I am not the kind of analyst who claims to be correct all of the time. I have found that my observations tend to be legitimate, but that the market sometime finds it own ways of playing them out. I spoke a last week about the similar wave length in all of the upward thrusts on the S&P 500 since March 17. My argument was that a rallly from that point would put us up near the 50% retracement level of the decline from October 2007. This did not happen.

This week I became significantly more bearish when three technical indicators made bearish cross-overs. This occurence was followed promptly by a sharp rally in the equity markets. I cannot say that the rally to this point changed my overall bearishness. Of the three technical indicators that I shared this week, the DMI is the only one to turn positive. We did break back above the 10-day and 50-day moving averages. The big question now is whether or not the S&P500 can hold above them. We usually see a reversal down within four days of such a breakout, if one is going to happen.

When I feel myself being kind of whipsawed around by market action, I like to step back a little bit and see what might be correct and needs to be abandoned. I could not help but notice that the closing low on the S&P 500 this week was 1328.32. If we see the 54 point rally that we discussed last week take shape from the Monday close, then that would put us above 1382. Interstingly enough a 38% retraceement of the decline from the October highs rise to around 1384.83. So, it could be that we see a final shot up to the 1284 area before we begin the bearish movement suggested by the technical oscillators.

We will just have to wait and see how things play out.

Eldinril