After looking at these issues last letter and seeing some cracked and broken trendlines curisoity drove us to look at the 5 year charts.  What we got out of that analysis was extremely bullish.  The Russell is threatening its 5 year high, and under current market conditions looks likely to break above it.  Very bullish.

The midcap spider MDY has broken above the 5 year high and no immediate resistance is apparent above it. In fact it is above its 10 year high.  These kinds of charts are very bullish.

The MVV midcap 400 is plowing through resistance and approaching its 10 year high.

The Qs are vaulting over their 5 year highs, actually 10 year highs, but they still have that nasty memory of 2000 which is more than 10 years back.

And here is the laggard — the S&P.  And here is an interesting irony.  Readers will probably remember one of our little  fantasies — or follies — or foolishnesses — that we did a point and figure analysis of the S&P and foresaw a target of 1565.  Guess what the previous high was in the S&P (a figure we had forgotten)  1565.  Some freaky things fall out of analysis.

Now to remind you of some of our predilections  and prejudices.  By nature we incline more to the bear side than the bull.  Born under Aries, sign of the bear.  So in general we always look a bull in the teeth, and in general are always slow to get on a bull bandwagon.  Above all we treat bull markets cautiously because they can turn on you in an instant.  Bear markets are much friendlier to us.  You can judge the above analysis in this light.

And remember the Composite Operator is always  testing the worthiness of market participants to participate in the profits.  That is the purpose of downwaves.  See who knows how to ride the long wave.  During the April to June trial we remarked that it was necessary to flush the unwashed and the unworthy out of the market before taking it up.  That was what set the stage for the present market.  Whether we will have to endure some more testing is unknown.  In our opinion there has to be a downwave here at some point.  Why?  Because.  Just because.  That’s the way the market is.