• New highs by end of August
• Commercials still long
• Rates have fallen 40 bp

I believe we are near the lows for this pull back and the next move will be to new highs. Key financial stocks appear to have completed five wave patterns to the down side and should move back up in price. They will likely fail to make new highs setting up a classic divergence with the major indexes and creating a reliable sell signal some time in August.

The commercial traders continue to buy this market and are long record levels. They report on Tuesdays after the close and these stats are released to the public on Fridays. This Fridays report will be telling since it will include their activity on Tuesday’s big sell off.

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Posted by Michael Chapman at 12:00 PM UTC

If you aren’t already familiar with the individual alternative minimum tax (AMT), there’s a good chance that you soon will be. Because its key figures aren’t indexed for inflation, the AMT reaches further into the ranks of middle-income Americans each year. And, since temporary legislative band-aids expired at the end of 2006, the stage is set for a dramatic rise in the number of individuals who are affected.

Read the Retirement Place AMT article (PDF) >>>

Posted by Michael Chapman at 12:00 PM UTC

• Stock Indexes hit new 52 week highs
• M&A and P.E. funds behind the rise
• Bond prices (i-rates) remain key

As I write, the major stock indexes are breaking to new 52-week highs. This ends a two month consolidation and answers the “what direction from here” question. Moving to new highs will likely force the record short interest to cover. Once the shorts are out we can have more confidence in the next sell signal. Our proprietary trend indicator has turned back to neutral and will turn up next week if price and volume stay strong.

Merger and acquisition activity continues at a record pace. Additionally, the private equity funds continue taking companies private at a record pace. All of this means a decrease in the quantity of publicly traded shares. Economics 101, as quantity of supply drops, price will rise.

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Posted by Michael Chapman at 12:00 PM UTC