Some longer term perspectives

The market has not been able to stage a significant rally, telling me that the market remains weak on an intermediate term basis. The market could stage a short term relief rally that lasts on the order of a couple of days to a couple of weeks at any time and the longer if fails to do so the more clear it becomes that it will do so eventually. Large one-day moves in either direction are hall marks of bear markets and it could happen to us. One day bear market rallies of 4 to 10% are common and some are larger. I suspect we are in a 17% to very deep bear market correction over the next year. It is no suprise that I believe that a major market top has been put in. I don't expect a long-term bottom this year.

A CANSLIM investor does not look toward playing a bounce that lasts a few days but instead waits for the possibility of a rally failure at regions of logical resistance when the path of least resistance continues. The play at rally failure being to the short side. The charts of leading stocks are largely broken. It is apparent that this will take time to repair and a significant intermediate term rally proably can't happen before August/September. We could have multiple follow-through days between now and then. That doen't mean they are going to work.

Looking at the NASDAQ there are two possible left shoulders of a yet to be completed H&S pattern. The shorter pattern has a left should in early May 2011. The larger pattern has a left shoulder top in late April 2010. It is quite feasible that in the nearterm that we could see a relief rally complete the shorter term right shoulder pattern with a rally up towards the 50-day with a roll over to new correction lows. A Septermber to December intermediate term rally could later unfold completing the second right shoulder of the larger pattern with a failure perhaps in January 2012. That rally could be of CANSLIM long-play proportions. It will depend on the establishment of some sound bases. It is this larger H&S pattern that could then bode poorly for the general market as larger topping patterns produce larger drops. The end result could be the real bear market move next year with bottom the in the following summer/fall of 2012.