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Thursday's Closing Comments 04/29/2010

Here’s our thoughts on today’s market action

Bottom Line: We said earlier today that as long as the SPX (1219.80) and Dow (11,258.01) highs aren’t breached, we believe the Top has been completed. We said this because we fell from that previous high in 5 waves and have rallied in 3 waves. In addition to our Elliott Wave analysis suggesting that the Top is complete, we continue to see a topping process in PCLN while GOOG, GS and AMZN have already pulled back from their highs.

Meanwhile the the Financials continue to look like their topping out as well.

We continue to view the advance-decline volume, with 3 to 1 up on rallies and 10 to 1 down on declines, as a continuation of the trapping process. One respected reader alerted us to information concerning the lack of short interest in many major names, which that got us thinking. Since there is no risk of a short squeeze, what happens when the market traps traders who chased DNDN or BIDU and in the coming days those names reverse down? In our mind, that’s the trapping process and we expect to see more of that kind of action in the days to come.

The dollar pulled back, but we believe it’s only a rest before heading to 83.32 and beyond. We also noticed that while Crude continued it’s bounce higher, many Crude related indices and ETFs didn’t quiet join in the festivities. Indeed, the ERX didn’t jump for joy and the ERY didn’t collapse. This kind of action just makes us think that the Crude bounce is only temporary and will wind-up lower (79-80) in the coming days.

Now we turn to Gold and Silver and the feeling that something big is brewing. We continue to expect Gold to pullback back after reaching the 1160-1180 level, but will it drift lower or have another $30 a day drop to lower prices. We’re not sure, but we continue to watch closely for an indication of its direction and a trade to capitalize on.

The foreign markets have been losing momentum since late 2009 and if China is going to pull the world out of the doldrums, it better get started. A jobless “recovery” in an America that’s, at best, bottom bouncing in various economic indicators has a better chance of seeing the other shoe drop than lifting off to nirvana.