Looks like the bulls are getting some comfort from last week’s finale. Our long-term cycle continue on a decline and we are not sold on this “bull” yet. To us this is a major short coverings squeeze which creates violent rallies because the short seller’s stop prices are getting triggered. Even a little profit taken by short sellers can create an explosive rally.

Breadth numbers which normally help confirm underlying strength are still gasping. In a confirmed intermediate advance, we should see the number of new lows down into the single digits. Last Thursday that number was at a much higher 92 level, suggesting that hedge funds are still shorting, and institutions are still unloading weaker shares.

We don’t feel at this point that this market will turn into a big long-term rally because our very reliable long term cycle is moving downward. Nobody is in charge yet, bull or bear. Average retail investors are still too bullish despite the stock market correction. The stock market’s plunges won’t come to an end until pessimism and despair become a lot more widespread. And that could be a while. Bear markets like to descend a slope of hope, just as bull markets like to climb a wall of worry.