Thursday, June 3, 2010

Market Timing Update (6/3/10 Close)

Range Busting Stocks
The ultra-bearish count has so far tracked market actions well. After having delivered the worst May performance since 1940 last month, the SP500 index has lost another 2.25% in the first week of June.

There are a number of near term paths the market can take. Chart 1 summarizes the top bearish counts and Chart 2 the top bullish counts. All in all, the likelihood of the market making a new recovery high before a lower low appears very slim, even when following the bullish counts.

The market has been stuck in a wide range between 1040 and 1105 in SPX over the past few weeks. A break of this range is very likely over the next few days.

On the upside, a rebound higher early next week is probable, but not guaranteed as there are a lot of index points to make up and technical damages to recover from. And a roll-over to the downside is also expected if a rebound higher indeed develops first.

On the downside, a decline that bust the range is most likely either [v] of 1-down OR (iii) of [iii] of 3-down. The former should be relatively moderate and be retraced by wave 2-up soon. The latter should bring about a forceful sell-off or even a crash. We'll know by the nature of the decline soon enough. And we'll find out how many stops have been set at the 5/25 low soon enough.

[4PM] Stocks - A simple (a)-(b)-(c) corrective structure (in the form of a double three) is tracking the rebound from the 5/25 low quite well. Hence, there's no need to delve into more exotic structures at the moment.

The advance from today's intraday low looks reasonably corrective. So leave room for one more decline before b of (c) is complete. The much focused monthly jobs report comes out tomorrow morning, which could cushion an overnight slide or induce a drop itself.

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