Friday, May 13, 2011

MTU Weekend Ed. - Consolidation (5/13/11 Close)

The U.S. stock market has continued its recent consolidation over the past week, producing an inside week. Furthermore, price actions suggest little need to modify the assessment on stocks discussed in Multi-asset Outlook (5/6/11). The following is an exact quote, with updated Chart 1 and Chart 2.

"The primary count is that stocks are approaching the end of an x wave rebound from their lows during the financial crisis. The bullish alternative of a multi-year bull market remains a less likely scenario at the moment. Chart 1 presents the top three tracking counts (blue, gray and red) within the context of an x-wave, as well as the very bullish green count. The differences among the blue, gray and red counts are their upside potential and the depth of the near term correction. As long as SP500 is cushioned by the decade long resistance zone (Chart 2) from which SP500 finally broke out on its second attempt in recent months (see Breakout (4/29/11)), odds favor the more bullish corrective counts (i.e. red and gray)."

Chart 3 presents a number of near term bullish and bearish tracking counts on SP500.