Bounce, Test, Bounce, Crash
The technical damage done this week was substantial, but as I mentioned last night on Kudlow, we are near support.
I'll expand upon this later, but I can envision a bounce off of these lows, a reflex rally that runs on decreasing breadth and volume for a few days to a week or so, then a retest -- and failure -- to new lows in June.
That gets us oversold enough for a stronger bounce for a month or so (July? August?) and then the denouement into September and October.
This is just a guess, and I'll try to get more details and intelligent projections later this week, but that's my expectations.
Your mileage may vary . . .
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I suspect that the NASDAQ (and NDX) will rally up to resistance and fail badly. I will remain short the QQQQs and SPY. Yesterday, I sold most of my OEX June puts near the close and will look to buy September SPX and NDX puts into any rally.
Posted by: Larry Nusbaum, Scottsdale | May 18, 2006 7:56:54 AM
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