Stock Market -- Technical

The cyclical bull market remains intact. The current leg up off the early 07/10 low represents
the second major up leg, with the real action not getting started until the end of Aug.'10.

The current move up is very strong off the late Aug. low and has the potential to carry the
SP 500 up to longer term resistance at 1300 by the end of Jan. 2011.

The market is not strongly overbought on my shorter term price oscillator, but internal trend
measure (ADX), 13 week momentum and intense speculative interest via heavy call buying
all signal to me that a fast, sharp sell-off is close at hand. In addition, the TRIN measure
(relative strength of down volume vs up volume), which helped me identify the Jul. '10 low
as an exceptionally sold out period, is now flashing a very strong overbought. So, I am cautious
in the very short term.

Looking a little further out in time, I am conjecturing that we could see a more pronounced
correction in the market sometime over the mid Feb. / mid Mar. time frame. I am simply
guessing that such a correction would be about 7% off a cyclical high of 1350 on the SP500.

From a technical perspective, the first step for me in 2011 is to see if a quick sell down
may be at hand in the days just ahead.

SP500 chart with ADX in bottom panel.