S&P 500: 1234
The rally underway since the end of 4/05 has served to extend
the second leg of the cyclical bull market.
There are cycle factors which suggest the broad market should be
in a topping mode over the course of most of this month. Curiously
enough, most of the short and intermediate term indicators I follow
suggest the market turned up around the beginning of the month.
However, what is most striking to me is the substantial compression
in the proprietary momentum and internal demand / supply indicators
I follow. I have never been able to figure a sound method to tell
how extended compression periods will be resolved (topping out vs.
consolidation). It is clear there has been an ongoing battle between
the bears and the bulls since early July, 2005. My charts suggest
this battle could go on for up to four to six weeks before it is
resolved. When extended compression periods are resolved, the move
in the market, be it up or down, is usually sure and powerful.
I am a discretionary trader and a trend follower, but I have hesitated
to go long so far this month because of the compression I see in
the market. So, I may just wait until that issue is resolved before
deciding what to do.
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