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Monday's Closing Comment 5/3/2010

Bottom Line: Another C wave push back up unfolds, but until it breaks above the prior top we continue to view this as a chance to sell.

Nothing has changed from the scenario we highlighted this morning. The dip buyers came back as expected, but the rally still has the look and feel of a C wave (counter-trend). Provided new recovery highs aren’t made, this is a chance to raise more cash.

There was nothing in today’s internals to make us think we should be changing our view. However, if new recovery highs are made it means the counter-trend rally off the March ’09 low is still unfolding into something more complex than originally anticipated. A failure to do so would add to our conviction that another 5-wave leg down is soon to follow. Once the headline risk subsides, we think the tape will resume its trapping sequence and our lower projected targets will be met.

The Dollar held firm, which had an impact on the commodities we follow. Copper was weak and Gold was near flat.  The energy sectors continue to lag, leaving us with the distinct impression that Crude’s attempted breakout is not to be trusted. It’s late day sell off added to those suspicions and our confidence that we are correct.

Lastly, we neglected to update readers on the closing of our position in NTGR on Friday. We were stopped out at 27.19 for a 4.5% loss and apologize for the oversight.