave iii began in late August and has broken down into five major waves, wave iii of 3 having ended six trading days ago and wave iv apparently concluding on Tuesday. Now we are declining in wave v that should reach its end late next week, most likely around the 770-810 level. After that, we should anticipate a five week secondary wave 4 rally that should take us to the 1100 area on the S&P 500, followed by a decline to marginally new lows. I hope you don't have as much difficulty following this discussion as I had writing it.

Week Beginning 10/19

As anticipated two weeks ago, major wave iii of secondary wave 3 appears to have put in a bottom this past week, after which the market rallied a stunning 24 percent in two days! This coincides with a convergence of buy signals that point the Composite Cyclical indicator in the bullish direction (view chart). That is telling us that stocks are either ready to rally or are going to move sideways prior to testing the recent lows. I think there is little chance that the former scenario will win out over the latter.

In other words, this market will most likely back and fill for a while -- my guess is for five weeks -- before going lower to test the recent low (view chart). Five is a Fibonacci number, just like all the others in that chart (3, 5, 8, 13, 21, etc). For the S&P that means a trip down to the 840 level is the likely outcome over the next two months. If that level does not hold then 810 is next and 770 after that. I believe that a low beneath 770 in 2008 is highly unlikely.

Week Beginning 09/07

It would appear that the financial stocks made a significant bottom in July. By significant I mean that they completed a five wave pattern down (as measured by the Financial Select Sector SPDR -- ticker XLF) beginning in June 2007 and now are retracing that decline. I expect to see the XLF run up to the 200-day moving average in three waves before continuing down in five final waves. The implications for the general market are important. Since the XLF topped out four months before the major stock averages, I would look for these averages to bottom out near November; i.e., four months after the July bottom in XLF.

I have put together a Composite Cyclical Indicator that combines four elements: my daily model, weekly model, monthly model and the Bradley model. This new indicator issues a change in signal when at least three of the four are aligned in the same direction. For example, in October 2007 the daily, weekly, and monthly models all issued sell signals (view chart). By March 2008 all four went to buy and in May the daily, monthly, and Bradley teamed up for a sell. The Bradley model only issues turn dates so it takes on the sign of any indicator that changes signals within a turn window. The current composite signal is on sell, where it has been since May 2008. The signal for this indicator is shown on the right of this page, along with a secular indicator. The secular indicator paints a long-term picture, showing whether the stock market is in secular bull or bear mode -- a trend that typically lasts 15-20 years.

Next week, on September 9, the first of a pair of Bradley turn days makes an appearance. Because these two dates (the second one is September 19) are within three weeks of each other, I have lumped them together to form a single +/- four trading day turn window centered around September 15.

Week Beginning 09/14

We are currently in a minor Bradley turn window centered around Monday September 15 +/- 4 trading days. If a top does not form this week that leads to an immediate downdraft to new cycle lows, then the consolidation of the past few weeks will turn out to not be a Sub-wave 2 within a larger Wave 3 but rather a Sub-wave 4 within a larger Wave 1. In other words, the decline that began in May and bottomed in July could be Sub-wave 1 of a larger Wave 3, but only if the consolidation (Sub-wave 2) ends post haste. Otherwise the supposed Sub-wave 2 will last longer than the eight week Wave 2 in March and April. That's a no-no and would indicate, to repeat, that this is a Sub-wave 4 within a larger Wave 1 with a downside target of 10200 as shown in the chart (view chart).

Week Beginning 09/28

This week the S&P 500 made a lower closer on the weekly chart than it did at the July bottom, thus negating the weekly model buy signal. However, there is enough data available to determine that the monthly model will switch from sell to buy for September. That means that three out of four elements of the Composite Cyclical Indicator will have formed a buy cluster at the September 17 low (view chart). On the other hand, my Elliott Wave analysis of the S&P 500 is telling me that the market may be in the early stages of a major wave 3 within a primary wave 3 (primary wave 1 lasted from October 2007 to March 2008, primary wave 2 ended in mid-May, major wave 1 of primary wave 3 ended in mid-July). So which analysis is correct?

There are two things to look for to make that determination. A close above 1300 by the S&P would prove my wave count to be incorrect while a rapid move to new cycle lows would confirm it. The second indication would come if the following chart of the Dow Industrials divided by the 30-year treasury bond crosses above the 50-day moving average, confirming that a bottom is in place (view chart). This has followed a bottom in the weekly chart of the S&P 500 typically by one week in each preceding instance. Should that occur, the rally could be short-lived as the second Bradley chart is showing a turn window in mid-October.

Week Beginning 09/21

No doubt the stock market was poised to fall off a cliff until the Feds committed, in round numbers, one trillion of taxpayer dollars to prop up failed financial institutions and bail out over-leveraged rich shareholders. The plutocracy has been spared for the time being.

My Composite Cyclical Indicator (view chart) supports the idea of at least a short-term bottom forming here. Had the market closed near the lows of the week, the weekly model would have flipped back to sell. But such was not to be. Not only did it remain on buy but my daily model also went to buy on Wednesday, the day before a bottom was established within a minor Bradley turn window of September 15 +/- four trading days. Taken together, we should expect for the markets to at least test the 50-day moving average, something they are already doing due to the astonishing rally on Thursday and Friday.

If this is simply a correction of the down leg that began at the start of the month, we would expect to see stocks struggle at the 50-day MA over the coming week followed by a resumption of the decline. A close above 1278 would rule this option out and seems the most likely outcome. That's because my monthly model has better than a 50 percent chance of moving to buy this month. Should that occur, we are probably looking at a three month rally or sideways movement that would at minimum test the 200-day MA. Unfortunately, we will have to wait for month's end before the data comes available for that model. Either way, though, nine times out of ten a large volume spike on a potential bottom like we saw last week is sooner or later followed up by a retest of that low (view chart).

Week Beginning 08/03

Last week I suggested that a final top in stocks was nearing for the current counter-trend rally. The NASDAQ 100 has traced out five waves within a bearish rising wedge while the Dow Industrials and S&P 500 appear to be forming bearish three wave flags (view chart). The NAS formation could break down at any time, but the S&P and Dow look like they want to make one final push up toward the 50-day MA within their respective trend channels. A good shorting opportunity would present itself should the lower support lines of the various bearish formations be violated to the downside.

Week Beginning 08/10

The bear flag formation I alluded to in last week's letter may have morphed into a Wave "a" leg up followed by an ascending triangle Wave "b" followed by a breakout of this pattern on Friday for both the S&P 500 and the Dow Industrials. The Dow chart indicates a destination to the 12250 area is very likely based on a projection from the triangle (view chart). For the S&P, the next price target based on the triangle projection is 1249. The NASDAQ 100, in retrospect, can also be drawn to show a very similar bear market rally configuration. It broke out of its triangular formation earlier on Tuesday and has a projected target of 1950. All these targets could easily be met by next Thursday after a Fibonacci 21 day rally has completed.

Week Beginning 08/24

The stock market is approaching a criitical test in the coming week. As this week's chart indicates, the Dow Industrials broke down through the support line of its rising wedge formation and then immediately ran up in a retest of that line (view chart). On Monday this average will also confront a trend line that captures the downtrend that began in May -- illustrated in the first of the double chart above. The intersection of those two lines should present significant overhead resistance. If the Dow can close above 11660, we would have to conclude that the bulls are in control. On the other hand, if the bears take control and prevent the Dow from penetrating the downtrend line, then the second of the double chart that depicts a large head-and-shoulders pattern will likely drive the Dow below 10,000 in a hurry.

Week Beginning 08/17

It is clear from the price action this week in the Dow Industrials and the S&P 500 that the bear flag did not morph into an ascending triangle as was speculated last week. These two market averages now appear to be tracing out rising wedges on their respective charts (view chart). The targets will change accordingly, with a 50% retracement of the May-July decline the most likely stopping point. That translates into 1320 for the S&P and just shy of 12000 for the Dow. Normally a rising wedge is a bearish consolidation so we should be looking toward a selling/shorting opportunity once the lower support line is violated. A breakout above the upper resistance line would be bullish.

Week Beginning 08/31

Week Beginning 07/06

Both the NASDAQ 100 and the S&P 500 averages achieved the targets I set a couple of weeks ago (1800 and 1257, respectively). Although I believe we are close to a bottom, there are no reversals on the charts that would confirm that stocks are ready to rally from here. My hunch is that there are two or three more days of downside left in equity prices before a tradeable rally ensues.

Week Beginning 07/13

After performing a thorough Elliott Wave analyis on the S&P 500 index, I have concluded the following: major Wave A took the S&P 500 down from 1553 to 769 between March 2000 and October 2002. Major Wave B rallied it up to a double top by October 2007 when Wave C, the last and final wave of the secular bear market began. Wave C will contain five large waves -- three down waves interspersed by two up waves. Large Wave 1 took the S&P from 1576 last October to 1257 in March 2008. Large Wave 2 drove prices back up to 1440 in May where large Wave 3 began. Within large Wave 3 there should be five intermediate waves; iintermediate Wave 1 is playing out right now. If my analysis is correct, the S&P began the fifth and final minor wave down within that intermediate Wave 1 on Wednesday of last week. I suspect that this minor Wave 5 will take five days to unfold which takes us to Tuesday (+/- one day).

My targets for the end of intermediate Wave 1 have been revised as follows: S&P 500 target is now 1200 (down from 1257), NASDAQ 100 target becomes 1750 (down from 1800). I have also established a downside target for the Dow Industrials (view chart), which took over the leadership role from the NASDAQ back in October 2007 and continues to lead this decline today. If a bounce begins by mid-week, look for a rally of about ten percent before a powerful intermediate Wave 3 within a larger Wave 3 takes stocks significantly lower.

Week Beginning 07/27

Little has changed from last week's newsletter. Looks to me as though the major averages want to rally up to test their 50-day moving averages, a move that would suggest roughly a four percent rally from Friday's closing prices (view chart). I would look for a top to form within six trading days from now.

Week Beginning 07/20

The S&P 500 made a bullseye hit on my 1200 target while the Dow Industrials and the NASDAQ came up short by about one percent. It would appear from the weekly chart of the S&P 500 that the market has put in a short-term bottom here (view chart). Last week's candle is a hammer bottom on heavy volume, a fairly reliable indication that still requires confirmation in the form of a white candle with a higher closing price. Neither the RSI nor the MACD histogram on that chart got terribly oversold so I suspect that what is in store is a 7 to 10 percent rally from the 1200 low that should string out to the end of the month. If my read on the market is correct, a very powerful downdraft should begin the first week of August.

Week Beginning 07/06

Both the NASDAQ 100 and the S&P 500 averages achieved the targets I set a couple of weeks ago (1800 and 1257, respectively). Although I believe we are close to a bottom, there are no reversals on the charts that would confirm that stocks are ready to rally from here. My hunch is that there are two or three more days of downside left in equity prices before a tradeable rally ensues.

Week Beginning 07/13

After performing a thorough Elliott Wave analyis on the S&P 500 index, I have concluded the following: major Wave A took the S&P 500 down from 1553 to 769 between March 2000 and October 2002. Major Wave B rallied it up to a double top by October 2007 when Wave C, the last and final wave of the secular bear market began. Wave C will contain five large waves -- three down waves interspersed by two up waves. Large Wave 1 took the S&P from 1576 last October to 1257 in March 2008. Large Wave 2 drove prices back up to 1440 in May where large Wave 3 began. Within large Wave 3 there should be five intermediate waves; iintermediate Wave 1 is playing out right now. If my analysis is correct, the S&P began the fifth and final minor wave down within that intermediate Wave 1 on Wednesday of last week. I suspect that this minor Wave 5 will take five days to unfold which takes us to Tuesday (+/- one day).

My targets for the end of intermediate Wave 1 have been revised as follows: S&P 500 target is now 1200 (down from 1257), NASDAQ 100 target becomes 1750 (down from 1800). I have also established a downside target for the Dow Industrials (view chart), which took over the leadership role from the NASDAQ back in October 2007 and continues to lead this decline today. If a bounce begins by mid-week, look for a rally of about ten percent before a powerful intermediate Wave 3 within a larger Wave 3 takes stocks significantly lower.

Week Beginning 07/27

Little has changed from last week's newsletter. Looks to me as though the major averages want to rally up to test their 50-day moving averages, a move that would suggest roughly a four percent rally from Friday's closing prices (view chart). I would look for a top to form within six trading days from now.

Week Beginning 07/20

The S&P 500 made a bullseye hit on my 1200 target while the Dow Industrials and the NASDAQ came up short by about one percent. It would appear from the weekly chart of the S&P 500 that the market has put in a short-term bottom here (view chart). Last week's candle is a hammer bottom on heavy volume, a fairly reliable indication that still requires confirmation in the form of a white candle with a higher closing price. Neither the RSI nor the MACD histogram on that chart got terribly oversold so I suspect that what is in store is a 7 to 10 percent rally from the 1200 low that should string out to the end of the month. If my read on the market is correct, a very powerful downdraft should begin the first week of August.

Week Beginning 06/01

For the time being, the NASDAQ 100 is tracing out a head-and-shoulders top but it won't take much advance to turn the right shoulder into something other than a right shoulder, thereby eliminating the head-and-shoulders pattern altogether (view chart). To preserve the bearish reversal pattern prices will need to retreat by mid-week. Once the bull channel is violated to the downside it will be safe to start entering short positions but don't go all in until the neckline is broken.

Week Beginning 06/08

The NASDAQ 100 charged to new highs on Thursday, eliminating the possibility that a head-and-shoulders pattern was in the making. That thrust higher, however, turned out to be nothing more than a head fake. On Friday all the major averages collapsed by more than three percent, with the NAS violating its 3-month long uptrend channel and the S&P 500 completing a head-and-shoulder bearish reversal pattern (view chart). The S&P now has a downside closing price target of 1327 based on the head-and-shoulders projection.

In that chart there are four blue arrows, one each at the lows of March 10, April 15, and May 23 and one at Thursday's high. The arrows also align with the four Bradley turn windows we have experienced thus far this year. The first one arrived on March 8-9 which fell on a weekend. The market bottomed the following Monday. The next two fell on April 7 and April 27 with a mid-point between those closely placed dates falling on April 16, the day after stocks made a bottom. The next one surfaced on May 24, once again one day after the market made a bottom. This last turn date of June 7 falls on a Saturday so Friday June 6 is the closest trading day, one day after stocks made a convincing top. This most recent Bradley turn window is classified as a major turn date while all the prior ones fall into the minor category.

Looking ahead, there are only three turn windows remaining for the year. The first two arrive in September and are minor turn dates while the last one on December 14 is a major one. The Bradley model is suggesting that the current reversal could develop into a long joy ride for the bears.

Week Beginning 06/22

The stock markets are getting oversold so I would anticipate a temporary bottom to emerge in the coming week. This should provide an opportunity to take profits on half of any equity shorts you may be holding in your retirement account (I am personally long the QID and SDS ultra short proshares) and all of the shorts in your trading portfolio (I am short SPY and QQQQ). That bottom should coincide with the end of Elliott Wave five for the S&P 500 (view chart) and Elliott Wave three for the NASDAQ 100. The bottom should also coincide with the RSI in the above chart dipping below 30 and the CCI reaching under -200. My target price is 1257 on the S&P 500 (retest of the March low) and 1800 for the NAS.

Gold appears to have put in a bottom here. I am moving 10 percent of the retirement account into GLD with a target price of $11.25.

Week Beginning 06/15

This week the S&P 500 finished flat after selling off earlier in the week. It would apear that this average has traced out Elliott waves 1, 2, and 3 and is curently working on wave 4 (view chart). My upside target is 1370 followed by a sell off down perhaps to the March lows. A close above 1377 would be bullish and would negate my Elliott wave interpretation.

Week Beginning 06/29

The Dow Jones Industrials crashed through its January 2008 low and currently trades at the low of the year. In the last six weeks this average has fallen fourteen percent and is now twenty percent below the all-time high it made in October 2007. It has now met Wall Street's official definition of a bear market (20% decline) and surpassed my own definition some eighteen weeks ago. The S&P 500 has fallen nineteen percent off of its 2007 peak while the NASDAQ, which fell twenty-five percent between October 2007 and January 2008, only declined ten percent in the last six weeks and is trading just seventeen percent off the 2007 highs.

My targets from last week's newsletter remain unchanged. I anticipate those will be achieved early in the coming week followed by a tradeable bounce for the short-term traders. I have added a second Bradley turn indicator (link above) that has been a little more reflective of the markets thus far this year. It indicates a more pronounced bounce in early July followed in two weeks by a resumption of the decline.

Week Beginning 05/04

My short-term model moved from Mixed to Positive this week and the stock allocation in both the retirement and trading portfolios has edged higher. If the Bradley turn window of April 27 (+/- 4 trading days) is to have any validity, Friday should mark a temporary end to the rally. That is very likely considering that the NASDAQ 100 has run into overhead resistance in the form of an uptrend channel (view chart). Use any pullback here as a buying opportunity with upside targets of 1460 for the S&P 500 and 2055 for the NASDAQ 100.

Week Beginning 05/11

The pullback arrived just in time to confirm a short-term Bradley turn window top. At the same time my short-term model moved back to Mixed. The sell off is going to be shallow, followed by a resumption of the rally. From the chart it looks like the NASDAQ 100 is heading for the bottom of the uptrend channel at around 1917 ( view chart). Once the channel is tested, this index will likely rally to the 2067 area.

Week Beginning 05/25

The Dow Industrials completed a double top on Monday May 19 then tanked down through its bear market rally trendline support (view chart). The May 19 peak also serves as a right shoulder of a bearish head-and-shoulders reversal pattern. So it looks as though the next leg down in the 7-month old bear market has begun for the large cap stocks, including the S&P 500 and the Dow Transports. The NASDAQ 100, however, appears in the above chart to be tracing out a head-and-shoulders pattern of its own, with the left shoulder and head complete. If stocks bounce over the coming week, then a right shoulder will have a good chance of developing.

That May 19 peak in equities is close enough to the Bradley turn window of May 24 +/- 4 trading days that it probably qualifies. My suspicion, however, remains that the May 24 and June 7 turns will merge into a single turn window of June 2 (+/- 4 trading days). That would fit nicely with a bounce in the coming week and the tracing out of a head-and-shoulders for the NAS. By the way, my intermediate term economic model has joined the long term dividend yield model by turning negative this week due primarily to inflation trends. My short term sentiment model remains mixed. Treat any bounces here as selling and shorting opportunities.

Week Beginning 05/18

There was no pullback in the market this past week but one lies just ahead. A minor Bradley turn window opens from May 20-29 so I would anticipate one final sell-off down to the channel support line before charging higher toward a target of 2067 in the NASDAQ 100 (view chart). There is a lot of support within the channel between 1950 and 1980, so that should hold.

The May 24 (+/-4 trading days) Bradley turn date is immediately followed by a major Bradley on June 7 (+/-4 trading days). That window from June 3 to June 12 will probably mark the end of the bear market rally and the beginning of the next leg down. We shall see. Another way this could play out is that the two Bradley dates -- which are so close to each other -- could merge into a single turn date at the midpoint which would be Monday, June 2.

Week Beginning 04/06

This week my short-term model flipped from positive to mixed just as the S&P 500 and Dow Industrials are struggling with their 80-day moving averages and we find ourselves in the midst of a Bradley turn window. While I don't believe this is the end of the rally, it may prove prudent to start taking some chips off the table. Assuming the large cap stocks are able to penetrate the 80-day MA, there is considerable resistance just overhead at the 1407 level for the S&P (view chart) and 12850 for the Dow. Should the market find its way to those levels, a pullback is near certainty and a move into cash would be recommended until the market's direction becomes clearer.

Week Beginning 04/13

This week the focus is on the Bradley turn window of April 7 (+/- 4 trading days). It was on precisely Monday April 7 that the Dow Industrials made an intraday high of 12734 -- the highest in over a month. In the four days since the market has fallen more than 3 percent for the Dow, more than 4 percent for the S&P 500, and nearly 5 percent for the NASDAQ 100. From here I would anticipate a three wave decline into the first week of June that could potentially take the S&P down to the head-and-shoulders target of 1230-1240.

Week Beginning 04/27

The S&P 500 penetrated the upper resistance line of the bear market channel I presented last week, but to confuse the matter the weekly chart left a bearish hanging man candlestick on the chart. My suspicion is that in the coming week the S&P 500 and NASDAQ 100 will test resistance at 1407 and 1950, respectively, followed by a retrenchment. After that, however, be on the alert for a resumption of the rally because the NDX appears to have completed a head-and-shoulders bottom that projects it up to the 2055 area (view chart).

Week Beginning 04/20

Stocks made a powerful move up this week and appear poised to go higher. But a number of indicators are suggesting that the coming week will be very critical in determining the direction of the markets. Focusing on the S&P 500, while it is certainly the case that MACD momentum is quite positive -- positive enough to break out of the Wave 1 bear market channel -- volume has been quite weak in the recent five week rally (view chart). Furthermore, the RSI at 50-55 is a normal retrenchment point where the bears often regain control in bear market rallies.

Finally, a Bradley turn window opens on Tuesday of next week that will last for eight days. If the market reverses early in the week, a signifcant downtrend will likely unfold. If a reversal occurs later than that, a 50% pulback is the most likely scenario followed by a run toward the October 2007 highs. I would not be short equities in the event of a breakout above channel resistance by the S&P 500.

Week Beginning 03/02

Stocks finally broke out of their one month plus consolidation and appear poised to continue the cyclical bear market decline that began last October. The S&P 500 tested its 50-day MA and then traded lower, breaking the recent uptrend line on Friday (view chart). The target of 1230-1240 based on the head-and- shoulders formation with head at 1576 and neckline at 1406 still has not been achieved and remains as the likely end game of this leg of the decline.

Week Beginning 03/09

For the week, the NASDAQ 100 fell 2.2%, the S&P 500 2.8%, and the Dow Industrials were hardest hit at a minus 3.0%. Seasonally, February and March are weak months for stocks and this year appears to be no exception. The S&P 500 declined 3.5% in February and has already fallen nearly 3.0% in the first three trading days of March. I would look for the target of 1230 to 1240 to be achieved this month. With a Bradley turn window scheduled to arrive April 7 +/- 4 trading days, that would be my first choice for a bottom and the beginning of a retracement of the decline that began in October. We are currently in the March 8 Bradley turn window so look for a short term bottom by this coming Thursday. It's not likely we will see the 1230s this coming week, but neither is it completely out of the question.

Week Beginning 03/23

On Monday, the Dow Industrials (on which the Bradley model was formulated) made a successful test of the March 10 closing low at 11740, moving down to 11757 intraday and then finishing the day at 11972. It is currently the strongest of the major averages I follow, finishing up 3.43% on the week and above its 50-day MA. The weakest is the NASDAQ 100, which finished up only 2.21% but managed a succesful retest of its March 10 bottom as well. The S&P 500 threw a bit of a scare into the bulls on Monday, dipping to a new intraday low of 1257 before finishing the day at 1277 -- four points above the March 10 finish and seven points above my recommended mental stop loss. The S&P then managed to rally up 3.21% on the week but, like the NAS, was unable to close above its 50-day MA.

There are two things I would follow to confirm that a tradeable bottom is in place. One would be to watch for the S&P 500 20-day MA to cross above the 50-day MA. The other would be for the Dow Industrials to make a daily close above reistance at 12744 (view chart). When the Dow Industrials recently made a low below its January 22 bottom of 11971, the Dow Transports made a higher low instead. This is known as a nonconfirmation and could signal a change in direction for the stock market. In other words, if the Dow Industrials close above12744 it will have made a bullish reversal and will be trending in the same direction as the Transports and a confirmed bull market will have been established. Until that event, Dow Theory tells us that the bears are still in charge.

Other than selling out of gold -- which got wacked this week -- my trading recommendations for the coming week are unchanged from last week.

Week Beginning 03/16

On Monday March 10, the S&P 500, Dow Industrials, and NASDAQ 100 all made a bottom within the Bradley March 8 (+/- trading days) turn window. At the same time, my short term sentiment model flashed a solid BUY signal and positive divergences are everywhere to be found in the charts (view chart). So I think it is safe to say that my target in the 1230s for the S&P 500 will not be achieved on this first leg of the decline. I would recommend going long 50 percent SPY here with a mental stop at 1270 (S&P 500). Once the 20-day MA crosses above the 50-day MA, I would allocate the other 50 percent long in the short-term porfolio only. Upside target is 1425-1505 in the S&P 500 and 1955-2130 in the NASDAQ 100.

Week Beginning 03/30

My trading model has reduced equity exposure this week. I have chosen to ignore the shift and remain 50 percent long in both the short-term and long-term portfolios. My analysis tells me that the S&P 500 is currently in a 50 percent retracement of the October-March decline. As the chart indicates, that gives us a target up in the low 1400s (view chart). I'll know I'm wrong about this if the market moves below 1270 support.

Week Beginning 02/03

Stocks are getting overbought here so I would expect a bit of a pullback this week before heading higher. At this point it appears that the S&P 500 low of 1270 was the end of the first leg of a larger bear market and a 4-year cycle bottom -- 63 months after the October 2002 low. That makes it one month longer than the elapsed time between the August 1982 low and the December 1987 bottom. This correction will likely qualify as an official bear market according to my definition (50 days where the 50 DMA trades below the 200 DMA). So far we have three waves down in an A-B-C correction. If the S&P 500 is unable to close above 1408 and then turns down, it can still develop into a five wave affair and reach my initial downside target of 1250.

With the Fed easing, Congress stimulating, and the Plunge Protection Team (PPT) dumping cash into financial stocks, odds favor that we will have a sustained rally. For the coming week, there are too many cross-currents from me to play in the stock market. Add to this that gold has traced out a bearish shooting star on its weekly chart (view chart), and I think cash is king for the time being.

Week Beginning 02/10

Compared with last week I am slightly more bearish on stocks and more bullish on gold. The shooting star candlestick on the weekly gold chart of the prior week did not get bearish confirmation in the week just past. The week ended with gold at $922 -- a close above $943 would be bullish, below $908 would be bearish. If the NASDAQ 100 trades below 1750 I would consider a small short position in QQQQ. Set a mental stop at 1780.

Week Beginning 02/24

Stocks have been in a consolidation for the past month, the NASDAQ 100 actually tracing out a symmetrical triangle (view chart). The usual price action coming out of one of these triangles is for the prior trend to continue. In this case, that would suggest that the NAS will break down through the triangle support and continue lower. The move down should be at least equal to the height of the triangle at its widest point, so the target would be in the 1570 vicinity. If prices push up through the upper resistance of the triangle, that would be a signal to trade long.

Week Beginning 02/17

The S&P 500 has established a short-term uptrend, and with the RSI in neutral territory I would anticipate that this index is on its way up to test its 50 DMA, currently at 1409 (view chart). While stocks have been rallying, volume has been declining, which reduces the likelihood that the S&P will be able to break through that moving average. The most likely scenario at this point is that the S&P 500 will test the 1406 level sometime during the approaching Bradley turn window of March 8 (+/- 4 trading days), after which a decline to form a more solid bottom would follow. Should the S&P make a quick run up to 1406 in the coming week or break down through its recent uptrend before reaching there, however, then the March 8 Bradley would probably play out as a bottom instead and a retest of last month's low.

Week Beginning 01/06

The S&P 500 index plummeted toward its head-and-shoulders neckline support at 1406, closing the week at 1412. We may see a bounce off of that support but there is nothing in the indicators I follow that would suggest that the S&P will not be below that level a week from now. Meanwhile, the NASDAQ 100 has decisively violated its eighteen month uptrend line (view chart).

These two moves occuring together lead me to believe that the S&P and Dow Industrials are destined to tank 20 percent from their 2007 highs and probably means that we are witnessing the long overdue four year bear market cycle. Normally these fall in a fairly regular cycle -- ten of the last eleven arriving right on schedule (1962, 66, 70, 74, 78, 82, 90, 94, 98, 2002). The 1987 cycle low was a year late, after a total of 64 months elapsed from the August 1982 bottom. If this is to be the elusive selloff, we can anticipate a bottom in March -- a full 65 months since the October 2002 nadir.

Staying with that scenario, I believe a March low would be followed by a significant rally, but one I doubt will take the market to new highs. That's because the S&P 500 this past week definitively penetrated below a long-term uptrend line that goes all the way back to the October 2002 bottom (view long-term chart). I suspect that economic variables will soon coalesce to take my intermediate-term stock market model into negative territory, signalling that a second major downtrend in stocks will carry the S&P 500 down to the 500 vicinity by 2010.

Week Beginning 01/13

The S&P 500 closed the week at 1401, five points below its head-and-shoulders neckline support. The weekly chart shows that prices may begin to accelerate lower because volume has been increasing while MACD histogram downward momentum is strenghthening (view chart). The RSI has a long way to go before it is solidly oversold so look for this index to break support at 1375. After that, there is a vacuum all the way down to the 1235 support area.

Week Beginning 01/27

Stocks are trying to put in a bottom here, but the daily charts made a bearish reversal on Friday and it appears prices are headed lower in a retest of the lows put in last week. If support holds at 1270 for the S&P 500 and 1693 for the NASDAQ 100, then an A-B-C correction will have been completed and a rally up to last year's highs is in order (view chart). If, on the other hand, stocks are putting in a Wave 4 correction, then lower prices lie ahead. As a minimum, we should look for my S&P target of 1250 to be reached. More importantly, stocks would be descending in a 1-2-3-4-5 correction which is far more bearish than a simple A-B-C. That's because a five wave downtrend would constitute Wave A of a much larger A-B-C bear market.

Week Beginning 01/20

The NASDAQ 100, Dow Industrials, and S&P 500 fell 3.6%, 4.0%, and 5.4% on the week. Clearly, the S&P is the weakest of the three and another week like the one just passed and it will achieve my target of 1250. The NASDAQ has traditionally been the market leader but clearly that has not been the case during the decline that began last October. Since then, the three averages have fallen a total of 18%, 15%, and 16% -- all very similar amounts. Under normal conditions, the NAS would have declined about 24% with the drops we have seen in the two large cap indices.

Keeping with that theme, we can see that the S&P has broken down through its five year uptrend line while the Nasdaq has yet to do so (view chart). This violation of the trend clearly signals that we are in a belated 4-year cycle decline. It's common for an index to bounce before piercing a trend line so be alert for the possibility that the NAS will make a small rally this week before heading lower. Naturally the large cap averages would follow suit. Lastly, my short-term model changed to mixed from negative so a tradeable bottom is probably very near -- I would guess within two weeks.