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Monday's Targets Reached; Will Bulls Hog the Whole Turkey?

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Monday triggered some signals commonly seen at important lows, but here are the key price levels.

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Given the five-wave impulsive nature of the rally and the strength of market internals, the odds presently suggest that more upside will follow after the first correction. As noted in yesterday's update, the market reached an inflection point on Friday -- though of course, nothing significant had developed as of the time of publication. But now we can see that bulls have responded to that inflection point with fury, and this leaves open the possibility that an intermediate low has formed, though presently the intermediate trend should still be considered "down." The chart below details the near-term path for the bull prospect, as well as the bearish prospect, and notes the key levels for bulls to reclaim. Sustained trade below 1360 will favor the bears.


Click to enlarge

Finally, the longer-term chart of the Philadelphia Bank Index (INDEXDJX:BKX) is one of the things I'm indirectly referencing in recent updates when I've mentioned that I'm not completely sold on the long-term bear case just yet. Note the impulsive nature of the rally from the October 2011 low, which suggests there are new highs still out there for this market. Also note that key support has held so far. I have outlined the conservative bull case in red, and the conservative bear case in black, as well as the next two key levels.


Click to enlarge

In conclusion, Monday's rally into the upper edge of my target zone was impressively strong, and seems to have caught many shorts on the wrong side. Odds favor more upside before new swing lows, but the bulls still have some key levels to reclaim in order to turn the intermediate trend back up. Whether they will or not remains to be seen, but yesterday was a promising start. Trade safe.

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No positions in stocks mentioned.
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