Sunday  18 July 2010

 Not many look at charts beyond intra day and daily when assessing the markets.  We are presenting the
Quarterly and monthly charts, rarely viewed by most, because they portray the overall conditions of the
market, sans the daily/intra day "noise" that keeps people focused on the proverbial trees.  This is our
"forest-like" point of view.

 The bull market ended in the first Qtr of 2000.  What followed was a normal correction in 2002, and then
a retest of the market high.  Why do we call it a retest if a higher high were made in the final Qtr 2007?
It sometimes happens that way, and this was one of those times.  Note the size of the bars and the
shorter duration in time to reach low in 2002, 11 Qtrs.  Contrast that with the smaller ranges on a more
labored rally to retest the high, 20 Qtrs, almost twice as long to cover the same ground lost.  

 It is the character of the decline versus the lesser character of the recovery rally that defines the quality
of a given move.  From the 2007 high, price has made a lower swing low.  What characterizes a change in
trend?  Higher swing highs in an uptrend, and lower swing lows in a downtrend.  After the April 2010 high,
we may now be seeing a lower swing high to confirm this change in trend.  That April high now becomes
the most pivotal point in the developing market scenario.  It also happens to be a Quarterly Outside Key
Reversal, [OKR].  This is a potent piece of information.

 OKRs have been covered here often.  To save going back, briefly an OKR is when the market makes a
new recent high, then a lower low, and in this instance, also a lower close.  In fact, the second Qtr close
was very weak.  It almost reversed the previous two Qtrs' effort.  It is also obvious, [once you look], that
volume increased to the highest level since the low, just over a year earlier, March 2009.

 April 2010 could very well be the last gasp rally within a bear market environment.  If it stands, it may be
decades before it is exceeded, again.**   From here on, prices are about to embark on a protracted
move lower and should easily exceed the 2009 lows, around the 740 area.

 **We say this but will qualify by adding that the Fed's deliberate debasing of the US fiat Fed "dollar"
could rally the S & P to $50,000, but that "value" will be relative to the cost of $200 loaves of bread.

 One of the characteristics of a retest rally, which is what the April 2010 high is, is that it retests a prior
last support area, and that previous last support was 1202 in July 2008, just before price fell with such
unbridled speed.  Note the size of the bar in April 2010.  It is very small, and the close was under the
mid-range point of the bar.  We know that a small bar in a rally shows the inability of buyers to extend
the range higher, and that is because sellers came in and stopped the effort.  The position of the close
tells us that sellers won the battle that month.  There are no accidents.  Previous support becomes
future resistance.  It is worth mentioning that the volume for that April was low, a sign of a lack of
demand.

 Where did the decline from April stop?  Right at the high of November 2008, the highest high for over
nine months.  For your information, markets are continuously testing and retesting previous support and
resistance areas, all of the time and over all time frames.  These are just two examples, and on a larger
monthly time frame.

 The April high to recent July low may be the parameters of a trading range for the next several months,
if price does not just continue lower.  As we often say, anything can happen, and there is absolutely no
way to know how a market will unfold into the future.  So the anticipation of a trading range may or may
not happen.

 Keep in mind, these are larger time frames, and they take longer to develop and confirm, but you can rest
assured that the larger money interests are keenly aware of, and use them.  Next we move to the "tree"
level of a 60 minute chart.

 On  a much shorter time frame, a trading range had developed between the 1075 area and just under
1100.  Once the 1075 support gave way, on a day of no forgiveness for the longs, a short position was
initiated as it became quite clear that the market was breaking down.  Note how once price traded under
1075, every bar had a low end close, showing that sellers were in control and buyers were unable to
make any kind of showing.

 The 1075 area is likely resistance on a retest of the breakdown that occurred.  One has to watch the
developing market activity to see HOW a retest of potential resistance transpires, and the market will
provide those clues.

 Short from1074.50.