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I look for a confluence in my work across a variety of indicators. Recent
action in the COT has shown a commercial reluctance to build heavy short
positions on each of the previous rallies. I was expecting a substantial
increase in commercial shorts would accompany this last high, but commercial
positions are unchanged.
SPX has run to within 4 handles of a long standing price objective at 1078
yet it still seems reluctant to sell off hard. I also have a big confluence of
targets at 1086-89. As shown in the chart I posted last week, since June the SPX
has repeatedly declined sharply and then retraced 127% of the decline. I'm
getting a sense we may get another repeat ... perhaps a double bottom in the
1031 area which would target 1086 on a 127% retracement. Or price could simply
bounce off the 50 dma and lower trendline in the 1045 range. Also bothering me
is the break of the steep red trendline in all breadth models even though the
last high remains unconfirmed.
In sum, looking over my weekend work, I see little which has changed from a
week ago, a month ago, or even six months ago when the SPX was 1015 and
everything was pointing to a significant correction. Unless something changes
radically, I will not be pressing the short side as hard as expected.
Earl
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