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SPX, INDU, NDX, NYA Updates: Bears on the Run

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The bulls have reclaimed the key 1453 level on a closing basis, which means the odds are good that an important cyclical low is in at 1425.

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MINYANVILLE ORIGINAL For several weeks, I have projected that after this correction completed, the market would make new swing highs for the intermediate term. In the most recent update, I discussed two short-term possibilities: a short-term turn near 1444-48 SPX, or a run directly to new swing highs. I listed 1453 as the key level to differentiate one outcome from the other, and the market both sailed through that level and also closed above it, which now causes me to favor the view that the bottom is in at 1425. It's simply going to take a break of that level for bears to get anything going at this point.

It's too early to say for sure and declare bulls the long-term winners, but there are some signs that this rally has the potential to pull the indices at least another 10% higher. The first case in point is the NYSE Composite Index (INDEXDJX:NYA), which, as I've been warning since September, still looks quite bullish. Bulls have now held the breakout level on two back-tests, and the last test resulted in a very strong bounce -- so unless that level fails, it's simply wishful thinking to view this chart as bearish in any way.


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The next case in point is the Nasdaq 100 (INDEXNASDAQ:NDX). On September 20, I warned that NDX appeared to have formed a complete five-wave rally, which meant it was likely to correct lower. The problem now for bears is that if the blue (2)/b high is broken, that will strongly suggest that the recent decline was a second wave lower. This would mean that the current rally is going to be a Minor Third Wave up -- which is every bulls' dream. Third waves are usually the longest and strongest wave, since they represent a "point of recognition" for the masses.

Again, it's too early to be certain here, but a third wave up would largely be confirmed by a break of the (2)/b high at 2846, and could put the bears on ice for months.


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No positions in stocks mentioned.
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