Today, the Nasdaq 100 reached the double bottom measured move level, and it might not encounter resistance until it reaches the 1600 level.
The DJIA broke out of the inverted H&S pattern yesterday and today it pulled back toward its neckline to test for possible support.
The SP500 encountered resistance at its inverted H&S neckline and pullback away from it.
Definitely, the market is at a juncture it can move strongly in either direction. Therefore, to initiate new positions before the market has decided which direction it will take can be very risky here. If you are long, the best move is manage your long positions with tight stop, and if you have survived the pains for holding on to your shorts, then maintain your stop, your reward could be just around the corner.
In the short term, the market is more likely to pullback from its current over extended level. With only seven trading days left in the month of July, it is very unlikely the market will drop to the March 2009 level before the end of the month. As August and September approach, the seasonal summer rally could give the market another surge before it resumes its primary downward trend. If you believe this is a bear market rally, then without having the market bottomed in July, the expected economic recovery in the second half of 2009 is off the table. The earliest we can look forward to a possible recovery is in the year 2010. If the market bottom in October 2009, then a possible recovery could begin near the end of first half of 2010. For now, the good news is the market has been up, and the bad news is the economic recovery is still not in sight.
