I’m on the first real vacation in years and the regular column will resume next week but I just wanted to say a few things. Our August time window is complete and it seems to have created an inversion of the cycles. First we hit a high in the NQ on August 13 only to hit a low several days later on the 17th for a small drop of 4.7%. We know it’s an inversion because of the new highs on Friday.
Part of this move is being fueled by dollar weakness which is once again retesting support at the low. Before we issue the all clear, let’s realize the dollar low came in at 3% bulls. We have intraday readings on the dollar which suggest it could turn back up at any time. At the 3% sentiment handle, it would appear it couldn’t have much further to fall.
But this week can turn out to be one of the lightest volume weeks of the year. Don’t get complacent just because the cycle in inverted, the NDX at this point is up 60.84%. The recent pullback on the Bank Index was exactly 161.8%. The NDX can still hit a high once it climbs exactly one more percent. Think of this week as a test of the highs (stock market) and lows (greenback). This could be a week with some wild swings.
Finally, the NDX has nudged slightly beyond the 50% retracement of the bear market. It has not surged passed it enough to be significant but the next real test comes at the first wave lows of March 2008. This is a significant test because of the Elliott wave 4 overlap rule. A serious dent into this resistance level will rule out this move since March being a larger degree 4th wave which means something else is materializing.