Friday's decline and this morning's weakness further confirms our conclusion from late last week: that the June 21st +/- peaks were larger degree, important secondary peaks from which a potentially serious decline could take shape. If this intermediate term degree trend conclusion is correct, the interpretation suggests a move well below DOW 10,000 (9,600 +/-) at minimum.
Transports (as well as the Baltic Dry index) are confirming the larger degree bearish trend, which is good supportive evidence. Add to that the continued tightening of 2 year - 10 year note spreads (now at 33 bps and suggesting at a minimum economic contraction and potentially a recession in 2006), the start of impulsive declines in other worldwide equity indices (the German DAX and Japanese Nikkei specifically), as well as 'Austrian' money supply (liquidity) figures, which are dropping significantly in the last 2-3 weeks, and you have now have both market price-related and macroeconomc reasons to be confident that a bearish trend down has begun.
In the short term, we would be patient; it is highly probable that a bounce to relieve the current (very short-term) oversold condition develops that takes the DOW back to 10,400-500 and the SPX to 1200-1207.
The NDX remains in a more difficult-to-assess pattern so we are focusing our attention on the SPX, DOW, OEX, RTY, TRAN, NYA, and SML indices.
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