Even as rumors abound of a debt haircut deal between private investors and Greece, markets have started to correct from short and intermediate term overbought conditions. Many pundits have already started to talk of a major top and no doubt the current round of selling will spur more to jump aboard the bear bandwagon. While I tend to agree that a significant market peak is not far away, my current analysis leads me to conclude that the present decline is a minor episode and there is at least one more surge higher to come before we can abandon our long orientation and switch to the short side of the markets.
There are a number of plausible scenarios presenting themselves for our consideration at this time. There's a small possibility that we have seen the top recently but there is also an even better possibility that the wave from the March 2009 low has not yet completed. I continue to favor the scenario which calls for a final high above the February and May 2011 peaks.
Here is my favored scenario on a weekly chart:
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