Market Update

A hazy short-term picture has cleared up for the stock market, as a Rising Bearish Wedge has
revealed itself Thursday, April 9th, which means stocks are topping short-term, that a decline is close
to starting. This top is wave (1) up of C-up of (B) up, and is shown in our charts this weekend.

This pattern’s forecast is supported by other indications this weekend of a short-term top in
stocks. There is the overbought position of the Daily Full Stochastics. Further revealed Thursday, is a
Bearish Divergence between the S&P 500 and the 10 Day Average Advance Decline Line Indicator.
We show that chart later in this report. Also, the Percent Above 30 Day Indicator is at a level that historically
has led to measurable declines starting within a week or so. We show that chart in this report.
Then when we factor in the presence of a huge Fibonacci Cluster turn window that lasts until
this Wednesday, April 15th + a day or so, it would make sense that a significant turn is occurring now,
the significance being a 26 percent rally is ending. We showed in last weekend’s newsletter that this
turn has several former tops or bottoms a Fibonacci number of trading days from this time. Stocks have
bounced nicely since the March 9th bottom, a phi matte turn date, the S&P 500 rising 26 percent.
But this four week run is about to end, and a decline will correct this rally leg. This decline could
take the S&P 500 down anywhere from 38 percent to 62 percent of the recent 180 point rally. That
suggests downside targets of 787 to 745. This decline should be wave (2) down, within the Bear Market
multi-month rally that started on March 6th intraday at 666 and March 9th on a closing basis at 676,
that will culminate in wave (B)’s top. This should produce a buying opportunity for those with a speculative
appetite who want to play the rest of wave (B) up, but mindful they are investing against the primary
trend, according to Dow Theory and our Primary Trend Indicator, which we present later in this
report.
Over the next few months we should see stocks rally nicely as wave (B) up completes. That
rally could see the Industrials reach the 9,000 to 10,000 area, a 38 to 50 percent retrace of the decline
from October 2007, just like occurred during the start of the Great Depression.