Too Crowded With Bulls.

Judging by some analysts comments, the bullish talking-heads on CNBC, and fearless bulls, we have to continue to question whether this is a "corrective" rally up in the markets working off oversold indicators and sentiment in late June, or the start of a major third Elliott wave structure off the 2009 bottoms that takes the markets to new all-time highs.

In the interim, evidence mounts that the bull trade is getting pretty crowded now just 30-odd days since there were nothing but bears on CNBC and headlines were pretty negative. I scan CNBC here and there, mostly to see how many talking-heads and pundits are bearish versus bullish. Near the July 1 lows, there were all kinds of calls to raise cash and for markets to move much lower, indicating a bottom was probably nigh. Now, nobody is willing to be bearish after this rally, indicating a near-term top is nigh as well.

The Elliott wave patterns still appear to be an intermediate upward correction or a Wave 2 or Wave B up in sentiment off the 1,011 S&P 500 Index lows on July 1. Often bottoms come out of nowhere, as do tops. They don't tend to ring bells at either bottoms or tops, do they? I don't remember getting a phone call on July 1, but I did indicate a pivot low around 1,008 on the S&P 500 would be normal. What I didn't fathom was the extent of the rise since that low, and this has forced me to go back and re-draw charts and find my old Fibonacci calculator.

Right now, the area between 1,131 and 1,140 on the S&P 500 fits several Fibonacci upward targets over various time zones. In addition, the current pattern looks and walks not like a duck, but like an "ending diagonal" triangle. These are terminal patterns and serve to stop sentiment in its tracks when read correctly.I remenbered our KLCI was having the similar patterm in 1996.

Will we have a terminal top or a throw-over top in the next few days on this rally followed by a substantial correction? The probabilities say it’s likely, and above is a chart showing a sample of an "ending diagonal" pattern, and then the actual S&P 500 pattern right now. They look nearly the same. We'll soon see if this "3-3-5" corrective pattern was the right read I made, or if we're off to the races. Evidence suggests a lot of racing from here will be difficult for the bulls to pull off, but we shall see. The lows at 1,011 in terms of the pattern itself just don't seem that they completed to me, hence my stubborn views that we need a re-test of those lows. Time will tell. Sometimes forecasting is like predicting the weather three days in advance -- we'll have to see how the radar is tuned in shortly.