Stock Market -- Daily Chart

My view over the past two weeks has been that I did not see a top in view but that caution was
warranted because the market was overbought on an intermediate term basis. So, let's look at the
damage in recent days.

The very strong uptrend from the late Nov. '11 low was fractured with a sharp downside break to
a powerful uptrend line. My view has been that extended run ups at that level of trajectory rarely
last for more than 3 - 4 months without a break. This one extended just a touch beyond 4 months.
Since powerful uptrends like the one just witnessed can resume after a break and consolidation
of several weeks, the break this week is not necessarily a death knell. But, you have to be prepared
to give a situation like this a month or so to resolve even though the overbought condition has been
reduced.

The SPX chart will also show trend breaks for the 40 day RSI and a special intermediate term
MACD. Obviously further downside in these measures cannot be ruled out. $SPX

In the short run we need to watch the movements of the SPX's 10 and 25 day m/a's. A dip in the 10
below the 25 followed by a dip in the 25 can signal more downside. As of today, the market has
not dropped far enough below the 25 day m/a to signal more trouble ahead.

Note as well that SPX 1350 is pivotal as it has offered both short term support and resistance.

To muddy the waters further, you can draw a trendline up from the Oct. '11 low of SPX 1100.
This line now implies downside for the SPX to near the 1300 level and would if tested confirm
the high volatility mode in which the advance originated.

Finally, the cycle work indicates the market should move into a bottoming process over the
next 2 weeks. There was an approx. 84 day cycle in operation for the SPX from 2007 through
the early part of 2011. The cycling has since shortened to 70 -75 trading days. You should note
that the run in the market over the past 4 months blew right through these cycle measures if
only to remind us never to bet the farm on such work.