Cycle update --
Let's quickly review our overall market view. We believe the recent highs could turn out to be very important highs that ultimately lead to new bear market lows. There is an outside chance those new lows could occur over the next four weeks while we are away. The far more likely scenario is that new lows will be postponed until the final quarter of this year. There also remains an outside chance that highs above the June highs could be seen without changing the ultimately very bearish outlook, but we believe the odds are better than 50% that the highs for the year have been seen. Based on the potential head and shoulders pattern that we discussed yesterday, the market could test the neckline one more time before declining towards its price target around 822. At the close today, on a 30 minute chart, the neckline on the S&P cash was around 893.20 and rising approximately 2 S&P points every five trading days.
The S&P 500 advance/decline line which we believe is a far better representative of the average share of common stock than the New York Stock Exchange advance/decline, moved to its lowest level since mid April today. At that time, the S&P index was trading around 830. That does not guarantee a move by the S&P down to 830, but the S&P advance/decline line does tend to lead the market.
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