A Feeding Frenzy

Through 1 p.m. the market moved in a trade range that is now almost "imagined" around the 10,070 potential bottoms. Gold and Silver dropped. We now see support lines on GLD at 1175, but suggest short term that Gold itself may trade range.
By 3.48 p.m. we had exhausted ourselves in lackluster summer trading, and a "trade range" developing.

Much like the iPhone4 we believe the market has begun a feeding frenzy of what is wrong, and what could happen.

The market, again before the classic afternoon trading hours, hit theoretical Dow bottoms of 10,033, to highs of 10,210.

The August 500Call was available as a new buy, below prior day close, as low as 5.05 in early morning trading. The endless gyrations thereafter allowed only tight profits and "trade watching up until the later hours of the trading day." We Do NOT Think A Trade Range Developing, but instead a clear bias

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You truly could not make this stuff up. For what they did, and what it caused:

AIG Agrees to $725 Million Settlement of Securities Suit

http://online.wsj.com/article/SB10001424052748704229004575371591698030242.html

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On Wednesday, 7/21 Big Ben Bernanke gives his semi-annual report card on the monetary policy and the economy. We think he'll say we are softly recovering, and that it will take a long time, and may require more stimulus. He may leave the stimulus stuff out but believe me, they are thinking about it.
The S&P 500 is trading only 12.4 times what companies are expected to earn over the next four quarters, below the 14.3 multiple of last year (Reuters). I see this as yet another sign of our FEAR.

The market dropped 270 points on Friday when Bank of America dropped 9.2%, it's worst one day drubbing in 15 months. What was interesting: Bank of America news was NOT bad. Our expectations were unreasonably high, and we set the tone immediately for FEAR and sell off.

We write about the whipsaws and giant movements of last week because they are either part of moon cycles algorithms (the last ten day period important in moon cycles) of natural law, or in other words, a "special event" or were/are they the advent of a return to a deeper bottom? We think the market has stronger potential to hold longer term.
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With last Friday's massive drop here were chartists points of view intraday on Friday. Compare them to where the market is today, and what is different from their perspective.

We remain contraian short term bulls, believing a downside test to 9800 area likely, with a rebound to as high as 10,550+. This could begin to occur without even a downside test.
A short term summer rally is perfect fishing for Wall Street, to bring the individual investor in, get the card game going again, and figure ways on Wall Street to be "creative around the new legislation."

The market will improve in bursts, with volatility becoming the norm. We waited a day to show you Friday's "expert" chartist commentary:

-- SPY FORMS LOWER HIGH WITH WEEKLY REVERSAL
-- NASDAQ AD VOLUME LINE FAILS TO BREAK RESISTANCE
-- NYSE AD LINE FORMS LOWER HIGH AS SMALL-CAPS WEAKEN
-- NET NEW HIGHS TURN NEGATIVE
-- CONSUMER DISCRETIONARY AND FINANCE WEIGH ON MARKET
-- KEY SECTORS TESTING SUPPORT LEVELS
-- STOCKS MOVE SHARPLY LOWER TO AFFIRM RESISTANCE ZONES
-- BREADTH INDICATORS REMAIN BEARISH OVERALL
-- RISING EURO WEIGHS ON GOLD
-- GOLD BREAKS WEDGE SUPPORT
-- VOLATILITY INDICES TEST IMPORTANT SUPPORT ZONES
-- ELLIOTT WAVE COUNT SHOWS THE S&P 500 IN WAVE 4
-- AN ALTERNATIVE ABC CORRECTION AND SUMMER RALLY

We think we will have a burst up on the "alternative ABC correction."