Monday, April 17, 2006
Major indices have support at their current levels, but the uptrend started in October of 2005 is severely weakened. We expect support to hold at this point and we should see one last rally take place. It is likely that this rally will give long term holders a chance to exit their positions and should give traders a great shorting opportunity. We don't expect the market to reverse course harshly, but the uptrend has come a long ways without a correction. It is nearly due, perhaps as early as next month, for a 10%-15% correction. In fact, this toppy market has been tough on traders due to overhead distribution. Rallies have been getting stuck in the mud of selling above. Even so, we are more than likely heading into a trader's market where it will be long term holders that are most frustrated. Due to rising interest rates and global economic worries due to rising commodity prices and continued geopolitical problems in the Middle East, we could easily move into a trading range market that will make for some very nice trader's reversals, but that won't make a lot of long term progress.