Two Possibilities

I was out sick again yesterday and did not spend much time watching the market. However I am on lunch and kinda caught up.

The most probable scenario for the upcoming months is the following: 858 max is the high for this wave. Then a wave down to 750, then another wave up, then wave down, then finally wave 5 up to end this bull market.

We might not hit 858. Yesterday's high could have been it. Either way the top of the first wave is almost in. The next wave down could retrace 38.2%, 50%, 62.8% or even 100%. I rule out the 100% cuz that would mean a double bottom and those tend to be long lasting (many years). I think we'll set new lows within 12-24 months. With a large move like we had usually the retraces are more significant so I am shooting for the 50%. 830-666=167, 830-167*.5=746 which is pretty close to 750. That is where I get my target.

Interestingly you can project approximate lenghts for the remaining waves based on the length of wave 1. They are only targets of course, but give you some idea. Based on this the minimum high for this bull market is the 950 area. Most likely top is in the 1050 area. Possibly could go up to 1150, but unlikely.

The way I'm playing this will be to scale out of shorts from 775-750. Then go long. Ride it up to the 950 area (target of wave 3), then scale partially out of longs and scale back into longs when wave 4 finishes. I don't know where that will be yet. It could be months away. Then go all long for the wave 5 finish to 4 digit SPX territory.

It sucks I missed the entire first leg of this bull, but it was a sneaky bull. From what I have read over the last few days it has been a bull market led by retail, not institutions. In fact the institutions are just now trying to figure out when to join the public like we are. My guess is in the mid 700's they will hop on and push us up through a long wave 3 in both time and price.

From a fundamental stand point we did not reach any milestones of a typical bear market. The PE did not reach historic lows, the bond market did not indicate a bottom, even companies did not indicate optimism for late 2009, just the opposite in fact. The only thing telling us this bear ended was price. We ran out of sellers. The public got all bulled up on "hope and change". This will have consequences when this bull market ends as we should get a horrific crash to purge the system, but that is months away.