Skating on Thin Ice?

The major averages posted modest gains today on better volume. However, the averages outperfomed breadth. We would rather see the opposite; the generals leading the troops could be a sign of a tiring rally.

The overlapping structure of the rally makes it difficult (if not impossible) to count the pattern from the March low as an impulse wave (i.e., a trending move) in Elliott Wave terms. The rally could rescue itself with an upside acceleration in the next few days. But near term momentum is postioned for a downside reveral for most groups before the end of the month and and the 10-day p/c ratio is overbought. These conditions argue against such an acceleration and suggest that the rally is now skating on thin ice. Moreover, the increasingly evident corrective (counter-trend) Elliott structure implies that a reversal could lead to a deep retracement.

S&P support is evident at 770-800. First resistance is at 850. We would view a rally through 875 as a significant (bullish) development.