I had been expecting the daily cycle to bottom on last Friday’s revision to GDP or possibly with Friday’s jobs report. Yesterday’s big rally more than likely confirmed the daily cycle low did come last Friday.
Now we have a test coming. If the market can break above the August highs it will complete a 1-2-3 reversal. That will confirm the trend change from down to up and the odds will be good that we will test the April highs.
Actually I expect we will probably test and at least marginally break to new highs even if we have entered another leg down in the secular bear market. I’ll explain why.
Back in July I posted an article showing how big money runs technical levels in order to trick technical traders into puking up their shares. That allows big money to accumulate large positions without moving the market against themselves. Well the same thing happens at market tops and bottoms.
Both the `02 bottom and the `07 top occurred with a slight break of a significant technical level that immediately reversed.
My expectation is that if the market can complete the 1-2-3 reversal by rallying above the August highs we will probably see the April highs marginally broken. Now if that break is immediately sold there is pretty good odds that big money used the technical break to unload positions onto technical traders in preparation for the next leg down in the secular bear market.