Quote from Xspurt:
There are big support levels showing in the major indices at or near where we are now... In spite of all this perfection I'd prefer to see the Dow reach closer to 12,200 for a reversal attempt...
The daily still looks weak but the volume flag usually indicates we are at or near a bottom and in such a setting if we bounce it is usually the 2nd bounce that is the real reverse long. If the daily channel is broken (it is the easiest guide) for a long I will afterwards be watching to reverse short and then relong for the weekly challenge to the upside...
The only thing that would alter that expectation for a 2nd bounce is if we stage an emergency reversal and get a powerful move up; then I won't be expecting the 2nd bounce...
ACTION
As I don't have a clear prediction this week here is how I'd play it.
1) Remain short until there is a clear candle signal and the channel is broken. If it is broken look at the speed and strength of the move. If it is weak expect a pull back and then the real move up. If it is strong then expect it to continue for the week.
2)If we get a long signal and the move is weak, reverse short on a good signal and if the base is broken then we are likely on the way down again.
3)The absence of a daily buy cycle means any weakness below 12200 will keep the shorts in play for some time so hang in there.
Good trading 
REVIEW
When PA was at the last 13300 top resistance I expected a straight forward major reversal down which is what we got. This time on major support I expected a more complex double tap and again PA played out pretty much as I predicted...
1) As you can see on the attached chart, the Dow gave a 1st bounce as expected, and the down channel was broken, however it was a weak break up with PA reversing down intraday and closing on the channel.
2) I said if this weak break happened I would be looking for a reversal back down to form the 2nd bottom which is more likely to give the real move up and PA reacted with a 2nd hard bounce up.
So the question again is - is this it? Are we all set for the move up? Will the weekly players take us to new highs?
CURRENT
As an aside, we are on the holiday weekend and Gann said to look for trend reversals at or close to holiday restarts.
The S&P shows a more orderly reversal into resistance on Friday with sellers coming into the market and my expectation is for more follow through on this selling pressure.
This support is too obvious for my liking and I still have a Dow support at 12,200 that I would prefer to reverse on. Why? Because the last top was too obvious and it was a gift and gifts tend not to follow gifts so often, thus a fake here would work a treat to suck the traders into a weak position for a strong reversal up.
However there are serious contenders here for screwing the best laid plans for everyone and the ability to read PA well and react fast from now on is perhaps going to be critical. I have mentioned my reasoning before when I reviewed 2012 at the turn of the year but here again is my thinking...
1) Yes it's an election year when historically markets don't crash and all kinds of supportive manipulations take place. Non US central banks are buying the market so now is a good time for them to jump in and of course Ben will save us all. Really?
Against that thinking is my view that we are in uncharted territory as far as world problems are concerned that may get well out of the control of bankers...
2) Fukushima is on a knife edge and presents a problem so serious that governments have prevented the media from covering the issues. When the architect of reactor 3 says the China Syndrome is inevitable without another quake causing it - it's something the world has never faced and the impact is beyond calculations.
3) The Israeli government would have easily won the next election but instead has just persuaded the opposition to join the government. This has stunned commentators because a few weeks ago, Mofaz was calling Netanyahu a âliar,â vowing never to join the Netanyahu government, and attacking the Prime Ministerâs approach towards Iran, saying Israel did not need to consider a preemptive strike against Iran for at least another two years. The last time the parties united like this was before war and this time I expect a war that will impact world markets. I'm not saying war is imminent, just that I have red flagged this with a big flag. When (not IF imo) this one kicks off it will affect all of us.
4) The PIIGS. The Euro mess just keeps getting bigger and bigger. Greece is and is not going to leave the union. Spain is about to hit the fan. Germany will and won't sort it all out. Who knows? They sure don't! That dithering and uncertainty can cause a lot of fear in the markets.
5) Cockroaches: as the saying goes, find one and you'll find more. When Barings Bank sunk it was for a horrendous amount but now that is small fry. MFG sunk and they don't know where the $'s are and how much is lost and if segregation failed but it's a bigger mess than Barings. JP Morgans have lost billions (we don't know how much) and the only reason we don't have a meltdown is because they can carry the loss. Expect another cockroach to crawl out and it might a Bearn Stern to the market.
6) Natural Disasters: there are weird things happening all round the world with sky quakes let alone earth quakes. Recently we experienced a series of major quakes in a time span that has never been recorded before. The markets are vulnerable to a big one.
7) Derivatives have become the unregulated casino for banks with a much higher exposure than 2 yrs ago. It's affectionately referred to as The Time Bomb and we can only guess at how many hundred of trillions are involved. Just four banks hold a staggering 95.9% of U.S. derivatives
8) National Debt: let's not forget the monster under the bed. Each US citizen owes over $50k so when Helicopter Ben promises to save us all it's no longer a national issue, it's an international problem that is alarming other governments resulting in talk of having a new reserve currency.
9) China is the economic miracle that will pull the world out of recession! I think there is a grave danger of a few ripples in that pond what will cause severe waves for us.
10) Corruption: we have never faced such corruption in government and financial leadership. Many complain Wall Street is becoming as trustworthy as a den of thieves. The gamekeepers are more like poachers and in the post Maddoff SEC inquiry many of the top SEC staff were close to full time porn addicts.
11) Flash Crashes: we have no idea of the impact HFT will have on the market in a panic, but I think we may well find out this year. HFT might even cause the panic!
12) Terrorism: it was sad to see a top police investigator in the UK tasked with the job of identifying the greatest terrorist dangers conclude that government was the number one enemy for black flag operations to manipulate the masses. And then there are the terrorist terrorists. I don't know which are the real terrorists.
I could go on and on but I think I have made the point that the comfort the history books have provided in the past is now in danger of providing a fools confidence. We have never faced such problems before on a singular basis let alone the potential for one to trigger another into a massive domino effect.
SUMMARY & CONCLUSION
The daily looks due for another push down into the base and if it breaks then 12,200 would look great for a weekly reversal. The Weekly looks great for a strong move up so I would be looking to get long after the drop. A fake drop would make sense here to make it look like the support has broken.
The reason for my rant is not just to highlight the risks we face but because of how I have seen major events impact chart reading. As I said my daily expectation is down but if something big kicks off, a minor short set up like that on the daily will be all the warning you get to roll everything into a big move that overruns the weekly.
ACTION
I'd be looking for longs if PA breaks above the last high tails but preferably after signal on a return to the base and better still if we get 12,200'ish on the Dow.
All being well the weekly will kick in for the upside and let's see how the monthly closes as right now it is very bearish.
Sterling's charts dont have the clarity that the worden charts have for posting. And no, I can't blame this one on a head injury. I tried that one when I ordered dinner out vs cooking at home last night, and my Wife said, "I'm not buying that excuse! Get a pad of paper.":eek: 