Here is an hourly chart of the Spiders, the S&P 500 ETF. I last commented on this market here.
The chart of the March S&P futures looks pretty much the same since the premium of futures over cash has shrunk to nearly zero. But remember that the June futures will become the front month next Thursday and are currently trading about 13 points over cash, so adjust the prices cited below appropriately when looking at the June futures.
The market never reached my 142.50 rally target and then proceeded to drop to what I thought would be the next support level at 138.00 this morning. I think that the rally from this morning's lows will probably last into early next week and will bring the Spiders up to that 142.50 level.
After that I anticipate that the third phase of the corrective move will begin. My best guess is that the Spiders will drop to 135.00 or so during this phase. A decline from the high at 146.42 to 135.00 would in percentage terms match the length of the previous big reactions in the bull market, those of March-August 2004, March-April 2006, and May-June 2006.
Once the market reaches 135 I shall be looking for the start of a move to new bull market highs.
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